IMF urged to testify in favor of Pertamina at U.S. courts

IMF urged to testify in favor of Pertamina at U.S. courts

Moch. N. Kurniawan, The Jakarta Post, Jakarta

Experts and legislators urged the International Monetary Fund
(IMF) on Tuesday to testify at the U.S courts in favor of
Indonesia in a legal dispute between state oil and gas firm
Pertamina and U.S. independent power producer Karaha Bodas Co.
LLC.

Outspoken legislator Priyo Budi Santoso said that the fund
must clarify to the courts that the suspension of the Karaha
Bodas power project by the government in the late 1990s was a
matter of force majeure.

"The IMF must bear moral responsibility by testifying to the
U.S. courts because it was the party that suggested the
government suspend many megaprojects at that time," he told The
Jakarta Post.

Priyo is a member of House of Representatives Commission VIII,
which oversees the energy sector.

He said that if the IMF declined to testify, the public would
doubt its commitment to helping the country.

Priyo made the statement following a complaint voiced by
Pertamina's president Baihaki Hakim on Monday that the IMF had
recently rejected Pertamina's request for it to testify at the
New York court in favor of the state company.

The U.S. court is now hearing a lawsuit filed by Karaha Bodas
against Pertamina over the suspension of its geothermal power
project in West Java.

The company, which is controlled by two U.S. energy firms,
Florida Power and Caithness, is seeking US$261 million in
compensation for the suspension of the project.

Baihaki said that the geothermal power plant was one of a
number of giant energy projects suspended by the government in
September 1997 amid the economic crisis -- a move that was
supported by the IMF.

Baihaki accused the IMF of trying to wash its hands in the
case by refusing to clarify at the U.S. court that the suspension
was a matter of force majeure.

The Karaha Bodas case is one of several disputes faced by
either the Indonesian government or state companies in the energy
sector as a result of the suspension of the energy project. Last
year, the government agreed to pay US$260 million to the U.S.
state insurance firm Overseas Private Investment Corporation
(OPIC) as compensation for the suspension of the Patuha and Dieng
geothermal power projects owned by American firm CalEnergy.

Economist Dradjad H. Wibowo of the Institute for Development
of Economics and Finance (Indef) and energy expert Riki F.
Ibrahim shared Priyo's view.

"Pertamina and the government must continue asking the IMF to
issue a written statement stating that the suspension was either
a necessary or unavoidable measure," Dradjad told the Post.

Should the IMF maintain its refusal, he suggested the
government sue the IMF for allegedly not having the goodwill to
help the country recover from the crisis.

According to him, the Karaha case was the latest failure by
the IMF to predict the negative consequences of its recipe for
healing the country.

He cited, as a previous IMF failure, the collapse of the
country's banking industry as a result of the IMF-recommended
closure of 16 banks in 1997.

Riki said if the IMF continued to refuse to testify at the
court in favor of Pertamina, the agency should at least help
persuade Karaha Bodas to resolve the dispute out of court.