UK firms suffer in Suharto aftermath

THE construction company Trafalgar House is set to become the next British casualty of the fall of President Suharto, with the new Indonesian government poised to cancel a $625m joint venture involving the dictator's daughter.

Sources in the Indonesian government told The Independent yesterday that they want to find another private company to build a 59km toll road which Trafalgar House, now called Kvaerner, is constructing in West Java.

News of the latest blow to British interests in Indonesia came as details emerged of other big companies with contracts linked to family or friends of the former president Suharto. Rolls-Royce, Rio Tinto, BP, United Biscuits and the Bank of Scotland all have projects that may come under scrutiny.

Last night, Kvaerner said it hoped to salvage the toll road deal, but government sources said they were keen to scrap it. They claim that the project is behind schedule and that relations between the British company and the Ministry of Public Works have all but broken down. The project is likely to be scrutinised for evidence that it was awarded as a result of nepotistic favours granted to Trafalgar House's partner in the deal - Mr Suharto's eldest daughter, Siti Harijanti Rukmana, better known as Tutut.

"We want to end the whole thing," a senior government source said yesterday. "The ground-breaking was one year ago, and by now they were supposed to have completed one segment. We have reminded them many times, but relations are not good."

The news comes five days after a pounds 225m contract involving Thames Water and Mr Suharto's eldest son was suspended after allegations of nepotism.

The secretary-general of the Ministry of Public Works, Sunaryo Sumadji, said yesterday that the government will "intensify" its investigations into companies with links to Mr Suharto's relatives and cronies.

But Thames Water is not alone in having links that were once advantageous and are now potentially disastrous. Questions have also been raised about the future security of PowerGen's role in a pounds 1.065bn power station project in East Java. The company's partner was part-owned by another of the ex- president's sons, Bambang.

And according to information compiled by the Indonesian human rights campaign group Tapol, there could be many more. Rio Tinto is a shareholder in PT Freeport Indonesia, which runs at $3bn copper and gold mining operation in Irian Jaya. Another Freeport shareholder is a company 80 per cent controlled by Suharto-controlled charitable foundations, with the remaining 20 per cent divided up between Mr Suharto's son, Sigit, and his golfing partner Bob Hasan.

The company said it had not deliberately allied itself to any Suharto family or friends and was committed to long-term investment in the region without becoming involved in politics.

"We are, and always have been, completely and utterly neutral as far as politics go," said a spokesman.

BP owns 51 per cent of Indonesia's first polyethylene plant, PT Peni, which makes polythene. Sigit owns 9 per cent of the company, while Bambang controls a company which has secured a five-year contract to supply the plant with half its ethylene requirements.

A spokesman for BP said it was not concerned about links to the Suharto family.

Rolls-Royce's agent in Indonesia is PT Mahasaran Buana, a company owned by Mr Suharto's youngest son Tommy. Rolls-Royce engines are used in the Hawk aircraft and the N-25 passenger planes manufactured by the state aircraft company IPTN, which was headed by BJ Habibie before he became President.

Taylor Woodrow is involved in building a $1.2bn light railway in East Java with GEC Alsthom and a third partner, the Bimantara Group, Tapol claims. Bimantara is controlled by Bambang.

Last night, Taylor Woodrow said GEC Alsthom had signed a letter of intent with an Indonesian company in October 1996 and they had come on board a year ago. Neither company would confirm the Indonesian company was the Bimantara Group.

The Bank of Scotland is investing pounds 5.5m in a huge papermill project in South Sumatra. One of the other investors, with a 16 per cent stake, is PT Trodden `Satriaputra, which is owned by one of Mr Suharto's daughters, Tutut.

In 1994, United Biscuits launched a joint venture with the Salim Group to build and run a biscuit factory in West Java.

The Salim Group, which has a 50 per cent stake in the project, is owned by Liem Sioe Liong, the former president's closest friend and one of the richest men in Indonesia.