Lawsuit against KPC damaging RI image: PwC

Lawsuit against KPC damaging RI image: PwC

Moch. N. Kurniawan The Jakarta Post Jakarta

The recent lawsuit brought by the East Kalimantan government against coal mining firm PT Kaltim Prima Coal over delays in the firm's divestment program had further hurt the country's poor image among mining investors, an analyst from international accounting firm PricewaterhouseCooper said on Wednesday.

Firdaus Asikin said the suit had made foreign investors doubt the country's bona fides in respecting Contracts of Work.

"It's a negative sign. The parties shouldn't be bringing the case here, but rather should be bringing it to international arbitration as stated in the CoW," he told The Jakarta Post while unveiling the company's latest report on Indonesian mining.

He said the lawsuit was also forcing existing investors to further defer their investment plans.

The East Kalimantan administration has sued KPC in the South Jakarta District Court for intentionally delaying the divestment of 51 percent of its shares. The divestment is part of KPC's obligations under the CoW.

Firdaus said that should the East Kalimantan administration win the suit, it would discourage potential foreign investors from putting their money in the country.

The PwC report, which focuses on the performance of Indonesian mining last year, said Indonesia's mining sector continued to make a valuable contribution to the country's economic and social advancement last year despite falling profitability.

The report is based on a survey of 19 producing companies and 15 exploration companies.

Firdaus pointed out that the continued strength of the industry was of paramount importance to all Indonesian as 98 percent of the sector's employees were Indonesian nationals.

The industry was also an important customer for Indonesian suppliers, he said, citing that Indonesian suppliers accounted for 27 percent of industry spending of more that $1.5 billion on goods and services.

The report said that the industry's overall net profit decreased by 33 percent to US$368 million in 2000, despite a 25 percent increase in net revenue.

Total government revenue from the industry in 2000 dropped 2 percent to Rp 6.8 billion (US$801.8) from the previous year's figure, the report said.

Last year's total tax take from mining companies, including royalties and indirect taxes, stood at $572.1 million, it said.