Editorial: Pertamina Must First Get Its House in Order
State oil and gas company Pertamina is an important state asset. As the main player in a critical sector, it has been central to the development and growth of the industry in the past half-century.
Now Pertamina wants to spread its wings and grow into a major energy player in the country and the region. By this move, it intends to compete with the private sector in extracting coal and building power plants. But given its history and track record, we must ask if this is in the nation’s overall interest.
What is more important at this stage is for the company to professionalize and become profitable with transparent accountability. With total assets of Rp 319.9 trillion ($34 billion) in 2011 and with 21 subsidiaries, it is already a sprawling corporate entity.
It is general knowledge that Pertamina has acted as an ATM for the political elite and the corrupt bureaucracy for many decades. Such practices have drained the company of its profits and led to billions of dollars in lost income for the state.
Unless this situation changes, the more Pertamina does, the more it expands, the broader it goes out and the higher the moral hazard. If the company has greater access to energy resources, the risk remains that it will be more susceptible to such shady practices and may become an even bigger attraction for corruption.
So in the bigger picture, we do not agree with the priorities it has set for itself. Pertamina should not be looking to expand until it can ensure that it is well-managed, can add value to the sector and is profitable.
Its top priority should therefore be to clean up its internal processes and free itself from politically vested interests. This will require time, courage and backing from the highest echelons of the country’s leadership. Only then should it be allowed to grow and expand its business interests.