Govt plans to turn Bulog into a conglomerate

Govt plans to turn Bulog into a conglomerate

Adianto P. Simamora, The Jakarta Post, Jakarta

Following the change of the State Logistic Agency's (Bulog)
status to a semi-profit-oriented state company (Perum), Bulog has
transformed its business strategy from the short-term to the
long-term with the aim of becoming a conglomerate, but the plan
has drawn mixed reactions from analysts.

With its new status, Bulog is allowed to run commercial
activities both in the upstream and downstream, aside from its
main task of strengthening much-needed food security in the
country.

According to a paper written by Suyitno Afandi, the deputy for
logistics and tourism affairs at the State Ministry of State
Enterprises, Bulog, in the downstream, will enter commercial
businesses such as hotels, the property sector, gas stations,
education, hypermarkets and cargo forwarding.

In the upstream, said Suyitno, Bulog would establish a food
estate and set up modern large-scale rice mills and several other
mills for crude palm oil, wheat and processed food.

In addition, based on government regulation No.7/2003 on the
establishment of Perum Bulog, the government can also assign
Bulog to do anything.

Bustanul Arifin, an economist from the Institute for the
Development of Economics and Finance (Indef), said he was worried
that these big tasks would only make it difficult for Bulog to
focus on its main job of maintaining the country's basic food
supply.

"For me, it is an extraordinary business plan, but I am
worried that it will hamper Bulog's main job. This huge task
would create new controversies in the future," Bustanul told the
Jakarta Post.

He said Bulog had to first improve its corporate culture from
the bureaucratic-minded before eying commercial activities.

He said the government should also clearly define commercial
and public activities as well as make special assignments for
Bulog.

With regard to the government's assignment, for example, one
of the much-debated problems is the appointment of Bulog to
purchase four Russian-made Sukhoi jet fighters and two Mi-35
helicopters under a countertrade deal.

Minister of Industry and Trade Rini Soewandi recently tasked
Bulog, which is now under the State Ministry of State
Enterprises, to execute the US$129 million countertrade deal
between Indonesia and Russia.

But the deal has caused quite a controversy following Bulog's
demand that the government reimburse it for the $26 million down
payment for the military equipment.

The House of Representatives has barred the government from
reimbursing the agency and has even set up a special committee to
investigate possible irregularities in the process leading to the
countertrade deal and the appointment of Bulog as the executor of
the deal.

As a matter of fact, Bulog has been dogged by numerous
controversies since its establishment in the late 1960s to
stabilize the price of farmers' unhusked rice and to distribute
rice.

Throughout the three-decade-long administration of former
president Soeharto, the agency developed into a very profitable
state agency holding the monopoly in the importation of several
basic commodities, including wheat, sugar and soybeans.

During that time, it become a cash cow for government cronies
and the political elite to finance political and business
interests.

Bulog's exclusive rights were rescinded by the government in
early 1998 at the request of the International Monetary Fund
(IMF), but the agency continued to stir controversy thereafter.

After Soeharto's era, a number of the country's top figures
have been disgraced due to scandals related to the funds from the
agency, including former president Abdurrahman 'Gus Dur' Wahid,
former minister of industry and trade Rahardi Ramelan and
incumbent House Speaker Akbar Tanjung.

An audit conducted by Arthur Andersen in 2000 revealed that
Bulog lost some Rp 6.7 trillion between April 1993 and March
1998, due to unfavorable business contracts, irregularities and
weak supervision.

Thus far, the public remains in the dark about the amount of
funds owned by Bulog as the government has so far not unveiled
them. As such, most people do not know whether it has the
financial capability to finance the new business plan.

Meanwhile, noted agriculture expert H.S. Dillon was not
entirely opposed to Bulog's new business plan, but he said the
agency should first focus on its core task of maintaining the
country's food security.

"It is not a problem if Bulog wants to do commercial
activities but they have to first fix its core task," Dillon told
the Post.

He added that the planned commercial activities had to be also
carried out in remote areas where the private sector was still
hesitant about developing the same business.

List of Bulog's "victims"

Abdurrahman 'Gus Dur' Wahid: In July 2002, the People's
Consultative Assembly (MPR) impeached then president Abdurrahman
"Gus Dur" Wahid, despite the police dropping all charges against
him involving Rp 35 billion of Bulog's money. The case is better
known as Buloggate I.

Akbar Tanjung: In August 2002, the Central Jakarta District
Court sentenced House of Representatives' Speaker Akbar Tanjung
to three years in jail for misappropriation of Rp 40 billion in
Bulog funds. The High Court upheld the district court's decision
in January 2003, but until now Akbar is still free. The case is
better known as Buloggate II.

Hutomo 'Tommy' Mandala Putra: In November 2000, Tommy was
sentenced to 18 months in jail for his involvement in a Rp 5.2
billion land exchange deal with Bulog. Tommy, however, absconded
until November 2001. Tommy is in prison for the murder of supreme
court judge M. Syaifuddin Kartasasmita.

Megawati Soekarnoputri: The House of Representatives has set
up a special committee to investigate the purchase of four
Russian-made Sukhoi jet fighters and two Mi-35 helicopters. The
move is seen by many as an effort to damage President Megawati
Soekarnoputri's reputation ahead of the 2004 general election.
The case is better known as Sukhoigate, but some have started
calling it Buloggate III.