Q

em>Questions concerning the much-hyped initial public offering (IPO) of state steel company PT Krakatau Steel — Southeast Asia’s largest — have divided political parties in the ruling coalition. The Jakarta Post’s Rendi A. Witular and Hasyim Widhiarto explored the root causes behind the political turmoil. Here are their stories:

State-Owned Enterprises Minister Mustafa Abubakar cut short his Oct. 29 trip in South Sulawesi following a string of telephone calls demanding he immediately return to Jakarta upon the mounting uproar related to the Krakatau IPO.

Mustafa was enraged upon learning from the National Intelligence Agency (BIN), which was mired with internal rifts, that there were tapped telephone calls and text messages between his officials and several politicians in which they demanded a large chunk of Krakatau shares.

According to several witnesses, Mustafa grilled some of the accused officials, who eventually admitted they were pressured by five legislators and one politician from the ruling party to meet their demands.

It is a deep-rooted tradition for ministry officials to pressure the underwriters who handle the IPOs of state companies to allocate shares to well-connected people.

The Krakatau IPO has caused a political rift between members of the ruling coalition, triggered by allegations the ministry officials had undervalued Krakatau’s share price so that politicians and well-connected businesspeople near President Susilo Bambang Yudhoyono could buy a majority of the shares and sell them for a hefty profit.

Krakatau sold 20 percent of its shares to the public in early November, pocketing around Rp 2.68 trillion (US$297 million) in proceeds. The share was sold at Rp 850 per piece, lower than Rp 1,250 estimated by independent consultant PricewaterhouseCoopers, which was hired by the ministry to fairly value the company’s share.

It was the vice chair of the National Mandate Party (PAN), Dradjat Wibowo, who came forward on Oct. 26 alleging that the IPO was rigged to benefit Yudhoyono’s Democratic Party elites.

PAN patron Amien Rais, who is an icon of the 1998 reform movement, also joined the bandwagon. PAN is a member of the Democratic Party coalition.

Coordinating Economic Minister and PAN chair Hatta Rajasa insisted Mustafa make public all documents related to the Krakatau IPO, saying the issue might spiral out of control.

“My position in this case is to demand transparency from Minister Mustafa so we can all know which parties have benefited from the IPO,” Hatta said on Friday.

Hatta refused to explain the reasons behind PAN’s loggerhead with the coalition.

It was not until last week that PAN received a boost of support from the Golkar Party, the coalition’s second most prominent member.

Golkar broke the silence and demanded a thorough investigation into the Krakatau case.

The party would fight for a special committee to investigate the case, Golkar secretary general Idrus Marham told The Jakarta Post on Wednesday.

A special committee would necessitate intense questioning and investigation, with the result only a few steps away from demanding the President be held accountable, potentially leading to the unseating of the President.

A special committee on Bank Century’s whopping bailout earlier this year cost the reform icon then finance minister Sri Mulyani Indrawati her seat.

“This case is just too big to get away,” Idrus said after a meeting between Golkar chair Aburizal Bakrie and his Democratic Party counterpart Anas Urbaningrum. “Through a special committee, we can demand responsibility from those involved in undervaluing our state assets.”

Golkar could not immediately plunge into criticizing the case because of internal debate, after at least three of its top legislators were allegedly involved in requesting share allotments from the ministry.

Upon the request of Aburizal two weeks ago, Idrus and the party’s faction chair at the House of Representatives, Setya Novanto, began investigating several of the alleged legislators.

“Yes, we have questioned our legislators who reportedly demanded a share allotment. There is no solid evidence they were involved,” Idrus said.

Idrus also denied allegations the Krakatau case was retaliation against Yudhoyono’s camp after the allegations that graft suspect Gayus Tambunan had illegally left police detention and flown to Bali to meet Aburizal.

Former low-level tax official Gayus has been critical of the alleged tax evasion at Bakrie-linked companies.

“Golkar has been hit hard by the issue. But there’s no way we want to use the Krakatau case as political barter,” Idrus said.

A source at Golkar said the Krakatau issue was captivating because of the alleged involvement of Yudhoyono’s relatives and inner circle.

Both the Krakatau and Gayus cases were among the catalysts that prompted the two-day meeting between Aburizal and Anas, according to the Democratic Party’s advisory member Syarief Hasan, who is also Cooperatives and Small and Medium Enterprises Minister.

“The meeting was aimed at strengthening our ties with Golkar. Several contentious issues were discussed, including those that have been in the headlines for weeks,” Syarief said on Thursday.

Syarief also denied any involvement of the party’s elites in engineering or taking advantage of the Krakatau IPO.

“There has been no evidence that our members are involved in the Krakatau case. It was a politically motivated issue,” he said.

He also believes the case would not lead to the forming of a special committee that might deteriorate relations within the coalition.

Amid the tension in the camp, Democratic Party’s legislator Ruhut Sitompul said Golkar ministers would likely be ousted from the Cabinet in the upcoming shakeup.

“As a coalition partner, Golkar has not yet demonstrated a commitment to be friendly with us,” Ruhut said on Wednesday.

“Don’t be surprised if they are replaced by the PDI-P [Indonesian Democratic Party of Struggle].”

The PDI-P, led by former president Megawati Soekarnoputri, is part of the opposition camp.

While friction within the coalition looms, analysts believe the Krakatau issue will continue to simmer, and be retained as future political ransom against the Yudhoyono camp.

According to the House Commission XI for financial affairs chair Harry Azhar Azis, it would take several months before legislators could form a special committee to investigate the case.

Legislators will need to hold several hearings with Minister Mustafa before calling in the Supreme Audit Agency (BPK) to launch an audit of the IPO.

A BPK audit will take at least three months.

The results of the audit would be discussed at the House, and a vote would likely be taken to decide whether a committee needs to be formed.

Minister Mustafa, who is widely known in the private sector as lacking competence and knowledge of the corporate world, has insisted he committed no wrongdoing.

Mustafa blamed the IPO underwriters — Mandiri Securities, Bahana Securities and Danareksa Securities — for determining the price of shares and allocating the shares to buyers.

“The price was set at Rp 850 a share, which triggered an outcry because it was considered too low. I asked the underwriters to raise it to Rp 950, but they rejected my proposal,” he said.

PDI-P legislator Hendrawan Supratikno said the Krakatau mess was a reflection of the country’s “expensive” form of democracy.

“Our political system has forced many politicians, assisted by well-connected businessmen, to practice rent-seeking aimed solely at financing for the 2014 general election,” Hendrawan said.