House members blast lobbysts for power projects

House members blast lobbysts for power projects

JAKARTA (JP): Amidst the lingering controversy over the March
awarding of three power plant projects to foreign contractors,
legislators have attacked the lobbyists and brokers who they say
inflated the prices of the projects and undermined Indonesia's
ability to lure more foreign investment.

Legislator Aberson Marle Sihaloho of the Indonesian Democratic
Party (PDI) said that local brokers, who are usually politically
connected, demand high commissions from domestic and foreign
contractors.

"Foreign contractors cannot escape brokers. Worse than that,
foreign firms compete to give higher fees to win job contracts,"
Aberson said.

He was commenting on the statement by the State Electricity
Company (PLN) in a hearing with the House of Representatives
(DPR) early last week that brokers had intervened into the
assessment of the contracts for the power projects.

The intervention had forced the foreign contractors to set
unusually high prices to offset the fees they would have to pay
to the lobbysts, without him contracts are impossible to get.

The PLN chief Zuhal declined to identify the lobbysts and
brokers in this particular case.

The foreign contractors initially asked for a total of US$2.14
billion to build the three plants, located in Grati (East Java),
Tambak Lorok (Central Java) and Muara Tawar (West Java) but they
later lowered the prices to $1.76 billion.

Erie Soekardja, vice-chairman of the House's Commission VI
(in charge of energy, mines and industry), however, said that the
$1.76 billion price is still to high, adding that a further
reduction of between between 20 to 30 percent is possible.

According to Soekardja his commission would again raise the
issue on the contracts for the power projects during a hearing
with the Minister of Mines and Energy on July 5.

The ministry awarded the 521-megawatt Tambak Lorok open-cycle
project to a group including Sumitomo of Japan and America's
General Electric, the 868-megawatt Grati combined-cycle power
project to a consortium of Japan's Mitsubishi and the German
Siemens and the 1,094-megawatt Muara Tawar combined-cycle power
project to a consortium of Swiss-Swedish Asea Brown Bovery (ABB)
and Marubeni of Japan.

Controversy

The repeat-order, however, set off a controversy because an
Anglo-French company, GEC-Alsthom, claimed it could complete the
three projects for much less.

Informed sources meanwhile said that the ministry of mines and
energy and PLN had not made final decisions on the contracts.
They would review the contracts after studying the final report
of a fact-finding team which last month visited Thailand and
Malaysia to conduct price-comparison studies.

The team concluded that that the contractors charged much
higher prices on the Indonesian projects. Their asking prices for
open-cycle power generation ranged from $529 to $534 per
kilowatt, as against $424-510 in Thailand and $395-493 in
Malaysia.

As regards the prices of the combined-cycle power plant
projects, the contractors' asking prices also were much higher,
ranging from $610 to $701, compared to $489-618 in Thailand and
$597-599 in Malaysia.

"Brokers, of course, are everywhere and they want some fees.
But I've never found a case like this before," Soekardja said.

Aberson, however, hinted that the brokers and the lobbyists
must be persons with exclusive ties to powerful decision makers
and have made a fortune because of the connection.

"Old habits die hard," he said, adding that the House
unfortunately cannot intervene in the decision-making process of
such projects, which are usually financed with the export credit
facilities, because it can only adjudicate the annual state
budget.

"Should Indonesia seriously want to increase its competitive
advantage, it has no other choice but to be efficient and
productive," he said, referring to a recent report of the World
Bank which said that Indonesia's economy remains vulnerable to
regional competition and internal weaknesses despite its growth.

Soekardja said that he hoped the minister of mines and energy
would resolve the problem to safeguard national interests.

"As the representatives of the people, we want the people to
take the benefit. Not brokers," he said. (09)