Payment of OPIC claim to burden budget: Legislators

Legislators have questioned the promise from Coordinating Minister for the Economy Rizal Ramli that the payment of US$260 million claim from the Overseas Private Investment Corporation (OPIC) would not burden the state budget, Kompas reported on Monday (May 14).

Rizal said last week that the payment of OPIC claim would not burden the government's budget as it would find alternative funding by re-tendering the disputed power plants, namely the geothermal-powered power plants in Dieng, Central Java, and Patuha, West Java.

Legislator Paskah Suzetta, from the House of Representatives' Commission IX on budget and finance, said that the promise from Rizal Ramli to find alternative financing through the re-tendering of the disputed power plants would also be hard to be met.

Paskah said in the current situation, it would be difficult for the government to get new investors for the abandoned Dieng and Patuha geothermal-powered power plants.

Even if the government could invite new investors through the re-tendering of the two projects, the government would not be able to get the maximum recovery rate of investment from the disputed projects.

Eventually, the government would use funds in the state budget to pay the claim, Paskah said. Paskah, nevertheless, suggested that the government demand rescheduling of OPIC claim and issue international bonds to pay the claim, if it failed to re-tender the projects.

Meanwhile, Commission IX chairman Benny Pasaribu said that the commission would continue to warn the government to be extra careful in using state budget, especially in settling its obligation to OPIC.

OPIC's claims arises following the government's decision to suspend the Dieng and Patuha power plants during the height of economic crisis in 1998. MicAmerican Energy Holding, that owns the two projects, filed arbitration proceeding against state electricity company PLN over the cancellation of the projects.

PLN lost the arbitration proceedings and was ordered to pay MidAmerican $572 million in damages. As PLN refused to pay, MidAmerican called in its OPIC insurance, that later demand the government to take the share of responsibility.

Initially, the government refused to pay the claim, arguing that the two power plants were plagued with corruption, collusion and nepotism practices. However, the government eventually agreed to pay the claim, following reportedly massive pressures from the U.S. government.

Meanwhile, economist Sri Mulyani Indrawati said that the government must explain to the public why it decided to pay the claim.

Sri noted that the debt belonged to PLN, and why the government assumed the claim. She expressed her worries that there were many more claims coming to the government after the one from OPIC. (*)