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)