Govt to establish team to assess Inalum contract

The government will set up a team to assess the current contract between Indonesia and Japan on the  PT Indonesia Asahan Aluminium (Inalum) joint venture agreement which is due to end in 2013, a minister said.

Japan wants a contract extension to the project which started in 1975, but the government is still assessing which will be the most beneficial for Indonesia, said Coordinating Economic Minister Hatta Rajasa.

"The team hasn't been formed. It will develop our options,” he said Tuesday.

The options according to State-Owned Enterprises Minister Mustafa Abubakar include extending the contract with Japan under the condition the government has a larger share, or ending the contract with Japan and offering state firms to become the operator.

Now the government owns a 41.12 percent share in Inalum. The remaining stake is owned by Nippon Asahan Aluminium Co. Ltd. (NAA), a consortium of 12 Japanese firms.

The firms are Sumitomo Chemical Co. Ltd., Sumitomo Shoji Kaisha Ltd., Nippon Light Metal Company Ltd., C. Itoh & Company Ltd., Nissho Iwai KK, Nichimen Corporation, Showa Denko KK, Marubeni Corporation, Mitsubishi Chemical Industries Ltd., Mitsubishi Corporation, Mitsui Aluminium Co. Ltd. and Mitsui & Co. Ltd.

Japan's Ambassador to Indonesia Kojiro Shiojiri had said Japan wanted to extend the contract.

State firms PT Krakatau Steel and PT Aneka Tambang are reported to be interested to operate the project located at Asahan, in the eastern part of Sumatra.

Hatta said the government planned to develop an economic corridor in the eastern part of Sumatra. “The corridor will be developed across Riau province,” he said.

According to the National Development Planning Agency (Bappenas), the government has identified six economic corridors prioritized for development and investment.

They are located in the eastern part of Sumatra to Northwest Java, the northern part of Java, Kalimantan, the western part of Sulawesi, East Java, Bali, East Nusa Tenggara and Papua.

The government is ready to offer the corridors in Sumatra and Northern Java to Japan, said Dedy S. Priatna, deputy of infrastructure at Bappenas.

The original Inalum contract was signed in Tokyo on July 7 in 1975 when Indonesia and Japan agreed to jointly develop the smelter.

On Nov. 25, 1975, the 12 Japanese firms established the NAA consortium. On Jan. 6, 1976, Inalum was established in Jakarta, with the government owning a 10 percent share.

In October 1978 the government's ownership was raised to 25 percent. In June 1987 the government share was raised to 41.13 percent and this was slightly changed to 41.12 percent on Feb. 10, 1998.

Under the deal, Inalum only retains 100,000 tons per year, out of the 250,000 tons of aluminum ingots produced annually, to help meet Indonesian domestic demand although the latter can reach up to 300,000 tons a year. The rest must be exported to Japan.