House urges investigation into questionable CPO deals

JAKARTA (JP): The House of Representative has demanded the Joint Marketing Agency of state plantation companies renegotiate several crude palm oil contracts signed last year by the Palm Oil Marketing Center and foreign buyers.

The chairman of House Commission V for industrial and trade affairs, Bachtiar Chamysah, said on Monday that key executives of the Palm Oil Marketing Center (POMC) should also be investigated for alleged malfeasance in selling crude palm oil (CPO) to several foreign buyers last year.

Bachtiar said a number of contracts entered into by POMC with foreign buyers, or domestic buyers representing foreign buyers, were suspected of being tainted with collusion.

"Our investigations found that the prices quoted in the sales contracts were way below prevailing market prices, thereby causing US$9 million in losses to the government," Bachtiar said.

POMC took over the marketing of state companies' crude palm oil in July 1998 from the Joint Marketing Agency at the directive of the then minister for state enterprises, Tanri Abeng.

The agency was put back in charge of marketing last November upon the discovery of alleged malfeasance committed by several POMC officials in CPO sales to foreign buyers.

Bachtiar said the Management Consultative Board of State Plantation Companies had assigned a special team from the Joint Marketing Agency to renegotiate sales contracts previously signed by POMC with eight foreign buyers.

He said that preliminary investigations showed that these sales contracts were the result of collusion between the buyers and POMC.

"Some buyers are willing to repay the difference between the market prices and those quoted in their contracts, but negotiations are still underway to determine the final amount to be paid.

"I don't accuse anyone, but an investigative audit of POMC's transactions throughout last year will ascertain whether there was malfeasance or not in the contracts," Bachtiar said.

The House commission sent a team to Medan, North Sumatra, last month to investigate the case of 85,000 metric tons of contaminated CPO which was shipped from the province to Rotterdam late last year.

The investigation in North Sumatra, Indonesia's largest CPO producer, also led the House commission to conclude that several sales contracts made by POMC in Jakarta with foreign buyers were "highly questionable".

The commission criticized POMC's authority as being too excessive, saying it failed to coordinate with the Management Consultative Board of State Plantation Companies in its marketing operations.

Bachtiar said that from July 1998 to October 1999, alleged irregularities or misconduct by POMC's management in the sale of crude palm oil to foreign buyers had caused $9 million in losses to the government.

"The losses were incurred because the prices quoted in the contracts were much lower than the average market prices," he said.

According to data from the commission, the foreign buyers in question are the Wilmar Group, the Global Group, the S. Alcan Group, the Tritunggal Group, the Allmax Group, the Rich Asian Group, the Kuok Group and Golden Oil.

No data, however, was available on the amount of crude palm oil involved in the contracts.

The eight companies, he said, took advantage of POMC's sales procedures, which contained loopholes which allowed for collusion in setting CPO prices below the market price.

Bachtiar also alleged that POMC marked up the freight costs of CPO, which under a Free on Board contract were charged to state plantation companies.

"The standard is $45, but POMC set the cost at between $52 to $70," he said, adding that this was another indication of POMC's collusion with several foreign buyers.

Bachtiar suggested the government review CPO sales procedures to ensure greater transparency and fairness in the transactions. (03)