Mon, 06 Mar 2000

Congratulations, Baihaki Hakim

First, I would like to congratulate you on your appointment as president director of state-owned oil and gas company Pertamina. As you are a former president director of PT Caltex Pacific Indonesia, the largest producer among the production-sharing contract (PSC) companies in Indonesia, I believe no one will doubt your knowledge of the oil business as well as your contacts in the industry.

In his speech prior to your installment, President Abdurrahman Wahid instructed you to take note of four things in doing your job: to clean up corruption and collusion, improve its efficiency, expand its production capacity and make Pertamina an internationally competitive oil company.

Based on the time frame, your assignments could be elaborated as follows: In the short term, maybe in one or two years, you have to be able to eradicate corruption and collusion, while at the same time improve the company's efficiency.

In the medium term, over two years from now, you would have to expand production capacity.

In the long term, maybe more than five years, if you are still in the position, we could see whether you can make Pertamina an internationally competitive oil company.

I suggest you concentrate on the short-term steps first. As a newcomer on the board, you are free of corruption and collusion, and therefore you would not feel any compunction in taking resolute actions against Pertamina personnel where necessary.

Also, Mr. Ainun Naim as a new finance director, will not cover up financial data that indicates corruption. Success in wiping out corruption and collusion will drastically change Pertamina's corporate culture, which of course will make it easier for you in performing your other tasks.

To improve efficiency, I would like to suggest one thing: Please give extra attention to PSC companies' cost recovery. In 2000, the budgeted figure will be around US$2.5 billion. Using an exchange rate of Rp 7,000 to the dollar, the amount equals Rp 17.5 trillion.

If PSC companies could enhance efficiency by 10 percent, which I am sure they could, we would gain additional revenue of Rp 1.7 trillion. Being cautious does not mean having to be involved deeply in the day-to-day PSC companies operations; on the contrary, Pertamina should give more authority to the firms.

As you are a former executive of a PSC company, I believe you know much about which part of Pertamina's involvement could be removed. It's time to review the function as well as the organization of the Foreign Contractors Management Body (BPPKA), if you really want to enhance overall efficiency. Your experience, professionalism and integrity will lead you in doing the job properly.