Fuel subsidies and Pertamina

Fuel subsidies and Pertamina

Sometime during or shortly after President Susilo Bambang
Yudhoyono's first 100 days in office, the public will likely pay
40 percent more for fuel (The Jakarta Post, Dec. 1).

This news will likely cause a variety of differing reactions.

One point is crystal clear, that if such price hikes become a
reality, most ordinary people will feel heavier burdens on their
shoulders.

After the 1970s oil boom, the government adopted a policy to
subsidize domestic oil consumption. Since that time, the policy
has been difficult to reverse as it affects most people's daily
lives. Each time fuel prices are hiked, the general public reacts
emotionally -- because people know they will be hit in the pocket
in more ways than one -- primarily by a general increase in
commodity prices.

Such subsidies are acceptable whenever the country's oil
exports are higher than its imports. But during the past four or
five years Indonesia's oil production has been continuously
shrinking, meaning that this country is no longer able to fulfill
its export quota set by the Organization of Petroleum Exporting
Countries (OPEC). Consequently, the country's oil imports are
higher than its exports, and beginning this year Indonesia has
become a net importer of oil.

The soaring oil prices, which have been enjoyed by all net
oil-exporting countries, have forced the government to set aside
an even greater amount of cash for the subsidies.

What is saddening is that the management of the state oil
company Pertamina; once dubbed "a state within a state" because
of its "unique" management in the 1970s under the late Ibnu
Sutowo; has not done much to increase oil production. Despite
this, its managers enjoyed a huge salary hike three months ago,
although they were already being paid far higher than executives
in other state-owned enterprises.

Pertamina, as one of the country's most important assets,
should face a total overhaul of its organization. All top-level
managers down to operation managers should be replaced by those
who are truly dedicated to the development of this state company.

The company's financial management, including its remuneration
system, must also be altered so that it is compatible with other
state-owned enterprises.

The current State Minister of State-owned Enterprises,
Soegiharto, with his previous experience in Medco Oil, is now
busy restructuring his ministry (Republika, Dec. 3). Soegiharto
is the man who can restructure this state oil company and turn it
into a profitable and internationally recognized and respected
company. This will eventually help contribute to the development
of the country.

M. RUSDI, Jakarta