Indonesia fiasco could cost UK billions

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SOME of the United Kingdom's best-known companies could lose contracts with Indonesia worth billions of pounds in the wake of the collapse of the Suharto regime.

British multinational companies such as BP, RTZ and British Aerospace are waiting to see whether their connections with the Suharto government will jeopardise their investments.

The new Indonesian government had put on hold a pounds 225m deal with Thames Water, on the grounds that contracts could have been awarded through nepotism. The eldest son of the former president Suharto was due to receive 20 per cent of profits, it emerged yesterday.

The Department of Trade and Industry yesterday warned companies to proceed with "caution". "We are aware that infrastructure projects are being cancelled either because of the currency problem or because of links with former president Suharto," an official said.

BP has devoted more than $1bn (pounds 600m) to building up its presence. The country's first polythene plant, PT Peni, is 51 per cent owned by BP while Suharto's eldest son Sigit owns 9 per cent. The company confirmed the links but could not comment on reports that Suharto's second son, Bambang, controlled the company which supplies half of Peni's feedstock.

A spokeswoman said: "Our investments were all straightforward commercial decisions. We have had no contracts cancelled."

BAe sold 44 Hawk aircraft to the Suharto government and was hoping to deliver 16 more. A BAe spokesman said: "Our involvement in Indonesia has always been with the government and it is up to them how they deal with their internal affairs."

RTZ has been involved in a copper and gold mining scheme handled through a company, Freeport McMoRan, owned 11 per cent by RTZ. The Indonesia Human Rights Campaign claims stakes are held by the government and charitable foundations established by Mr Suharto. RTZ said it could not confirm other stakeholders were but did not "anticipate any problems".

Thames Water's deal, page 6

Early elections, page 12