Sucofindo confident govt will extend its contract

JAKARTA (JP): State surveyor company PT Sucofindo said on Wednesday it was optimistic that the government would extend the company's two-year contract, although the Directorate General of Customs and Excise has said it wanted to end the contract.

Sucofindo corporate secretary Arief Safari said that the government could not afford to end Sucofindo's contract for the verification of export commodities.

"That contract constitutes 50 percent of our earnings, ending it would significantly impair the company's value," Arief told The Jakarta Post.

As the government planned to divest part of its stake in Sucofindo, it must maintain the company's appeal to investors, he explained.

Arief said the company surveyed one third of last year's non- oil and gas exports, with a value of around $38 billion.

The government owns 95 percent of Sucofindo, while the remainder belongs to Geneva-based surveyor Societe General de Surveillance (SGS).

For this year, the government plans to divest 15 percent of its stake as part of its privatization program.

Sucofindo has said that SGS was interested in purchasing the stake, with two other unnamed foreign surveyor companies also lining up.

On Tuesday, Director General for Customs and Excise Permana Agung said that at the end of July the directorate general would terminate its contract with Sucofindo.

Since 1986, Sucofindo has been handling the inspection of export commodities under two-year contracts, which the government reviews in July prior to the expiry of the contract each time.

But according to Permana, the government is now spending more money on Sucofindo than it does on his directorate.

He said his directorate was paying Sucofindo Rp 500 billion (about US$45.87 million) each year, compared to the Rp 297 billion the state budget allocated for his directorate.

Arief, however, said the directorate general for customs and excise had no right to review Sucofindo's contract, since it was signed by the finance minister himself.

He also said that Permana was exaggerating the government's outlay on Sucofindo, saying that the payment was only Rp 270 billion for last year.

"In turn, being a state company Sucofindo contributed last year to the state treasury with Rp 123 billion in the form of dividend payments, Rp 57.7 billion in the form of income tax, and Rp 57 billion in the form of value added tax," he said in a statement.

He further said that finding a replacement for Sucofindo was difficult because of the company's extensive operational network.

"We have 46 branches, and 26 laboratories across the country. The government cannot ignore the infrastructure we have," he claimed.

Nonetheless, Arief said Sucofindo would be unable to reject a termination of its contract by the finance ministry.

"We have to accept whatever decision the government arrives at," he said.

He added that 2,000 Sucofindo employees depended on the work that the government's contract provided.

If the government were to end Sucofindo's contract, the company would seek to retrain as many of its employees as possible.

"We may have to place them in other service divisions that we have," he said, adding that layoffs would be the last option.

Arief said Sucofindo was expanding its services with three new ones, namely monitoring the distribution of subsidized fuel, tracking logs from logging companies and controlling illegal fishing by foreign vessels.(bkm)