From: John MacDougall <apakabar@clark.net>
Forwarded message:
From apakabar@igc.apc.org Sun Nov 13 16:58 EST 1994
Date: Sun, 13 Nov 1994 13:58:30 -0800
From: Indonesia Publications/Task Force Indonesia <apakabar@igc.apc.org>
Message-Id: <199411132158.NAA29438@igc.apc.org>
To: apakabar@igc.apc.org
Subject: IN: Controversial Samarinda Power Project
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Content-Length: 17198
/* Written 6:40 PM Nov 13, 1994 by gn:bcet in igc:reg.easttimor */
/* ---------- "UK aid exposed" ---------- */
Making a killing with British aid
Michael Durham in Jakarta reports on the power plant project which
has more potential to embarrass the British Government than the
Pergau Dam fiasco
Source: The Observer
Date: 13 November
Status: Full Text.
[This long and important article is accompanied by one of Steve
Cox's photos of the Santa Cruz massacre, under which is the
caption: "Collateral damage: The massacre of civilians in East
Timor has failed to blunt the British appetite for arms deals
linked to aid."
The main street of Samarinda, east Kalimantan, in what used to be
known as Borneo. It is a typically Asian riverside vista.
Warehouses, shipping agencies and cheap hotels range along the
waterfront, next to an enormous mosque. Opposite longboats and
cargo ships ply the Mahakam River and its muddy delta.
Few tourists reach this sweaty, provincial outpost in the
Indonesian jungle. Lately, however, Samarinda has begun to see
more visitors. Even in the remote backwoods, there is business.
Logging, gold prospecting and coal mining have all taken off,
usually backed by Western money.
Factories, sawmills and smelters have sprouted. But the next
Western-backed project promises to be more controversial than
most. On a patch of virgin jungle, Rolls-Royce, the British
engineering company, will shortly start work on a 60 million
pound gas power station. It was ordered by the Indonesian
Government and will be paid for by British aid.
Britain says it will be just another aid project. But to sceptics
the Samarinda Power Station is already another Pergau Dam - a
colossal white elephant and, allegedly, a massive 'sweetener' to
the Indonesian Government.
Its real purpose, they claim, is to promote a behind-the-scenes
deal between the two countries. And there is one class of goods
above all that Britain is desperate to sell to Indonesia: arms.
As in neighbouring Malaysia (and revealed earlier this year in the
Pergau Dam affair), British aid, trade, arms and corruption are
inextricably linked in President Suharto's Indonesia.
The world's fourth largest nation, with 180 million people - and
potentially one of Asia's richest - Indonesia is desperate to
update its armed forces. Its army is ill-disciplined and poorly
equipped. Its navy, with 13,700 islands to watch over, is in a
pitiful state. Its airforce, while growing, is embryonic.
For years, Indonesia has acquired bits and pieces on the world
market, including British-made jets and armour. Last year it
acquired 37 second-hand east German warships; one nearly sank in
the Bay of Biscay.
But there is one powerful reason why Indonesia has trouble buying
modern arms in the West: its human rights record. Since 1967,
when Suharto was installed as President, Indonesia has not been a
democracy.
It is a dictatorship supported by ruthless violence. In Jakarta
and Sumatran villages, foreign-made tanks and armoured personnel
carriers have been used to crush dissent. And in 1975, President
Suharto's tanksrolled into East Timor, an inoffensive island
nation formerly ruled by Portugal. Up to 200,000 East Timorese, a
third of the population, died in the war that followed.
In 1991, several hundred young people were killed in East Timor's
capital, Dili, when the army opened fire on a peaceful
demonstration. Since then, many countries, including the |United
States, have tightened arms sales embargoes on Indonesia.
But Indonesia's army, and its energetic Minister for Research and
Technology, Dr Rudy Habibie, have responded by trying to buy from
Europe. According to defence sources, the Indonesians have been
shopping in European capitals for jet fighters, light tanks and
armoured personnel carriers, light artillery, ballistic and air
defence missiles, naval patrol vessels and a brand-new naval base
at Bandar Lampung in Sumatra.
One European country has taken the lead in negotiating a deal,
worth an estimated two billion pounds, to supply all those needs.
That country is Britain.
There is good reason to believe that Indonesia's arms-buying
offensive began in the mid-Eighties, at about the same time that
Margaret Thatcher was clinching a deal with Malaysia which later
became notorious as the Pergau aid-for-arms affair.
She went to Indonesia in 1985 and fell in love with the place. As
she recounts in her memoirs: "It was on the final day of my stay
in Indonesia that I realised that I had become an internationally
known figure............As I got off the aeroplane I was met by
girls throwing rose petals on the ground in front of me and then
all they way from the airport by crowds five to six deep along the
road crying 'Tacher, Tacher.' "
The arms-buying effort picked up momentum in the early Nineties,
as Indonesia began to make headway with companies such as British
Aerospace. Today it has become imperative for it to be in place
before next year's celebrations of 50 years of independence from
Dutch colonial rule. One Jakarta defence source said: "Yes, the
Indonesians are buying fast. They are keen to get their hands on
lots of shiny new kit in time for the independence parades. And
we are ready to let them have it."
But on what terms? According to groups that monitor relations
between the two countries, Britain and Indonesia have been
conducting covert aid-for-arms diplomacy over the past three
years. Indonesia's interest in buying weapons has been matched
only by Britain's generosity in giving aid - notably to Samarinda
Power Station.
Compared with some poorer countries, Indonesia has always scored
well in the aid stakes, despite its appalling human rights record.
Since 1980, Britain's aid to Tanzania, the world's second poorest
country, has remained at a constant low. Aid to Indonesia, which
is far from impoverished, has shot up. It began rising
spectacularly in 1991. This was the year that arms-aid diplomacy
really took off, according to groups such as the World Development
Movement, which on Thursday won a High Court case against Douglas
Hurd, the Foreign Secretary, over aid to Malaysia.
In June 1991, Dr Habibie, a favourite of General Suharto and a key
in the country's nascent aerospace industry, visited London. He
is believed to have held talks with Alan Clark, the then Minister
for Defence Procurement, andvisited John Major. During the visit,
he reached an outline agreement to buy Hawk aircraft from British
Aerospace, fitted with Rolls-Royce engines. The Indonesians had
already bought several dozen Hawks during the Eighties. Fitted
with missiles, they were used to attack East Timorese villages.
But it was not to be a straightforward deal. Negotiations over
the new Hawks evidently proved difficult and draged on for two
years without a firm agreement.
Britain turned up the pressure. In September 1992, the first of
many high-profile trade delegations left for Indonesia, led by a
government minister, Lord Strathclyde. In January last year,
Richard Needham, the Trade Minister, was in Jakarta promising that
Britain could become Indonesia's gateway to Europe. He has been
back four more times since then.
Negotiations were clearly progressing behind the scenes. Two
months later, in March 1993, Norman Lamont, then Chancellor of the
Exchequer, promised a big increase in export credit for Indonesia.
But the key that appeared to unlock the negotiations came in April
1993, when Douglas Hurd, visiting Jakarta, remarked that aid did
not have to be dependent on human rights. He announced a 65
million pounds concessional loan for a new power station at
Samarinda. It was by far the biggest aid donation to Indonesia
for 20 years.
A week later, Dr Habibie was talking wildly and publicly in
Jakarta of buying a hundred planes from Britain. Two months after
that - after two more ministerial visits from Britain - British
Aerospace formally announced that Indonesia had ordered 24
aircraft, an order worth 500 million pounds and hundreds of jobs
in Britain.
If the 65 million pounds aid for the Samarinda Power Station was
the price of securing the Hawk deal for Britain, a cynic might
argue it was money well spent. But is it even justified in terms
of aid - as a project which supposedly benefits the economy of an
emerging nation?
Samarinda will not be Indonesia's biggest power station. At 60
megawatts, it is a comparatively modest proposal in a remote part
of Indonesia's gold-and-coal belt in east Kalimantan. But several
aspects of the project have alarmed environmentalists and other
pressure groups.
In July, it was announced that the construction contract had been
won by the Rolls-Royce Industrial Power Group. Perhaps it is no
coincidence that Rolls-Royce will supply all the engines for
Indonesia's new Hawk jets and has a long-standing agreement with
Indonesia to transfer technology in connection with civilian
aircraft engines. But more curious is the technology that
Rolls-Royce will employ at Samarinda. The company will install
two gas turbines powered by RB211 engines, derived from what it
says is ' the world's most reliable aircraft engine'. It is
Roll-Royce's first power project in Indonesia, and the only one
using an aero-derived engine.
Rolls-Royce insists the technology is tried and tested. But
within the poer industry it is regarded as nothing short of
experimental, unproved in such an extreme climate and allegedly
unsuited to a remote location.
Gatot Prawiro, a manager in a Jakarta company in the power
generation field, said: "It is very unusual. But Rolls-Royce were
in on the project very strongly. Dr Habibie was behind them,
because they are coming in with the technology for him."
There are other complaints about Samarinda's value. Thinly
populated Kalimantan, like some other parts of Indonesia, already
has too much electricity. It lacks transmission lines. And,
quite apart from displacing more of Kalimantan's indigenous Dayak
people, the project will, in the longterm, help speed the
deforestation and pollution of one of South-East Asia's last
remaining rainforests. As Tapol, a London-based human rights
group, has pointed out, that will benefit nobody more than the
international logging and mining companies.
One of the biggest factories to use Samarinda's power will be the
Kelian Gold Mine, on a tributary near the town. Kelian has
already been involved in a pollution scandal and clear-felling of
rainforest, which has forced the relocation of 400 Dayak families.
It is largely owned by CRA, an Australian company, and the British
mining giant RTZ. The Kaltima Prima Coalmine, jointly owned by
CRA and BP, has been the subject of similar complaints.
Most of the big logging done by the Kalimanis Group, owned by Bob
Hasan, a close friend of Suharto. For like most other large
ventures in Indonesia, Samarinda will help to support Indonesia's
ruling elite - the relative, business associates and cronies of a
dictator who has amassed one of the world's largest personal
fortunes.
The greed and nepotism of Indonesia's 'First Family' is the stuff
of legend. It is common knowledge in Jakarta that the Suharto
family and a few hangers-on have used their position to amass
fabulous private wealth, on a scale probably even grander than the
Marcos family in Manila. Suharto himself is thought to be worth
10 billion pounds, with the rest of the family making do
withanother 10 billion pounds. Hardly a single large foreign
investment has arrived without the greasing of a Suharto palm.
There is now evidence that British aid money may be finding its
way directly into the First Family's bank accounts.
Suharto and four of his six children control a large slice of the
nation's wealth. His daughter, Tutut, 45, controls more than 60
companies, with near monopolies on everything from toll roads to
broadcasting. Her brothers - Sigit,43, Bambang, 41, Tommy, 31,
and Titik, 29 - have carved up many other aspects of economic
life, from banking and film distribution to plastics manufacture
and internal air flights.
Over coffee at a Jakarta hotel owned by Tutut, one journalist
commented: "The children are a big problem. They're greedy. They
are trying to get into everything, and one day that will be a big
headache. When this blows up it will make the Marcos family look
like child's play."
"They have got their hands stuck to everything," said a diplomat.
"You can't do anything in this country without a brown envelope.
Most of it goes to one of the children. Everything becomes much
more expensive because of the add-ons, and that is even more true
of defence deals where the sums are so much higher."
Aberson Sihaloho, an outspoken opposition MP, explained angrily:
"Everything depends on the President. Foreign investors who want
want to make business here have to make their approach as
effective as possible, so they take local partners with direct
access to the highest authority. Those local agents are usually
companies belonging to the First Family."
Scores of British companies, building everything from power
stations and bridges to chemical plants, have effectively gone
into forced partnership with one or other of Suharto's children.
"The local company doesn't do anything. It just gets commission.
How much depends on the price for the contract. That means that
everything here costs twice as much," Sihaloho siad.
In at least one case, large sums of British aid money are
involved. Last month Trafalgar House, the British conglomerate
and a large contributor to the Conservative party, reached an
outline deal to build a 35-mile toll road from Cikampek, near
Jakarta, to Padalaran, near Bandung. It will cost an estimated
400 million pounds. Britain has offered Indonesia 16.85 million
pounds in aid towards the road, an offer that has yet to be taken
up, and has already given 1.7 million pounds for technical
studies.
In a classic case of economic 'cronyism', one of Trafalgar's
partners in the scheme is PT Citra Lamtoro Gung, the major company
controlled by Suharto's daughter, Tutut, who has a 30 per cent
stake in the road. Last week a spokesman for Trafalgar House
defended the arrangement. However, the deal has raised eyebrows
in the British community in Jakarta.
"There is definitelt British aid money going into projects with
presidential family connections," one British aid worker said.
"It is surprising that this being done so obviously. In the past,
we have been very careful not to allow British aid to get involved
with the First Family. I think it shows that attitudes must be
changing."
After six years of negotiations between Trafalgar House and
Indonesia, the toll road deal was finally struck during the latest
visit to Jakarta in October by Needham. Only a few days earlier,
the British Field Marshall, Sir Peter Inge, had met his Indonesian
counterpart, General Feisal Tanjung. Afterwards, Tanjung was
asked at a press conference if Indonesia would be buying British
arms. "Yes, lots," he replied.
[At the bottom of the article there is a map of Indonesia - East
Timor, I am glad to say, is shaded to differentiate it from
Indonesia. There are photographs of Suharto and family and some
brief bio-data, which now follows - Jonathan]
Indonesia's 'First Family': The Wealthy Connections
Suharto: Personal fortune of the 73-year-old ruler was estimated
at 10 billion pounds in 1989. His wife, Tien, the daughter of a
Javanese sultan, is known as Madame Fi-Fi, because she always
wanted to go fifty-fifty, demanding a half share in any business
deal she was associated with.
Tutut: Suharto's eldest child at 45. She combines money-making
and jetsetting with love of politics. Her principal company,
Citra Lamtoro Gung, runs deeply unpopular toll roads; other
interests range through wood pulping, educational TV, radio,
publishing and pharmaceuticals. She is vice-president of Golkar,
the party of government.
Sigit: The dictator's eldest son is 43, and a partner with his
younger brother, Tommy, in the Humpuss Group, a huge manufacturing
and trading conglomerate. His entrepreneurial drive is blunted by
a passion for gambling. He is a partner with BP in a giant
polyethylene plant.
Bambang: 41 and Suharto's most successful son in business. His
firm, Nusantara, owns hotels, coal mines, property, paper mills.
He made a fortune out of a monopoly on the import of plastics; he
got a monopoly of the trade in oranges in Kalimantan but lost
money when his excessive greed caused farmers to revolt.
Titik: Suharto's second daughter, 36, is married to the commander
of the Indonesian equivalent of the SS. She figures as one of the
country's biggest taxpayers. One of her companies has joined
British investors in a 400 million pounds project to build a
mammoth cement works in Sumatra.
Tommy: Aged 31, he is in love with fast cars. His business
interests are concentrated in his Humpuss Group, one of
Indonesia's biggest firms. He started Humpuss when he was 23 and
it prospered with profitable contracts with nationalised
companies. Today it is a conglomerate of transport, farming and
petrochemicals.