Oil procurement ruling will kill local firms

JAKARTA (JP): A group of local suppliers blasted on Monday a number of production-sharing contractors (PSC) of state oil and gas company Pertamina for setting tough requirements for companies wishing to be their suppliers.

Heroe Wiedjatmiko, secretary-general of the Goods and Services Suppliers Communications Forum, said the rulings, which include a requirement for suppliers to have a minimum capital of US$40 million, would only favor financially-strong foreign suppliers and "kill" local suppliers.

Heroe said no local suppliers could meet the minimum assets requirement, as they only had maximum assets of $10 million.

"Only giant, foreign suppliers could meet such a requirement,

"Thus, if the contractors go ahead with such a minimum assets requirement, all of the local suppliers will undoubtedly be wiped out in their own country," Heroe told reporters at a press conference, adding there are now 1,500 local small and midsize companies supplying goods and services to Pertamina contractors.

Heroe specifically named the unit of American energy firm Vico Indonesia and Spanish-Argentinean firm Repsol-YPF which operate the Southeast Sumatra block off West Java as the contractors which were seeking to introduce such a ruling.

Repsol-YPF Southeast Sumatra is still better known here as Maxus, an American company, from which Repsol-YPF bought the Southeast Sumatra block several years ago.

According to Heroe, "Maxus" and Vico unveiled the new ruling on supply tenders in June last year.

With the new ruling, Heroe said, both Pertamina contractors wanted to select one single supplier for their respective operations. Before, there were many suppliers to both contractors.

By selecting only one supplier, both contractors hoped to significantly reduce their costs.

Pertamina, however, suspended the companies' plan following protests from local suppliers and the Indonesian Chamber of Commerce and Industry, which feared the new ruling would lead to local suppliers going under and allow foreign suppliers to monopolize the country's oil and gas industry.

Maxus insisted on putting the new ruling into effect and Pertamina has reportedly given approval for this to be done on June 5, according to Heroe.

"That's why we're now questioning Pertamina's inconsistent policy on the issue," Heroe said.

Pertamina could not use efficiency as an excuse for allowing its contractors to implement the new rulings at the expense of local suppliers, Heroe said, warning the closure of all local suppliers would leave thousands of workers jobless.

Heroe said the forum would wage an information campaign against the new policy of the Pertamina contractors.

Heroe gave the Pertamina contractors until the end of this month to revoke their new policy.

"If Pertamina and the contractors insist on implementing the new goods and services procurement policy, that's up to them. But we'll file a complaint with the Business Competition Supervisory Commission (KPPU)," Heroe said.

The antimonoply commission would be the last resort for local suppliers to seek justice, Heroe said.

The KPPU was established in 1999 to ensure fair competition in the business world by implementing the provisions of the antimonopoly law. (03)