Bowing to the growing international pressure and financial problems, the Indonesian government has halted 15 infrastructure projects including several large power schemes. The move reverses a controversial decision made by President Suharto on 1 November 1997 which allowed several of these projects to go ahead even though the financial crisis was already biting, Dow Jones reports.
The new move stops the development of eight power projects. One of these, Tanjung Jati C, has been criticised by international lenders because it threatened to contribute to a massive oversupply of power to Java. The $1.62 billion project was to be built by the Hong Kong based company Hopewell Holdings.
Tanjung Jati A, a $1.66 billion project has also been halted. This project involved one of the president’s daughters as well as the UK company National Power, Tomen and the Indonesian-based Bakrie Group. The 1320 MW Tanjung Jati B plant, under construction by the Hopewell Group, is due to enter service in 2000.
A further six power projects have been postponed or reviewed. These include a $169 million power plant at Palembang Timur, Sumatra, being built by US company Coastal Corp. and PT Astra; a geothermal power plant in Sumatra involving Unocal Corp. and the Nusamba Group; and the 60 MW Asahan I diesel power plant. Karaha I and Darajat I and II, all in west Java and Sarulla in Sumatra are also affected.
Halting these projects will do little to ease the immediate losses of the national electricity utility PLN, one of the major sufferers under the financial crisis. The company currently pays independent power producers (IPPs) 340 Rupiah/kWh for power but can only charge its customers 170 Rupiah/kWh. On top of this the company has to pay IPPs in dollars and the slump in the value of the currency against the dollar is likely to hit the utility heavily.
Several of the projects affected by the crisis have already secured financial backing and the disapprobation of the international the banking community is likely.
However the International Monetary Fund is likely to view the move as a positive indication that Indonesia is showing some serious intention of trying to tackle its financial difficulties.