A good inconsistency?

A good inconsistency?

What is a good inconsistency?! For our honored Constitutional
Court, that is probably the only way to describe their recent
decisions. Last week, we were baffled by the court's decision to
annul the Electricity Law. This week, however, we are encouraged
by the court's verdict to uphold the Oil and Gas Law.

Those laws govern two of the country's most important
commodities. Both laws seek to liberalize these two important
sectors, the anti-liberalization plaintiffs demanded that the
laws be revoked because they were inconsistent with Article 33 of
the 1945 Constitution. And yet, despite the obvious similarities
between the laws, the court's decisions differed. Could this be
an example of a positive inconsistency?

The bone of the contention here is the interpretation of
Article 33, especially the second and third paragraphs: (2)
Branches of production, which are important for the state and
which affect the life of most people, shall be controlled by the
state; (3) Land and water and the natural riches contained
therein shall be controlled by the state and shall be used for
the welfare of the people.

With these two recent verdicts, the court's interpretation of
that same article seems markedly inconsistent. In its verdict on
the Electricity Law, it interpreted the words "controlled by the
state" to mean the government must maintain a controlling stake
in all companies that provide electricity to the nation; yet this
is such a narrow-minded interpretation. But, in its verdict on
the Oil and Gas Law, the court interpreted "controlled by the
state" to mean the government's control over the industry.
However, the means of control could be in any form, not
necessarily a controlling stake in oil companies. In this case,
we believe the latter interpretation was the correct one.

Interestingly, in its verdict on the Oil and Gas Law, the
court tried to provide further explanation about the reasons
behind its annulment of the Electricity Law. It seems that they
were trying to explain that they were actually consistent. The
court said that, unlike the Oil and Gas Law, the Electricity Law
did not clearly stipulate the government's controlling roles in
the electricity sector. Still, we do not put much credence in
this new explanation. We basically do not agree with the court's
decision to maintain the electricity monopoly by inefficient
state company PT Perusahan Listrik Negara (PLN).

The court's different verdicts on these two crucial laws can
perhaps be understood if we look at the realities around us. The
Electricity Law had not been put into effect, as the government
never issued any implementing regulation. Thus, canceling the law
would not create havoc in the industry.

On the other hand, the Oil and Gas Law has been implemented,
especially in the upstream sector. The government has stripped
Pertamina of its monopoly and established BP Migas to assume
Pertamina's roles in controlling the upstream sector. In
addition, there have been a number of oil and gas contracts
signed, involving billions of dollars in planned investment.
Thus, annulling the Oil and Gas Law would have had grave
repercussions.

In addition, the Constitutional Court is filled with people
who are eloquent when it comes to constitutional law, but not the
modern economy or the corporate world. Therefore, we do not
expect these judges to be involved in a profound debate on a
choice between competition and monopoly in important sectors like
electricity and oil and gas. The result is, very simply, an
inconsistency in its verdicts.

We hope that the court's legal experts have learned something
from these important cases and broadened their minds to the
reality of the changing world. We think the court needs the
judges have a much broader world view and deeper understanding of
modern economics, not just constitutional law. It is particularly
important that they have a firm grasp of the ramifications of
monopoly and competition. This call is especially important as
the court is now deliberating on other important laws that have a
great impact on the life of many people, such as the Water Law.

Not only that, the government is now drafting a new
electricity bill, based on the annulled law with some minor
changes. We expect the bill will pass through the House of
Representatives in a timely fashion. However, we do understand
that these narrow-minded, even xenophobic groups will ask the
court to annul this revised electricity law, once it is complete.

Whether it is the Water Law or the new and improved
electricity law, we hope the court will be consistent in its
future decisions with a view to modern economic realities.