Government backs Bulog, allows it to pursue profit

A'an Suryana, The Jakarta Post, Jakarta

The controversial National Logistics Agency looks set to be renamed and given the green light to expand its business dealings and seek profit.

Documents obtained exclusively by The Jakarta Post show the government will issue a decree allowing Bulog, to be renamed Perum Bulog, to form joint ventures with other companies, to form subsidiary firms and to invest funds in other companies.

Bulog will even been allowed to issue bonds to raise funds subject to government approval, the draft decree, dated Jan. 20, says.

The permission to seek profit was allowed in order to assist Bulog perform its main duties, including to safeguard rice stocks, it says.

The government previously said that Bulog's profits from commercial activities could be used to partly cover the government's rice subsidy program.

But, for a while, Bulog's commercial operations would be limited to vital commodities, such as soybeans, corn, sugar and rice.

Some experts have aired concerns over the government's move to allow Bulog to seek profit, arguing it will encourage Bulog to shift attention from safeguarding and stabilizing rice prices to profit-making activities.

Founded in the late 1960s, Bulog was not only responsible for the stabilization of rice prices, but also held a monopoly over the importation of wheat, sugar, soybeans and several other basic commodities.

Bulog's wide-ranging authority during the New Order era made it one of the country's most strategic institutions.

However, the New Order government's tight grip over Bulog has left corruption unchecked in the agency, as the regime often used it as a cash cow to support its political operations.

After former President Soeharto stepped down in 1998, the agency was hit by a series of financial scandals relating to its past activities.

One recent scandal involved Akbar Tandjung, now the speaker of the House of Representatives.

Akbar, who got Rp 40 billion in 1999 when he served as chairman of the then largest political party, Golkar, cum State Secretary, has been found guilty by the Central Jakarta Court of embezzling the funds. The Jakarta High Court has upheld the verdict, but Akbar has appealed to the Supreme Court.

Following the downfall of Soeharto, the government scrapped Bulog's various monopolies at the request of the International Monetary Fund (IMF) which organized a multi-billion dollar bailout loan for the country.

The IMF has also called for Bulog to be financially accountable and transparent.

Many clauses of the decree pertain to Bulog's accountability, reflecting the government's main concern over the issue.

"The company is not allowed to cover the expenses of the government departments and agencies," a clause of the decree says.

The decree rules that the government must establish a supervisory board, consisting of a maximum five senior government officials to watch over its operations. The board members are all appointed by the minister of finance for a period of five years.

The board should gather once every three months to evaluate the company's performance, while the company has to submit a report on its financial reports to the board every three months, aside from submitting an annual report to the Minister of Finance, the decree says.