Indonesia's President Replaces Pertamina Executives to Fight Corruption and Boost Revenue

Indonesian President Abdurrahman Wahid has replaced key executives at the country's state-owned petroleum company, Pertamina, to address corruption and mismanagement that have led to billions of dollars in lost revenue. The move is aimed at increasing government revenue from the country's oil and natural gas fields, which are its largest exports and a significant source of budget revenue. Pertamina has been plagued by graft and mismanagement, with a recent audit revealing nearly $US5 billion in losses due to inefficiencies in the two years leading up to March 1998.

Key Takeaways:

• President Abdurrahman Wahid has appointed Baihaki Hakim, former head of PT Caltex Pacific Indonesia, as Pertamina's new president-director to clean up the company.
• Six other executives, including directors of finance, oil contracts, logistics, processing, exploration, and general affairs, have been replaced.
• The changes come at a critical time for Indonesia, which needs to increase government revenues to address a large budget deficit, pay for subsidies to alleviate the effects of recession, and increase the salaries of civil servants and military personnel.
• Foreign oil firms are demanding better terms for collaborating with Pertamina, highlighting the need for reform.
• The new executives face a tough task in rooting out corruption and streamlining the company's bureaucracy.
• President Wahid has emphasized the need for Pertamina to become internationally competitive and for the new executives to re-examine oil wells previously declared unproductive to offset Indonesia's declining oil output.
• Former president Suharto's relatives and associates were implicated in corruption and collusions at Pertamina, which the Wahid government is committed to addressing.

Statistics:

• $US5 billion: Amount of losses suffered by Pertamina in the two years leading up to March 1998 due to inefficiencies and corruption.
• 160: Number of "sweet-heart" contracts terminated by Pertamina following an independent audit.
• 1998: Year former president Suharto was forced to resign.
• 1998 (May): Date of Suharto's resignation.

Sources:

• The Straits Times, Friday, 21 August 1998, p. 18
• International Herald Tribune
• Petronusa Karyabakti