U.S. denies graft charges at Paiton project

The U.S. government, through its embassy in Jakarta, has denied charges that U.S. company Mid American Energy Holdings Company was engaged in corruption, collusion and nepotism practices when it secured contract for the geothermal-powered Dieng and Patuha power plants that were canceled by the government and state electricity firm PT PLN.

"We are upholding a U.S. anti-graft law," the embassy's spokesman Karl Fritz told Kompas on Thursday.

Fritz also said that his party was not concerned by Indonesia's House of Representatives' rejection to the Indonesian government's proposal to use state funds to pay US$290 claim from the Overseas Private Investment Corporation (OPIC) -- a U.S. Federal insurance agency that guarantees U.S. firms' overseas investment.

"I don't want to anticipate what policy that the Indonesian government will take in the next stage of negotiations," he said.

He maintained that the U.S. government's position that the $290 claim emerged because of PLN's breach of its own promise. He said that even President Abdurrahman Wahid himself had admitted that it was Indonesia's mistake to cancel the projects.

OPIC asked the Indonesian government last March to pay US$290 in compensation claim that it had paid to California Energy/Mid American Energy Holding.

An international arbitration ordered PLN and the government to pay $500 million to the two U.S. energy investors for the former's decision to cancel the latter's energy projects in Indonesia, Patuha and Dieng. Out of the total claims, $290 was paid by OPIC.

Minister of Finance Bambang Sudibyo said earlier that the Indonesian government would not pay $290 million to OPIC because the government had not allocated any fund pay that claim. Besides, the contracts between PLN and Cal Energy/Mid American Energy Holding were made during the New Order government and tainted by corruption, collusion and nepotism practices

U.S. Ambassador to Jakarta Robert S. Gelbard has threatened to confiscate Indonesian assets overseas if the government remained defiant and did not want to settle the claim.

However, Fritz did not want to specify what his government would do if the negotiations fell apart. He said that his government would avoid confiscation of Indonesia assets overseas.

Fritz said that the settlement of the problem would benefit Indonesia itself as it would help improve investment climate in the country. "Law enforcement is very important for any country that wants to attract investment, including Indonesia." (*)