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Jakarta Post

Reformer at Pertamina

  • Editorial Board

    The Jakarta Post

Jakarta   /   Tue, November 26, 2019   /   08:36 am
Reformer at Pertamina Pertamina president commissioner Basuki Tjahaja Purnama. (ANTARA FOTO/Wahyu Putro A)

State-owned oil and gas holding company Pertamina, which had seen five top-management shake-ups over the past five years and is still burdened with poorly defined public service obligations while facing perpetual pressure from vested-interest politicians, is now supervised by former Jakarta governor Basuki “Ahok” Tjahaja Purnama as its new president commissioner.

Pertamina, one of the country’s largest state-owned enterprises (SOEs) with a daily turnover of more than US$250 million, and a notorious cash cow for many politicians, has always been vulnerable to government intervention.

What then may we expect from Ahok, who now asks to be called BTP, in coping with Pertamina’s problems? His authority is mainly that of chief supervisor and adviser to the board of directors and not Pertamina’s chief executive officer.

There seem to be high expectations of Ahok, well known for his impeccable integrity and no-nonsense attitude in developing transparency and accountability when he was Jakarta governor from 2014 to 2017, replacing Joko “Jokowi” Widodo, who successfully ran for president. Both seemed to have built strong mutual trust in each other since 2012, when they served as a team in governing Jakarta.

But Ahok’s success will still depend on the key performance parameters set for his job. If one of the yardsticks is to reduce oil imports and accelerate the building of oil refineries, as cited last week by SOEs Minister Erick Thohir, it will be an impossible task.

Pertamina is only one of several large oil and gas producers and the upstream oil industry still depends mainly on foreign investment and technology, which in turn is determined by the business climate and policies devised by the oil regulatory body and the attitude of regional administrations. Likewise, long delays in the construction of refineries have been caused by complex problems beyond Pertamina’s ability to solve.

Pertamina's main problems are the poorly defined public-service obligations imposed on the company regarding fuel subsidies, along with the government’s fuel-pricing policy and lobbying pressure from vested interests. It is President Jokowi himself who should be responsible for resolving both problems. The main task for Ahok, given his managerial competence, is to build good corporate governance through the development of an effective internal control and internal audit system and high standards of transparency and accountability.

Transparency means a comprehensive approach to opening organizational structures, operations, policies and procedures to public view and reporting publicly on commitment to integrity. Transparency should be constrained only by the needs of commercial confidentiality and privacy.

Lack of transparency is one of the most common, and unfortunate, shortcomings of SOEs, notably Pertamina, which is still wholly owned by the government. Opacity undermines performance monitoring and limits accountability at all levels.

Even though his authority is mostly that of a supervisor and adviser, the full trust Ahok has from President Jokowi will enable him to wield strong influence on the board of directors to implement bold reforms within the company.