The Merpati-Xi’an fiasco appears to have soured trade ties between Indonesia and China. (Courtesy of Xi’an Aircraft Industry Co.)
The central government will investigate possible corruption involving markups on 15 aircraft bought in a deal worth $231 million between state-owned carrier PT Merpati Nusantara Airlines and Chinese Xi’an Aircraft Industry Co., Sofyan Djalil, the state-owned enterprises minister, said on Wednesday.
Sofyan said the government’s probe would be part of the process of resolving the stalled deal with the Chinese company.
“I think we will seek further details about the prices of the planes before we come to a conclusion,” he said. “I don’t know the details yet [on the prices] but it must be explained.”
“But let’s not come to a hasty conclusion,” he said, adding that the Merpati-Xian deal also included options for spare parts supplies during the next three years, including flight simulators, which could mean the price would be higher than normal.
Merpati agreed to purchase 15 MA-60s in 2006 using a soft loan facility provided by the Chinese government. However, Merpati, saddled with serious financial problems, never followed through on its purchasing commitments.
Xi’an has already threatened to take Merpati to international arbitration in Singapore to recover $90 million in damages from the now-frozen deal, souring bilateral relations between China and Indonesia. The deal has also been blamed for postponing loans of about $5 billion from Chinese banks for the government’s fast-track electricity program.
The 56-seater aircraft has been exported to various countries. And according to Kathmandu-based Nepalitimes, Royal Nepal Airlines paid only $11 million per plane for two aircraft in mid-2005 and got another for free.
Recently, Drajad H. Wibowo, a senior member of the House of Representatives’ Commission XI, which oversees the state budget, called for a corruption investigation into the stalled purchases.
“This issue needs to be investigated by many parties, including the Corruption Eradication Commission,” he said. “I have asked the government to fully scrutinize all foreign loans because most of them involved [illegal] markups.”
Meanwhile, a source within the State-Owned Enterprises Ministry said he suspected that officials at the Finance Ministry, Merpati, the National Development Planning Board, or Bappenas, and Xi’an had colluded to mark up the price of the aircraft.
He based his suspicions on the deal’s high cost.
“The normal price for an MA-60 is about $11 million, but we accepted $15 million [per plane],” he said. “That’s outrageous.”
Hotasi Nababan, the former president director of Merpati who signed the deal back in 2006, told the Jakarta Globe recently that he did not wish to comment on the issue and would leave the matter to the team in charge of restructuring the purchase.
Meanwhile, Sahala Lumban Gaol, head of the negotiating team for Merpati who traveled to Beijing last week with Finance Minister Sri Mulyani Indrawati and Trade Minister Mari Pangestu, said the talks to settle the deal were in an “advanced phase” where both parties had to prepare the options for a settlement.
“However, I cannot reveal the options now, as we are still in negotiations,” he said, adding that his team would find a win-win solution for Merpati and Xi’an.
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