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Discourse: Energy, mining reform: Common sense, no vested interests

  • The Jakarta Post

    The Jakarta Post

| Mon, October 19, 2015 | 06:03 pm
Discourse: Energy, mining reform: Common sense, no vested interests

Sudirman Said - JP

Reform in the graft-ridden energy and mining sectors has been at the center of attention since President Joko '€œJokowi'€ Widodo took office on Oct. 20. Energy and Mineral Resources Minister Sudirman Said, an accountant by training, recently talked with The Jakarta Post'€™s Raras Cahyafitri and Rendi A. Witular about his efforts to reform the multibillion dollar sectors. Here are excerpts of the interview.

Question: It'€™s been almost one year since you took the helm of the ministry. What are the notable changes?

Answer: First is common sense. We are returning the management of our energy and mining policy to be based on the common sense of how the business is run. All things beneficial to the public and the nation should be decided regardless of the difficulties. Second, to reach common sense, policymakers are prohibited from having any vested interests.

With the combination of both, we can resolve the fuel subsidy problem. It is hard, but we have to work on that.

The impact of the [fuel subsidy] policy has provided enormous fiscal space for the allocations of funds for infrastructure, village development and social programs. For the first time ever, our spending for infrastructure has outpaced that for subsidies.

Efficiency in our supply chain is also a result of such a combination. There is a need for a transparent supply and the government is being firm to eliminate all impediments to that. We have dissolved Petral [Pertamina'€™s Singapore-based unit that deals with supply and has long been accused of being infested with graft].

We are still waiting for the outcome of the audit. It will reveal the magnitude of inefficiency and misconduct in the past. After receiving the report, the government will have a future policy and a system in place to prevent the repetition of the bad practices. Therefore, we have to improve the leadership in the state oil and gas company Pertamina, as well as its systems and business process. If the report shows indications of violations to regulations, we will hand them over to the law enforcers.

Another issue in the sectors is how decisions for important policies were often delayed and played around. The decisions were taken at the last minute, causing minimum benefits for the industry and the public.

During this past year, we have accelerated such decisions because there are apparently no reasons to withhold them. An example of this is the Mahakam Block [operated by a local unit of French energy giant Total SA and Japan'€™s Inpex] that has been used for years as political commodity, and now we based our discussions on technical issues. We have also resolved problems plaguing 12 new oil and gas blocks. One by one, we are wrapping up the renegotiation with coal companies'€™ contract of work as well as with Freeport [a local unit of US mining giant Freeport McMoRan that has operated the world'€™s biggest integrated gold mine for over 40 years in Papua].

We are also dealing with the construction of the 35,000 megawatt power plants. It is difficult but we have to build them. We have to continue the process while looking for breakthroughs so that we can complete the program.

The Energy and Mineral Resources Ministry is notorious for graft. How do you turn the tables on that?


I was '€œthankful'€ to start this job when the ministry'€™s reputation and bargaining position was extremely poor due to several graft prosecutions. In the theory of change, it is called a burning platform. Thus introducing a change is easier when the platform is in trouble.

I told the team that we have to change our way of thinking if we want to see no more bad practices like in the past.

We are public servants given the authority by the state, and if we don'€™t want to repeat such practices, let us all change.

Although changes are difficult, the level of resistance is quite low. Hundreds of ministry officials have been rotated, promoted or demoted in the span of only six months.

Fifteen officials in the first and second echelons were rotated from their positions, 141 were promoted to a higher level, 302 have new functions at the same echelon levels and 60 people were thrown out. We now also have 1,100 new cadres prepared.

But we haven'€™t finished yet with the internal reform. At least half of our officials have new duties and this will change the atmosphere. Critics said that these changes would create a new backlog but in reality we are doing OK.

We also have 60 percent of the permission process simplified. So, this is all about common sense.

The directorate general of oil and gas is particularly known as '€œuntouchable'€. Many have said that it is '€œa state within a state'€. How do changes take place there?


About two thirds of the bureaucrats in the oil and gas directorate general are new people, from the director general, the directors and their lower echelons. This is actually the President'€™s order made in December when he requested all ministries to immediately apply a formula of promoting a third of its officials, rotating another third and filling the other third with new people from outside units.

We implemented the order within six months. I agree with your saying that the directorate general used to be '€œa state inside a state'€ and seemed to be untouchable.

However, you have to remember that in the first week of leading this ministry, I replaced the oil and gas director general. That is a sign that we are serious and use only professional considerations in making decisions.
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