SOE Minister Dahlan Iskan: We will Find the Money Somehow

Dahlan Iskan admits managing 142 SOEs is no walk in the park. Last week, the SOE Minister received Tempo's Heru Triyono, Ananda Putri and Purwani Diyah Prabandari in his office to "ask him anything."

In the first part of the interview he spoke of the conflict over Pertamina's cross section gas pipe and PGN, to which he asked both SOEs to "share the pain.

Below is the second part of the interview where he talked about the Inalum takeover.

Why was the takeover of Indonesia Asahan Aluminium (Inalum) delayed? 

Negotiations with NAA (Nippon Asahan Aluminium) were tough. Out of the blue, one day before the deadline (October 29), NAA changed its takeover method to become an asset transfer process. We were already prepared to pay by transferring shares.

Why did they do that? 

Actually, what was previously agreed in the master agreement was in fact the asset transfer method. But NAA had also agreed to the share transfer

What would the transfer method be if it involved assets? 

It would transfer assets, like the PLTA, the plant, only the documents would be different. The value of assets is about Rp14-15 trillion (100 percent), but if we built anew, at the same location, we would be spending Rp30 trillion. But we didn't transfer 100 percent because we own 41.12 percent, so it's about Rp7 trillion that we have to pay.

Why did NAA want to take the case to international arbitration? 

Don't get me wrong. What will be taken to arbitration is not the method, but the numbers. So, the arbitration would now affect the ownership. It will be owned by Indonesia. What is certain, NAA planned to go to arbitration not to extend its ownership, but because the price wasn't right.

Will Indonesia agree to transfer to NAA the amount of US$650 million in costs?

That number is not in line with the value submitted by the government. It's not that we want it cheaper, but it's a procedure of good governance. We will insist on US$558 million, which is the result of the audit by the Finance Development Controller (BPKP). We don't dare to go beyond that.

What if the international arbitration court favors NAA?

I am still hopeful the arbitration will decide on the price resulting from the BPKP audit. If they determine that the final number should be somewhere in between, we can still do it, although it will be different from the proposal by the BPKP. The important thing is that it's legal, so that we are not faulted according to the law.

The problem is that the National Budget has only allocated Rp7 trillion for it. So where would the additional money come from? 

So long as it's a court decision, we will find the money somehow. The important thing is that it's legal.

As far as you know, has NAA officially taken it to arbitration? 

Not to this day (last week). They are still negotiating it in Singapore. The team that went there was from the ministries of industry, finance, economics coordination and the SOE.

Has our lobbying been effective?

For sure, we don' need to shoot here and there. Businesspeople are different from politicians. We hope the Japanese government will be involved. Inalum is not the only project we share with Japan. We have had a long relationship with them. Last month, I officiated at another SOE project with a private Japanese company in West Kalimantan.

What will be the impact of Indonesian ownership of Inalum with regard to domestic aluminum production?

A big one. So far, the aluminum industry in the importing countries needs huge amounts of raw material, because it could not get allocation from Inalum. According to the agreement with the Japanese then, 70 percent of the production would go to Japan. That was 30 years ago when Indonesia didn't have an aluminum industry. Now, many will have a go at it and this means the price of Inalum aluminum will be far cheaper because we have a cheaper source of electricity. Aluminum smelters need huge amounts of electricity, quite different from the amount needed by shoe factories.

So, how much cheaper would that be?

The electricity cost at Inalum is only 3 cents, others spend 14 cents, or 1 dollar minimum. At Inalum there is a 600 megawatt power generator, that's why electricity is cheap. If in the future people will no longer use aluminum, we can profit from this power generator. If we sell power to PLN at the rate of 6 cents, the profit will be in the trillions.

Is it true the finance director of Krakatau Steel, Sukendar, will join the executive board of Inalum? 

Yes. He is one of the people we are looking at but it's not sure yet because Krakatau Steel is in difficulty. He is needed there.

** The full version of this interview is available in print in this week's edition of Tempo English.