House wants Tanjung Jati B project restarted

House wants Tanjung Jati B project restarted

A'an Suryana, The Jakarta Post, Jakarta

In contrast to its usual nationalistic stance, the House of
Representatives put more pressure on the government on Wednesday
to exempt a Japanese contractor from a countertrade regulation
that is hampering the resumption of the Tanjung Jati B coal-fired
power plant project.

"The construction of the power plant must be started up again
on time," said Emir Moeis, the chairman of the House's mines and
energy commission, while reading out his commission's conclusions
after a hearing with government officials from the electricity
sector team set up by Presidential Decree No. 133.

After the hearing, Emir said that rapid resolution was a
necessary as the role of the Tanjung Jati B plant was essential
so as to prevent a future electricity crisis in the country.

The US$41.6 billion Tanjung Jati B project is located in
Jepara, Central Java, and will have a power-producing capacity of
1,320 Megawatts (MW).

The construction of the US$1.6 billion thermal power plant was
suspended in 1998 due to the economic crisis, but the government
decided last year to resurrect the project after it learned that
Indonesia might suffer from an electricity crisis in the coming
years.

Responding to the House request, the head of the joint team,
Coordinating Minister for Economic Affairs Dorodjatun Kuntoro-
Jakti, said that the government was seeking advice from legal
experts so as to resolve the matter.

"Legal advice is being sought, whether we can provide an
exemption to the countertrade scheme. If an exemption can be
provided, the project should resume soon," Dorodjatun told
reporters after the hearing.

The resumption of construction, which was originally slated
for March this year, has been hampered by a 1982 government
regulation regarding countertrade.

The regulation provides that every foreign purchase exceeding
$500 million that affects the state budget must be based upon a
countertrade arrangement.

Such countertrade schemes, promoted by the Ministry of Trade
and Industry, are aimed at boosting exports, especially non-oil
exports.

They are, however, not popular with foreign investors, in this
case Sumitomo Engineering, the main contractor for the power
plant project.

A government official has said that the investor had expressed
objections, and these could possibly delay the resumption of the
project.

Learning from the controversy, Minister of Industry and Trade
Rini MS Soewandi said that countertrade schemes should be
flexible.

Dorodjatun's office, as the final arbiter, is expected to
resolve the matter.

Tanjung Jati B will be financed mostly by Japanese loans.
Sumitomo Corporation is to provide $550 million, while the
remaining funds will come from the Japan Bank for International
Cooperation (JBIC) and a consortium of Japanese financial
institutions.

Under the contract between state electricity company PT PLN
and Sumitomo Corp., PLN must pay Rp 405 billion (US$45 million)
every six months, and after 20 years the power plant will become
fully owned by PLN.

The plant is due to start generating electricity in 2006.