Tue, 21 Mar 2000

Managing Pertamina

First, I would like to congratulate Mr. Baihaki Hakim on his appointment as Pertamina president director. As a former president director of PT Caltex Pacific Indonesia, the largest producer among Pertamina's Production Sharing Contractors (PSC) in Indonesia, I believe no one will doubt your knowledge of the oil business or your contacts in the industry.

In his speech prior to your installment to your new position, President Abdurrahman Wahid specifically instructed you to do four things: eradicate corruption and collusion in the company; improve Pertamina's efficiency; expand the company's production capacity; and make Pertamina an internationally competitive oil company. Based on the given time frame, your assignment could be elaborated as follows:

Short term: Maybe in one or two years you will be able to eradicate corruption and collusion, at the same time improving efficiency.

Middle term: Over two years from now, you must expand Pertamina's production capacity.

Long term: I believe it will take more than five years, and if you are still in your position then we can see whether you accomplished the goal, to make Pertamina an internationally competitive oil company.

As a newcomer to Pertamina's board, you are free of corruption and collusion. Therefore, you do not face any constraints in taking resolute steps in regard to Pertamina's personnel. Success in the short term will greatly help you accomplish your middle and long-term tasks.

As regards to efficiency, I would like to suggest you give an extra effort for PSC companies' cost recovery. In the year 2000, the budget figure will be around US$2.5 billion. Using an exchange rate of Rp 7,000 per dollar, the amount equals Rp 17.5 trillion. If PSC companies could improve their efficiency by 10 percent, and I am sure they could, we would get additional revenue of Rp 1.7 trillion.