Ibnu Sutowo speaks up about graft charges

By Johannes Simbolon

JAKARTA (JP): After a three-decade silence, Ibnu Sutowo, the controversial founding father of state oil and gas company Pertamina, denied last week corruption charges launched by former president Soeharto's administration in the early 1970s against him.

Born in September 1914 in Yogyakarta, Ibnu graduated from the NIAS medical school in 1940 and later took up a military career. He was appointed South Sumatra's Sriwijaya military commander in 1955.

Ibnu, who headed Pertamina from 1968 to 1976, takes credit for its phenomenal success.

He built the state oil and gas company from scratch and turned it into a giant company respected by the world's oil and gas industry.

He is the originator of the production sharing contract (PSC) system, which has been copied by many developing countries.

During his leadership of Pertamina the country reached an oil production record of more than 1.5 million barrels per day.

But, to the younger generation, Ibnu is chiefly remembered as a corrupt figure, who almost brought Pertamina to bankruptcy in the mid-1970s with a debt of US$10.5 billion -- an accusation made by Soeharto's administration and never denied by Ibnu until an interview on Thursday.

Australian journalist Hamish McDonald in his book Soeharto's Indonesia writes about Ibnu as follows:

"To the foreigners, he was a 'Black Diamond'. He was a man whose word was his bond, who could cut through Jakarta's bureaucratic maze, get their money in and their profits out. But to his critics, he was the epitome of all that was wrong in Soeharto's Indonesia. Ibnu was beyond reach of constitutional authority, answerable only to Soeharto and, even then, through private channels.

He ran a massive, expanding section of the economy with little reference to agreed goals and priorities. He set an example of personal extravagance and financial irregularity which was repeated in small fiefdoms down a massive pyramid of corruption. He was a sultan in color and tie presiding over a new bureaucratic feudalism."

This is an excerpt of the interview with Ibnu.

Question: The public says you practiced corruption when heading Pertamina. Is that right?

Answer: No.

Q: How did you become so rich?

A: I have a brain. It was my brain which developed Pertamina. Before I was assigned by the government to head the state oil and gas PT Permina (one of the two state oil companies formed by the government before establishing Pertamina in 1968) in 1957, I practiced medicine in Palembang, South Sumatra, for 17 years. At that time, I was the only doctor in the Ogan Komering Hulu and I made a lot of money. I was already a rich man before taking the Permina job.

When I was a military commander in South Sulawesi, I performed my military job, but I also provided medical services in the afternoon.

Also, during the Japanese occupation (1942 to 1945), I made money from trading agricultural commodities in South Sumatra.

Q: Many people think your current wealth is the result of kickbacks from contractors of Pertamina's projects during your leadership of the company.

A: No. There were no kickbacks. I know people say: "How could Ibnu become so rich? It must be because of corruption." I was rich before I took the job at Permina.

I bought my residence on Jl. Tanjung in the Menteng area, Jakarta, in 1956 from a Dutchman, when Pertamina was still non- existent.

Q: One of your staff, Achmad Tahir, was charged with embezzling $80 million from Pertamina. So people think as the boss you could have swindled a larger amount of money from Pertamina.

A: Tahir was then my treasurer. I couldn't control everything.

Q: But, you were accused of leaving Pertamina with a total debt of $10.5 billion.

A: That's what people said. But, what was the truth?

Q: What really happened? How much was the debt?

A: I obtained a loan for what? Pertamina used the loan to build the steel company Krakatau Steel and the Bina Graha presidential office. Pertamina also financed sport events in the provinces and built sport stadiums in Palembang and several other towns.

Pertamina did all those things at the request of then President Soeharto.

Q: How about the tanker deal which was considered one of the financial burdens that later almost bankrupted Pertamina?

A: At the time I was ordered by the government to make tankers. I went to America and the Netherlands to look for credit to construct the tankers. But no banks were willing to give the credit.

When I was in the Netherlands, a man called Bruce Rappaport (of the Geneva-based Intermarritime Group) telephoned me, saying "Perhaps, I can help".

He came to the Netherlands to meet me and proposed a hire- purchase scheme under which he would finance making the tankers and Pertamina would hire and finally own them after the lease period expired.

Of course, the deal was very expensive. But, I instantly accepted his proposal, given the difficulties I faced in securing credit for the tanker project.

After the deal, the State Department of the United States sent a letter to the Indonesian government, which was later passed on to me, saying the deal was too expensive.

I said to the U.S. government: "The tankers are not expensive, but the credit is. If you can lend me money, I can make cheaper tankers."

The American lawyers and officials from our Attorney General Office then carried out an investigation to find out if I received kickbacks from the tanker deal. They did not found any proof of that.

(Hamish says that under the tanker deal which Ibnu signed with Rappaport in the early 1970s, Pertamina had to charter and purchase some 34 tankers of approximately 3 million tons, at a total cost of about $3.3 billion, payable at the rate of nearly $300 million a year.

In 1977, after a series of negotiations, the government was able to cut liabilities on the tankers to $256 million.)

Q: Why did Soeharto then fire you?

A: I was fired by Soeharto in 1976 when I was at the peak of my success, that was when I had just managed to send the first shipment of liquefied natural gas (from PT Arun NGL Co) to Japan.

He fired me because I turned down his proposal for a business which I thought was wrong.

(Ibnu then revealed the business proposed by Soeharto. His secretary ordered that the account be made off the record.)

Q: Why did you remain silent about it for so long?

A: Had I openly revealed it to the public, I would have gone missing. At the very least, my children might have been in danger.