Investors await resolution of Aceh and PLN

Investors await resolution of Aceh and PLN

JAKARTA (JP): The government's handling of the secessionist
movement in Aceh and of contractual problems involving state
electricity firm PT PLN will determine whether foreign investors
flock back to Indonesian investment opportunities, a minister
said on Tuesday.

State Minister of the Empowerment of State Enterprises
Laksamana Sukardi said the two cases demonstrated two important
factors for foreign investment, namely Indonesia's "territorial
integrity and contractual integrity".

"Aceh represents our territorial integrity problems. If we
cannot solve this, it will have an exceptional repercussion on
investment," Laksamana said at a seminar hosted by the Econit
advisory group.

Laksamana said that the handling of PLN contractual problems
with independent power producers, which mostly involve foreign
investors, would determine foreign investors' appetite to invest
in Indonesia, not only in the power sector.

He said the new government was fully aware of the matter, and
was trying hard to resolve both problems amicably.

He said President Abdurrahman Wahid was committed to solving
the Aceh problem in a peaceful manner and would not repeat the
mistake of the previous administration in using repressive
measures to silence the secessionist movement in Aceh and other
provinces.

He said that in its dealings with PLN, the government had
given the state company a chance to solve its own problems with
its private power suppliers.

The problem, Laksamana said, was that PLN did not have enough
cash reserves. Even if PLN could reach a settlement with its
power suppliers, it would not be able to pay its due debts.

"PLN is on the brink of default because of large potential
claims. If PLN defaults, it will destroy our image as a whole.
That's why we are trying hard to stop PLN from defaulting," he
said without elaborating.

PLN's problems with its power suppliers represent only a
fraction of the contractual problems faced by the government.
Other problems include state telecommunications firm PT Telkom's
join operating contracts with its partners, which are called KSO,
and those related to international copper mining venture Freeport
McMoran and Newmont.

Laksamana, who is a former associate director at Econit, said
that in order to attract foreign investment, the government would
take every step to maintain both its territorial and contractual
integrity.

With local private enterprises grinding to a halt, Laksamana
said the government had pinned its hopes on incoming foreign
investment to help spearhead the country's economic recovery.

In addition to foreign investors, the government also hopes
that the Indonesian Bank Restructuring Agency (IBRA) and state-
owned enterprises will be able to contribute to the nation's
recovery.

Laksamana said IBRA's role in reviving the economy was vital
because it controlled substantial assets pledged by indebted
local business groups and individuals.

He said state firms still had a role in keeping the economy
rolling because they controlled infrastructure and valuable
assets.

The total assets of 144 existing state firms are currently
recorded at Rp 142 trillion (US$20 billion). However, after being
evaluated using a discounted cash flow method, the intrinsic
value of all state firms only stands at Rp 205 trillion -- far
below their combined debts of Rp 236 trillion.

Laksamana said his office was currently "benchmarking" state
firms, that is forcing state firms to compete with private
entities, both locally and internationally.

"With the benchmarking, we envisage the potential value of
state firms in the next five years will be approximately Rp 920
trillion. But it will never happen without intense empowerment,"
he said. (rid)