Pertamina Believes Transparency Will Attract Investors, Allay Public Concerns

Jakarta Globe, Yessar Rosendar & Janeman Latul, January 29, 2010

In a bid to boost transparency and attract new investors, state oil and gas company PT Pertamina is set to begin following the Indonesia Stock Exchange’s disclosure guidelines even though it is not a listed company.

The company, long criticized for inefficiency and inept management, hopes to implement the new disclosure regime in the first half of this year, according to the State-Owned Enterprises Ministry on Friday.

Under the new regime, Pertamina, which was named as one of the nation’s top tax-dodgers by the Finance Ministry, will issue quarterly financial results and an annual report. The government will continue to maintain full ownership of the company.

“We expect [the plan] to be finished by the first half of this year,” Mustafa Abubakar, the state-owned enterprises minister, told reporters. “I expect the government regulation to be finished in February and the 2009 financial audit for Pertamina will be finished in April.”

Mustafa said the decision to make Pertamina a “non-listed public company” would help fight off erroneous allegations about corruption at the country’s biggest state-owned enterprise.

“This action will not require any approval from the House of Representatives, unlike other plans to list SOEs on the stock exchange,” added Mustafa.

Gita Wirjawan, the chairman of the Investment Coordinating Board (BKPM) and a former Pertamina commissioner, said that the move will help Pertamina to attract new investors.

“By disclosing its financial reports to the bourse, Pertamina is opening a new frontier for capital investment,” said Gita.

Pertamina said previously that it plans to issue $1 billion in dollar-denominated debt and Rp 1 trillion ($106 million) in rupiah bonds in April to fund its capital spending this year.

“The people of Indonesia will now be able to find out about the company’s financial performance and the transactions and contracts it enters into with third parties, as Pertamina will be obliged to submit its accounts to the bourse for scrutiny,” said Muhammad Said Didu, secretary at the SOE ministry.

Didu declined to say whether the move was a first step on the road to an eventual partial privatization of the company.

Established in 1968 through the merger of a number of existing state oil firms, themselves the successors of Dutch colonial-era companies, Pertamina is the subject of frequent criticism for its perceived inefficiency and inability to develop into a global player.

It is often compared unfavorably to neighboring Malaysia’s state oil firm, Petroliam Nasional (Petronas), which has become a major international force despite limited hydrocarbon resources in its home country.

While Pertamina’s revenue in 2008 totaled $55.42 billion, compared with $77 billion for Petronas, its net profit in the same year came in at only $3.03 billion, compared with Petronas’s $15 billion.

The temptation to preserve the status quo has been strong as Pertamina represents the biggest cash cow for the government in terms of dividends and critics claim that it has bankrolled the country’s ruling elite for years.