Govt finally agrees to pay KBC claim

Coordinating Minister for the Economy Aburizal Bakrie has confirmed that the government will pay compensation to Karaha Bodas Company (KBC), but it would ask for a reduction in the amount to avoid causing burdens on state finances, the Investor Daily Indonesia newspaper reported in its Friday edition.

?We never intend not to pay the arbitration claim, which was won by Karaha Bodas. But, the government certainly wants to follow the best possible way to reduce state losses,? Bakrie said after the Cabinet meeting in Jakarta on Thursday.

Bakrie mentioned that the government wuold not pay US$299 million in lump sum, but asked KBC to reduce the amount.

The government did not know from where the money would come to pay the claim.

?That problem will be (put into consideration) later. There should be a reduction... If possible, we will pay all. If we can't pay all, (maybe we can pay) just around 10 percent, so that it will not incur losses to state,? Bakrie said.

Meanwhile, State Minister for State Enterprises Sugiharto said the government would continue investigation into alleged corruption or violation of regulation involved in the case.

Sugiharto also said the government will try to prevent the seizure of its assets by KBC in foreign countries.

?We all shall go all out to prevent the seizure of assets. Our money was just blocked, not yet seized,? he said adding the government will have time until November 22 to respond and consult KBC.

Pertamina president director Widya Purnama told the Investor that he did not believe the plan to pay the compensation was a Cabinet decision. But he will clarify this to President.

Earlier Widya threatened to resign if the government asked Pertamina to pay the amount.

On Oct. 4, the U.S. Supreme Court rejected Pertamina?s bid to nullify the 2000 arbitration award to KBC

Due to 1997 Asian financial crisis, KBC?s power plant project at Garut, West Java was suspended by the goverment. (*)