Restructuring program cuts Pertamina's costs

Restructuring program cuts Pertamina's costs

JAKARTA (JP): State-owned oil company Pertamina's
restructuring program, which has been accelerated from five years
to three years, has helped reduce its operational costs by about
Rp 70 billion (US$30.43 million) per year, its president said.

"The restructuring program has also succeeded in eliminating
Pertamina's operational losses and lowering its operational
costs," Faisal Abda'oe said on Sunday after a ceremony to
celebrate the company's 38th anniversary.

Pertamina's has detailed its restructuring program as
consisting of efficiency improvement, a reduction in the number
of employees and the establishment of profit centers.

Abda'oe said that improved efficiency has improved the
company's ability to meet the increasing domestic demand for
fuel, which rises seven percent annually.

He explained that Pertamina, under the restructuring program,
had shifted the function of its operational units into profit
centers that contribute to its revenues.

"Efficiency improvement will help increase Pertamina's
profits," Abda'oe said.

He said his company booked a net profit of Rp 29.4 billion in
1994, compared to Rp 26.7 billion in 1993.

He said that although only 30 percent of Pertamina's
operations are profit-oriented, the company is able to repay its
foreign debts.

About 70 percent of Pertamina's operational activities, under
the assignment of the government, are aimed at meeting the needs
of the people.

Pertamina, for example, receives a government subsidy if its
costs for the domestic distribution of fuel are higher than its
sales revenues. In turn, Pertamina is supposed to pass on its
profits from fuel sales to the government if the costs are lower
than sales revenues.

As for downsizing, Abda'oe would not say if the company had
reduced the number of its employees by its target of 15,000.

Last year, Abda'oe told a hearing at the House of
Representatives that Pertamina would cut the number of its
employees from 46,000 to 31,000 within five years.

Abda'oe said on Sunday that his company had also simplified
its bureaucratic procedures to anticipate tougher competition in
the free trade and globalization era.(04)