KPPU sees fault in tanker sale
Tony Hotland, The Jakarta Post, Jakarta
The Business Competition Supervisory Commission (KPPU) said on Friday it had discovered "strong indications" that Law No. 5/1999 on monopolies and unfair competition was violated in the sale of two oil tankers by state oil and gas company PT Pertamina.
If the indications were true, the sale could be annulled and any party found guilty in the tender process could be either fined a maximum Rp 25 billion (US$2.69 million) or an unlimited charge for damages.
"After a 30-day preliminary investigation and hearing with the parties concerned, we have come to a conclusion that there are indeed strong indications of unfair competition in determining the winner of the Pertamina tender for its two Very Large Crude Carriers (VLCCs)," said KPPU member Sutrisno Iwantono.
Sutrisno said the KPPU had held hearings with newly installed Pertamina president Widya Purnama and former president Ariffi Nawawi, as well as State Minister of State Enterprises Laksamana Sukardi in his capacity as Pertamina chief commissioner.
"We've also been corresponding with (India-based) Indonian Essar Shipping, one of the participants in the tender, and of course, (Bermuda-based) Frontline Ltd. as the winner," he said.
However, the KPPU refused to elaborate on the indication of violations it found in the tender process, saying only that the tender may have violated Articles 16, 19(d) and 22 of the Antimonopoly Law.
Article 16 prohibits business players from making agreements with foreign parties that may lead to a monopoly or unfair competition.
Article 19(d) prohibits business players from discriminating against other players, while Article 22 prohibits conspiring with parties in determining the winner of a tender.
Pertamina sold the two VLCCs in June to Norway's Frontline Shipping Ltd. for $184 million, despite protests by Pertamina's labor union and a recommendation from the House of Representatives that the company hold on to the tankers for long- term benefits.
Activists and the labor union have alleged that the tanker tender was marred by collusion. They also pointed to a conflict of interest in the appointment of consultancy firm Goldman Sachs as financial adviser to the tender, as the firm owned a minority share in Frontline.
Pertamina, which claimed the tanker sale was aimed at easing the company's cash flow problem, brushed aside the allegations, saying the tender was transparent. It also insisted that Frontline won the tender fairly because other bidders could not provide a 20 percent down payment and a $5 million bid bond for each of the vessels.
Pertamina delivered one tanker to Frontline last month, and is expected to deliver the second one this month.
Elsewhere, Sutrisno said the KPPU had sent letters to the Pertamina management, Laksamana and Minister of Finance Boediono to take into account the legal process being undertaken by the commission before delivering the second tanker to Frontline.
"However, we didn't specify in the letters whether we demanded that they postpone delivery. I'm sure their lawyers know what they must do regarding this legal process. Just remember that we've warned them about this," he said.
Sutrisno said the KPPU would investigate further upon an expectation it would uncover more details from many parties, including experts.
"The process will take another 90 days maximum, then we'll deliver a verdict on the case," he said.