RI govt forced to pay OPIC claims, following pressures from U.S. govt

The government is committed to paying a claim of US$260 million from the Overseas Private Investment Corp (OPIC), U.S. federal insurance firm, due to pressures from the U.S. government, Kompas daily reported on Saturday (May 12).

Coordinating Minister for the Economy Rizal Ramli said the decision to pay the claim was pursued to maintain the good relation between the Indonesian and U.S. governments.

Rizal noted that the agreed value, nevertheless, was lower than OPIC's initial claim of $290 million.

In Washington, OPIC said in a statement that it had reached an agreement with the Indonesian government over the payment of the claim. The agreement itself would be signed by the end of this month.

The claim arose following the government's loss in the international arbitration for its arbitrary decision to cancel two geothermal power plants - Dieng in Central Java and Patuha in West Java - belonging to MidAmerican Energy Holdings Co, that were covered by OPIC.

Rizal noted that the government would not burden the payment of the claim to the 2001 state budget, saying that it might use funds from the re-tendering of the disputed power projects to pay the claim.

"The payment would be pursued through a long-term payment. We will again offer the projects (Dieng and Patuha). In a short-term period, we will pay the claim only after the projects are offered to investors. But for the whole claim, it will be pursued through a long-term payment system," Rizal said on the sidelines of the deliberation of the bill to amend the central bank law in Karawaci, Tangerang.

Rizal said the payment for the claim would be pursued in line with terms of payment in the Paris Club. But he refused to go into details of the terms of payment.

When asked further on why the government finally agreed to pay, Rizal said: "This is a difficult decision. The U.S. is our strategic partner. We don't want to have a confrontation with the U.S. because of this issue." Earlier, both the government and the House of Representatives categorically rejected to pay the claim, saying that the Dieng and Patuha projects were loaded with corruption, collusion and nepotism practices.

One source told Kompas daily that the government agreed to pay the claim following intensive pressures from the U.S. government.

"Indonesia was really pressurized by the U.S. This is really annoying. In time of crisis like this, we are continuously pressurized to pay the claim," the source said.

The source said that OPIC should have made in-depth analysis before covering he projects. "OPIC, without making its own analysis (of the projects), just covered the projects, and financing the U.S. investors in the projects. But when the projects stopped, it redirected the claim to the Indonesian government." (*)