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Targeting Pelindo II

Translator

Editor

11 July 2017 14:30 WIB

TEMPO.CO, Jakarta - For a long time, nothing had been heard about the House of Representatives (DPR) Special Committee for the Pelindo II case when suddenly it dropped a bombshell. Established in 2016 at a time of tense relations between Minister for State-owned Enterprises (SOE) Rini Soemarno and the Indonesian Democratic Party of Struggle (PDI-P), the Special Committee ordered the Supreme Audit Agency (BPK) to carry out an investigatory audit. Last month, the results were announced, and they put Rini in a difficult position: she was deemed negligent for agreeing to the extension of the contract between Pelindo II and Hutchison Port Holdings a process marked by indications of breaches of laws, ministerial regulations and the company's own articles of association. According to the BPK, the losses to the state amounted to more than Rp4 trillion.

For some time rumors were abound that this case was engineered so Rini can be forced to leave the cabinet. Hearsay about the unreconcilable dispute between her and PDI-P chairperson Megawati Sukarnoputri also was widespread. The Pelindo II Special Committee, chaired by PDI-P politician Rieke Diah Pitaloka, initially questioned Rini about alleged corruption in the procurement of cranes and Pelindo II investments. Subsequently, the focus shifted to the extension of the contract with Jakarta International Container Terminal (JICT), the company managing the Tanjung Priok container port.

The JICT management contract between Pelindo II and Hutchison is due to expire in 2019. However, the Pelindo II managing director, Richard Joost Lino, began sounding out the possibility of a contract extension with Hutchison in 2011. A contract amendment was signed in August 2014, before Pelindo II was awarded a concession license as operator of Tanjung Priok. The BPK believes that that contract was in breach of the Shipping Law.

Another problem is that Pelindo II signed the contract extension before obtaining approval from the SOE minister. According to the BPK, this was at odds with the SOE Ministerial Regulation on the Implementation of Good Corporate Governance as well as the SOE Fixed Assets Efficiency Guidelines, both issued in 2011. Furthermore, Pelindo did not organize a tender when deciding on the contract extension. SOE Minister at that time, Dahlan Iskan subsequently asked Pelindo to open it up to tender, but several candidates said they would not participate because they believed Pelindo II had already decided on Hutchison.

The government changed, and Dahlan Iskan was replaced by Rini Soemarno. Rini later agreed to the ‘procedurally flawed’ contract extension. She was also faulted for her failure to reconsider the valuation of the contract extension.

However, the investigatory audit by the BPK is not the final verdict, especially since the credibility of the BPK is now at a low point following the arrest of several of its auditors for bribery. Indications of accepting payment for good audit results have damaged the image of the agency. And given the political motives behind the establishment of the special committee, the BPK audit results are seen as concocted.

To stop these suspicions growing, the Corruption Eradication Commission (KPK) should immediately intervene. It must carry out an investigation and determine whether indeed there was corruption. If proof is found, everybody who benefited from breaches of the law must be prosecuted. Conversely, if there are no strong indications of corruption, the investigation must not be forced-for example simply to keep the Pelindo II Special Committee happy. The names of Pelindo II officials who were previously implicated then would have to be cleared.

The KPK should also look for comparative numbers to calculate the amount of losses to the state in this case. In its audit, the BPK included a comparison of profits if JICT were managed by Pelindo II alone or in partnership with Hutchison. According to the BPK, the compensation paid in the US$215 million up-front fee from Hutchison was less than the actual potential profits. The excuse from R.J. Lino was that if the contract with Hutchison were not extended, Pelindo II would not be certain to make that much profit.

The investigation into the alleged corruption at Pelindo II should be carried out in a way that does not disrupt company operations. Pelindo II is an SOE that is performing very well. In the last 10 years, its assets have soared from Rp6.5 trillion to Rp40 trillion. If what has happened is a violation of the principles of good corporate governance, the Pelindo II management must put things right. Together with other SOEs, Pelindo II must be managed in a way that is professional, open, accountable and free of political intervention. Government companies must not become an area for disputes between politicians, yet alone a cash cow for them.

Read the full story in this week’s edition of Tempo English Magazine



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