WB to guarantee ?political risk? on electricity investment

International financial institution, the World Bank, the Asian Development Bank (ADB) and Japan Bank for International Corporation (JBIC) have offered investors to guarantee the ?political risk? in investing in the electricity sector in Indonesia, Suara Karya reported on Tuesday.

Director General of Electricity and Energy of the Ministry of Energy and Mineral Resources, Yogo Pratomo, said in Jakarta on Monday that the three agencies would cover the risk resulting from political aspects so that if there was a default due to the political decision, the three agencies would have to pay compensation to the investors.

He said that the agreement of the three agencies to cover the political risk in investing in the country?s electricity sector which was made during a meeting in Tokyo recently was considered as an important breakthrough in bringing back the confidence of investors.

Many investors are interested in investing in the country?s electricity sector but they are reluctant to do so due to the lack of guarantee on its political risk. ?They fear the OPIC case will be repeated again,? he said.

A number of investors such as Karaha Bodas Company went to the international arbitrary after the government suspended their projects. As the consequence, the Indonesian parties had to pay millions of US dollars in compensation.

The WB estimates that Indonesia will need additional electricity supply of about 8,000 MW by 2010. This will cost Indonesia about US$30 billion. (*)