Yuanita Rohali & Bakrie Telecom’s IPO

Next month, PT Bakrie Telecom, the telecommunication operator known for its Esia, will hit the stock market trading floor. It’s parent company PT Bakrie & Brothers Tbk is preparing the initial public offering with target to float about 15% to 20% of Bakrie Telecom shares.
The extra-ordinary meeting of shareholder of PT Bakrie & Brothers Tbk which was held on September 22, 2005 has approved of an IPO of Bakrie Telecom but will keep the majority share at the company without additional investment.
Yuanita Rohali, Bakrie & Brothers’ finance director, is the key officer for the plan. She said this week that Bakrie Telecom prospectus needs approval from Bapepam (Indonesia’s SEC) next month.
And when you meet Yuanita, I am sure you could easily recognize her face. The face you might familiar with. Yeah, she is the older sister of famous actrees and TV presenter Alya Rohali.
Well, Yuanita as wrote by Cyberwoman few years ago, was star at University of Indonesia where she graduated with computer science degree. While at the university, she won bronze medal in Miss Jakarta 1988 contest and the finalist for Miss Campus. Even though she had the opportunity to be an actrees or TV presenter like her younger sister, Yuanita decided to work as Programmer Analyst at IT Department of PT Gajah Tunggal Tbk.
She got two master degrees, master of management from University of Indonesia and master of commerce in advance finance from University of South Wales, Sydney in 1994.
After that, Yuanita joint Credit Lyonnaise Bank (1995-2002) with last position as Head of Corporate Banking. As she admitted to Cyberwoman, Yuanita was the first Indonesian woman in that position.
Married with three kids, she try to balance career with family. That’s why at lunch time, she always try to be at home with her kids. Once she rejected a better job in the world’s largest bank because of family consideration. “Life is a choice and that’s my choice,” said the violin lover.
In 2004, Yuanita was appointed as deputy director finance & administration and appointed as Director of Finance on June 2004.
Late last year, she helped the loan arrangement from Swiss Chartered Investment for Bakrie to acquire its subsidiary PT Bakrie Sumatra Plantation (BSP) Tbk. Yuanita said Bakrie wanted to acquire 60% of the plantation company, signigicantly increase from 1% previous the transaction. Yuanita then installed as commissioner at BSP.
She helped Bakrie & Brothers in the June 2005 rights issue that raised Rp1.9 trillion to refinance debts and financing new investment, including Rp500 billion for Bakrie Telecom.
Bakrie Telecom IPO is Yuanita’s big project at the moment. Early this year Yuanita said Bakrie & Brothers was ready to inject fresh capital into its telecommunication unit as long as other shareholders committed to do the same. Bakrie holds 78.63% shares of Bakrie Telecom while CMA Fund at 21.34% and Richweb Investment 2.94%.
In the next two years, Bakrie Telecom needs capital expenditure of Rp1 trillion (US$100 million). In five years, the company, led by Anindya Noverdian Bakrie (son of chief economic minister Aburizal Bakrie who owns Bakrie Group) is targeting 3 million subscribers with additional investment of US$450 million.For sure, with her 30-something age, Yuanita is in line to be CEO like the famous Mrs Eva Riyanti Hutapea (former Indofood CEO) or Miranda Gultom (deputy governor of Bank Indonesia).

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Chorus of denials on election committee’s Thank You Funds!

For the first time yesterday all members of Komisi Pemilihan Umum (General Election Committee) reunited but not for their duties to make sure the smooth election process. They gathered at a courtroom as witnesses for the trial of Hamdani, treasurer of KPU who is charged with corruption.

Sosiologist and KPU member Dr Chusnul Mar'iyah was the first witness. She denied all attorney’s questions. Asked about the ‘Thank You’ funds (kickback) from KPU’s supplier, vendor, and business partners, she said that she knew nothing about that. Chusnul, a lecturer at University of Indonesia, was chairwoman of Committee for Information Technology Supply and Ballot Supply.

Previously Hamdani admitted to had received the ‘Thank You’ money twice from vendors that won open bid conducted by Information Technology and Ballot Supply Committee consisted of two payments from IT supplier at US$99,000 and US$60,000, two payments from ballot supplier in April 2004 from state-owned paper manufacturer PT Kertas Leces of US$432,965 and in June 2004 from listed pulp and paper company PT Surabaya Agung Industri Pulp & Kertas at US$155,000.

(The two IT vendors are listed company PT Integrasi Teknologi Tbk and PT Multidata. Integrasi got the US$15 million project from KPU, while Kertas Leces won the US$35 million project to supply ballot forms. Kertas Leces made profit US$3 million from this project.)

Supreme Audit Agency found a potential loss to the state budget of US$15 million from the IT project, but KPU denied that.

Chusnul denied to have received US$110,000 from Hamdani saying ‘I never received money in US dollars.’

KPU deputy secretary general Sussongko Suhardjo said during a previous session of the trial last week that initially Chusnul rejected to receive the kickback. “But she finally received the money,” he said.

Confronted with attorney’s question that KPU had drawn out US$10,000 from the Thank You Funds to pay her lawyers in a defamation case, Chusnul said she realized that later on.

Attorney went on with Hamdani’s statement that KPU member Hamid Awaluddin (now minister for law and human rights) had received US$110,000. Hamid denied the allegation including testimony made by another treasurer Ms Sri Rampini that Hamid received the money with his signature that written off by his secretary.

Responding to Hamid’s testimony, Hamdani said that he gave the witness a total of US$110,000, made up of five payments, in 2004. “But I never received in US dollars except for my official overseas travel,” Hamid said.

KPU member Anas Urbaningrum who had resigned and become chairman of political division at Partai Demokrat (president Susilo Bambang Yudhoyono’s party) also denied everything about the Thank You Funds.

While his members denied everything, Dr Nazaruddin Syamsudin, Chairman of KPU, admitted that he had received the money. Attorney confronted him with Hamdani’s testimony that the chairman had received US$160,000 during last year’s election rounds, he admitted of receiving US$45,000. “But I had returned the money.”

Did you aware that the money was collected from KPU’s supplier and business partner? “No, I thought it was a bonus for me as the chairman,” he said.

If I were the attorney I would ask further question, ‘ Bonus! Is KPU a business enterprise that every success deserved a bonus?’ Or question like this, ‘Did you suspicious about the term of bonus which is not deliberated by law on KPU?’

Anyway, we hope such questions would arise in the trial on Nazaruddin who is named suspect in the KPU corruption scandal.

Vice chairman of KPU Ramlan Surbakti and KPU member Rusadi Kantaprawira admitted it was Nazaruddin’s idea to collect money from vendors or suppliers and then share it down to all KPU executive members.

The high profile graft case at KPU centers on, among other allegation, the mark-up of costs during last year’s election and the collection of kickbacks by KPU officials from suppliers and vendors.

While Hamdani and Nazaruddin have been charged as suspects in the case, Hamid and fellow former KPU member Anas, and current commissioners Ramlan, Chusnul, and Valina Sinka have been spared prosecution. This has prompted criticism of the Corruption Eradication Commission (KPK), which has investigated and is prosecuting the case, for lacking impartiality.

Critics say that KPK should put Hamid and other KPU officials on trial, particularly as earlier testimony by KPU officials indicated that they also may have received the kickbacks, which were paid into what termed as ‘tactical funds’ or ‘Thank You funds’.

What about those who gave the money?

So far, no investigation being conducted by Bapepam, Indonesia’s SEC despite the fact that two suppliers in the case, PT Integrasi Teknologi Tbk and PT Surabaya Agung Industri Pulp & Kertas Tbk, listed their shares in Jakarta Stock Exchange.

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Krisna Wijaya to lead bank super agency

Krisna Wijaya, a commissioner at PT Bank Rakyat Indonesia (BRI), had been appointed executive chairman of the newly established Lembaga Penjaminan Simpanan (Deposits Insurance Agency), a FDIC-like agency, replacing the old blanket guarantee scheme that cost the state of US$70 billion in banking bailout since 1997.
His long time boss at BRI, Rudjito, will also his boss at the super agency as Chairman of Commissioner Council.
The agency has started its operation last week with initial capital of Rp4 trillion (around US$400 million), amount that is just too small to cover all the third party funds in Indonesian banking system at around US$100 billion.
LPS is established according to the Law No. 24/2004 in which banks should pay deposits insurance premium of 0.2% of its third party funds every year. Krisna, in his last article, said LPS is vunerable with so limited capital in its hands.
Krisna lost the race to be deputy governor of Bank Indonesia (Central Bank) to Siti Ch Fadjriyah few months ago, but it seems he get ‘better deal’. Krisna was seen in various meeting with people close to president Susilo Bambang Yudhoyono (SBY). Some economists believe he is SBY guy.
Krisna also a productive analyst with weekly articles and comments in various newspapers and magazines, mainly on banking topic. He is the author of REFORMASI PERBANKAN NASIONAL: Catatan kolom demi kolom, a book published in 2000.
In the last few months, he actively urged government to ammend the law on investment and put the foreign-owned national banks like PT Bank Central Asia (BCA), BII, Danamon, Permata, Lippo, or Niaga into the category of foreign-owned banks that should be excluded of guarantee scheme.

He also expressed his fears that LPS would not be able to handle a significant bank collapse with only US$400 million capital. This is because of total coverage in the next six months and will only cover maximum Rp100 million (US$10,000) per depositor per bank by March 2007.

Born in 1950, Krisna graduated from Bogor Institute of Agriculture (IPB) in 1980 and got his master degree from Gajahmada University,Yogyakarta in 1990. He was appointed director of BRI in 2000 in charge of microbanking and technology.

Technology almost killed Krisna’s career. In May, Supreme Audit Agency reported to State-Owned Ministry that it found irregularities and indication of corruption at IT expenses of US$100 million at BRI. No clear follow-up of the criminal case and government even installed Krisna as commissioner at the bank and now as chief executive of a super agency for the banks. Well, this is Indonesia!

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Teleconference for Soeharto’s Trial

Teleconference or videoconference to be exact, could be the best solution to conduct the trial on former president Soeharto who claimed can’t stands trial in court room due to ailing health. But don’t expect that would happen soon!
Researcher and political analyst from Indonesias Institute of Sciences (LIPI) Asvi Marwan Adam said today as quoted by Detik.com that with the official use of teleconference (as implemented by president Susilo Bambang Yudhoyono to lead cabinet meeting while he was in New York last week), there is no way that Soeharto’s trial can’t be resumed.
Soeharto trial, he said, would be a proof that this administration is serious in holding the supremacy of legal system. “That nobody could stand above the law,” Asvi argued.
In early 2001, Supreme Court (MA) ordered the South Jakarta District Court to resume trial against Soeharto who was allegedly involved in corruption case during his 32 years in power.
Four years already gone and the country’s judicial system moved nowhere while Soeharto is seen healthier than ever if we could assume from his public appearances in the last few months. He greeted a lot of guests, most of them former ministers, at his 84 birthday party in June. Late last month, he was seen visiting former vice president Sudharmono at a Jakarta hospital. Today Detik.com reported that Soeharto is about to visit his wife’s grave in Solo, Central Java prior to the holly month of Ramadhan (to be started early next month).
Last year, as reported by Suara Merdeka daily in Semarang, Soeharto managed to WALK (not with his wheelchair) up 250 meter stairway to the grave even though it cost him few days in hospital after the visit.
So, it is completely nonsense that Soeharto could avoid trial simply because doctors say he is too frail to face court after a series of strokes.
The corruption watchdog Transparency International in March 2004 listed the smiling general as the most corrupt world leader in recent history, estimating that Soeharto’s family had amassed between USD15 billion and USD35 billion during his 32-year presidency.
The South Jakarta District Court ruled in September 2000 that Soeharto was "mentally and physically unfit" to stand trial and retracted his city arrest status. Prior to the ruling he was absent from his trial twice. His lawyers said that their client, who had suffered three strokes, would not be able to face trial due to his ailing health. Soeharto was accused of stealing US$571 million from the state by funneling money from seven charitable foundations he chaired into businesses belonging to his family members and cronies. Prosecutors later lodged an appeal with the High Court, which ruled that prosecutors must present Soeharto in court if he was fit, with the approval of an independent team of doctors.
The Attorney General's Office remained unaware of Soeharto’s condition until 2002, when a reporter managed to sneak into his granddaughter's wedding ceremony. The journalist reported that Soeharto was able to stand up and welcome guests. Prosecutors later set up a team of doctors from Cipto Mangunkusumo General Hospital (RSCM) to examine him. The doctors later declared that Soeharto suffered from aphasia, a condition which reduces his ability to communicate with others.
Soeharto has been spotted several times in Nusakambangan, Central Java visiting Tommy, but the Office insisted that Soeharto was too ill to stand trial.
Can we expect President Susilo Bambang Yudhoyono’s administration resume Soeharto’s trial using the videoconference technology?
Well, I am bit skeptical on that. Remember in February 2005 when president Yudhoyono said that the government was focusing its antigraft efforts on the prevention of corruption in the future rather than pursuing graft cases that took place in the past.
Asked to elaborate, presidential spokesman Andi Mallarangeng said the government was determined to prevent corruption in the future through the creation of a deterrent effect.
"The graft cases currently being handled by the authorities, such as those involving Nurdin Halid and Adrian Waworuntu, will proceed. But a case like that of Pak Harto (Soeharto) will not be pursued as it has already been taken to court," he said that time.
In May, SBY visited Soeharto at Pertamina’s hospital and was angry when journalists asked him about Soeharto’s trial. SBY claimed his visit a humanitarian mission. Soon after that, several politicians and pressure groups asked SBY to grant Soeharto a presidential pardon.So, this is not about the way to get Soeharto stands trial, but willingness to do that.

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Kun Kurnely: CEO for Pertamina EP

State-owned oil and gas company PT Pertamina yesterday announced its new subsidiary called PT Pertamina Eksplorasi & Produksi or Pertamina EP. The company is a new sub-holding controlling and managing the whole assets of Pertamina’s upstream business, exploration and production of oil and gas.

Kun Kurnely, deputy director upstream operation at Pertamina, had been appointed and sworn in as president director of the new and powerful subsidiary. Apart from the wild and months of discussion on Pertamina reshuffle, the ceremony was conducted silently.

Minister of State Owned Enterprises Sugiharto who always at odd with Pertamina’s board of directors in the last few months, had approved both the establishment of the sub-holding and appointment of its executives including Mustiko Saleh (Pertamina’s deputy president director) as chairman of commissioner at Pertamina EP.

Born in Bandung, West Java August 30, 1953 (what a nice birthday gift!), Kurnely is a Pertamina professional graduated from Bandung Institute of Technology in 1981. He got his master degree in business and management from IPWI in 1998.

Started his career as an engineer for exploration and production in Pertamina, he was appointed senior vice president upstream operation of the company in March 2004 by President Megawati Soekarnoputri. Before that, he was general manager upstream for Pertamina’s South Sumatra operation.

Kurnely is also listed as director at Petral (http://www.pntrade.com), Pertamina’s subsidiary, which handles most of Indonesia’s crude oil. It is not clear whether he remains at the company after yesterday’s appointment.

His new job put him as one of the most important executives in Indonesia even though the rich oil and gas Cepu block (to be operated and jointly owned with ExxonMobil Oil) is not under Pertamina EP.

As an oil and gas engineer, Kurnely is one of the influential figures in Indonesian Association of Oil and Gas Expert (IATMI, www.iatminet.org). He has a lot of social activities in Pertamina including his position as chairman of BAZMA (an organization established to collect donation deliberated by the holly book Al’Quran).

Father of three, Kurnely is also active in Yayasan Baitul Hikmah (Islamic foundation) that has plan to build Islamic Center in Aceh. Aries Mufti, expert staff of MSOE Sugiharto, is also active in the foundation.

Kurnely is also a member of the board of Koperasi Energi (http://www.koperasienergi.com/), a cooperative established by Pertamina’s workers along with other executives like Hestu Bagiyo (appointed as president director of Pertamina EP Cepu that will take care Pertamina’s interests in Cepu block).

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The Twin Suns: Yudhoyono & Kalla

Respected Suara Pembaruan daily in its editorial today called the competition between President Susilo Bambang Yudhoyono and Vice President Jusuf Kalla as the existence of The Twin Suns in Indonesia’s government.

I believe most people agree with the term as reflected in the way both leaders competing to respond public pressure and the way they govern the country in the last few months. Some says it just a matter of different style, but others said it is fundamental problem with deep roots.
While the pair was claimed as solid as Soekarno-Hatta (Indonesia’s first president and vice president) in their campaign to win the presidency last year, day after day people watch the cracks between them.
The worst is in the last two months after the significant drop of Indonesian rupiah and step increase in oil prices altogether raised the concern of budget sustainability. When public criticized heavily the performance of economic ministers and market lost trust on them in handling the crisis, Yudhoyono responded with a signal to reshuffle his cabinet. But Kalla defended economic ministers saying that’s not the solution to the crisis. Golkar Party (led by Kalla) then soften its demand on reshuffle and asking more seats (seven compared to two seats now) instead. Meanwhile Democrat Party led by Hadi Utomo, Yudhoyono’s brother in law insisted to have the economic team reshuffled.
At the core of the conflict is domestic fuel price. Both leaders realized that maintaining the current highly subsidized fuel price could put the state budget in danger and put rupiah under enormous pressure. So they basically agree to raise fuel price. But both failed to agree on timing and scale of the price hike. As a result, public is confused with their conflicting statements almost everyday.
Kalla said the fuel price should be raised soon, while Yudhoyono said early 2006 will be the best. Under budget pressure, Yudhoyono then changed his position saying it could be raised sometimes in October or November. But after that, Chief Economic Minister Aburizal Bakrie (Kalla promoted him last year) said government could speed up the fuel price hike.
Yesterday, while Yudhoyono in his US trip, Kalla said October 1 will be the timing for new fuel price. But today, Yudhoyono through his spoke person Andi Mallarangeng said the president did not make decision yet on the timing.
Yudhoyono’s decision to lead cabinet meeting from US employing daily teleconference was first seen positively, but slowly raise eyebrows of politicians. Some said it is a vote of no confidence on Kalla and blamed the vice president for his absence in some video conferences. But today Golkar today come to Kalla’s defense saying he is loyal to the president in a respond to previous statement made by Minister for State Secretary Yusril Ihza Mahendra that Kalla is not in the position to make any decisions while Yudhoyono is away.
The competition is not something new though and its happen in almost everything including appointment of directors at big state-owned companies.
“Now we have Kalla Guys and Yudhoyono Guys at these big corporations. Appointment of PT Telkom CEO was a clear example of such competition. And it happens again in the process to appoint CEO at Pertamina,” said a former minister under Abdurrahman Wahid administration.
He remembers few years ago when relationship between Laksamana Sukardi (then Minister for State-Owned Enterprises and close ally of VP Megawati Soekarnoputri) and Wahid worsen because of competition to control SOEs. It was ended when Wahid fired Laksamana, but few months later it was Wahid’s turn as he was fired by People’s Consultative Assembly (MPR).
“I am afraid the history is repeating itself now,” he warned.Well, for sure, its almost impossible to be like the tale of Wahid and Megawati (Wahid’s successor) as Yudhoyono and Kalla was directly elected by people. But I just worry of the fact that this is less than one year of their administration. How about the next four years with two suns? Isn’t that just too much?

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Murdoch acquired ANTV & TV7

Press barons have always been feared, even hated, for the power they can wield over us. But until recently they have been the creatures of the neighborhood. Rupert Murdoch is the first press baron to be a monster of the entire world. That's globalization for you.
And monster is how many people do see Murdoch. He is subjected to far more criticism, if not abuse, than any other contemporary media mogul (except perhaps Bill Gates, and in both cases, mythomania plays a part). Throughout his life he has been attacked for his right-wing politics and for allegedly lowering the standards of everything he touches.

That was the article in Time magazine in November 1999.

An the monster is preparing something big in Indonesia. As reported by Prospektif.com late last month, Murdoch through its Star TV has signed agreement to acquire 20% of ANTV from Bakrie Group (a company controlled by Aburizal Bakrie, Indonesia’s chief economic minister).

Murdoch also in the process to acquire 20% shares of TV-7 (owned by Kompas Group, the largest print media business in Indonesia with its flagship Kompas newspaper). On top of that, Star TV through ANTV will control another 30% shares of TV-7.

Previously cable TV giant Astro also acquired shares of Indonesian Kabelvision, a company controlled by Lippo Group.

Star TV is not a new name for Indonesia. The network has entered the market since 1990s under a cooperation with PT Matahari Lintas Cakrawala (Malicak) which operates Indovision. Malicak is owned by Peter F. Gontha, a former executive at Bimantara and close friend of Bambang Trihatmodjo (son of former president Soeharto).

What drives Murdoch to acquire ANTV & TV-7?

Well, the media magnate once said Indonesia with its thousands of islands and a population that could rivaling that of the US, is made for digital transmissions. Statistics shown us the TV penetration among Indonesian households is low even in Java island average TV ownership is 59.28% while in Sumatra island well below 52%.

TV commercials also a promising business. According to data from Nielsen Media Research, total advertising spending in Indonesia last year was US$2.2 billion of which almost 70% absorbed by TV.

But business is not the only motive for Murdoch. Politic is his concern. Rupert Murdoch has given his full backing to Iraq war, praising George Bush as acting "morally" and "correctly" and describing Tony Blair as "full of guts" for going out on a limb in his support for an attack on Iraq. That’s why his Fox News is called Bush TV.

James Fallows of the Atlantic Monthly points out that most of Murdoch's actions "are consistent with the use of political influence for corporate advantage." In other words, he uses his publications to advance a political agenda that will make him money.

The New York Times reports that in 2001, for example, The Sun, Britain's most widely read newspaper, followed Murdoch's lead in dropping its traditional conservative affiliation to endorse Tony Blair, the New Labor candidate. News Corp.'s other British papers, The Times of London, The Sunday Times and the tabloid News of the World, all concurred. The papers account for about 35% of the newspaper market in Britain. Blair backed "a communications bill in the British Parliament that would loosen restrictions on foreign media ownership and allow a major newspaper publisher to own a broadcast television station as well a provision its critics call the 'Murdoch clause' because it seems to apply mainly to News Corp." [Atlantic Monthly, 9/03; New York Times, 4/9/03]

What is Murdoch’s political agenda in Indonesia? War on Terror? Polishing US and The West image? Support moderate Islam? Let's just wait!

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The President's Second trip to US; Cosf of Personality!

President Susilo Bambang Yudhoyono decided to cancel his trip to Middle East but move on with his US trip. He flew to US last weekend to speak in front of institutional investor's Indonesia Global Investment Forum to be held September 15-16 at 3 West Club, New York.

This is the first time an Indonesian president visits US twice in less than six months. In his May 2005 trip, he met US President George Bush at White House. This time, no schedule of meeting for the two leaders. But he will meet Condy Rice, US secretary of state and other world leaders.

Saint Louis, Missouri is hist first stop. The Saint Louis trip has been scheduled long before the Katrina as we could see in Webster University's website. On September 12, the university is about to award Yudhoyono an honorary doctor of laws degree.

Popularly known as SBY, Yudhoyono graduated from Webster University's campus in Kansas City in 1991 with a M.A. in management. He received a doctorate in agriculture from the Bogor Agricultural Institute week before the final round of presidential election campaign last year.

SBY attended the Command and General Staff College at Fort Leavenworth, Kansas as a young military officer. Fort Leavenworth will be his second stop in this trip before New York where the College award Yudhoyono an honorary certificate.

It is clear these first two-stops are about SBY's personality. At least 98 aboard with the president including 20 journalists. Well, personality care needs journalists to tell people right?

Yes he will speak before the UN members on restructuring of the world body. But what sounds contradictory is his speech at the Investor Forum.

Rumors said SBY need to speak at the New York forum because the organizer is one of his relatives, a former CEO of US company in Indonesia. Yudhoyono actually is not quite confident to promote Indonesia's invesment opportunities in a disfunctional government as investors had experienced in the last few months.

International investors are surely welcome his efforts to fight corruption (this migh be the reason why Webster University give Yudhoyono a honorary doctor in laws), even though recently the president asked for a cooling down and public started to sense 'politization of police investigation' in some corruption cases when it comes to close aides, friends, and relatives.

But his government is seen incapable to make important decisions, including the fuel price hike needed to ease state budget pressure. Besides, SBY's leadership is very much doubted in handling the economy, especially his cabinet members. Confusing and conflicting statements between the president, vice president, and ministers has put this government under heavy criticism from investors.

Worse, so many disputes with foreign investors left unsettled. Karaha Bodas, Cemex, and ExxonMobil in Cepu are some cases hanging in the air without clear settlement and give negative signal for foreign investors.

The president promised many times to foreign investors, including US president George Bush, to settle those disputes as part of his campaign promises to attract more investment in order to improve the economy.

The president tried to settle those cases. Say in the ExxonMobil versus Pertamina over Cepu oilfield, he asked chief economic minister Aburizal Bakrie to reopen the negotiation. Aburizal then set up a team consisted of government officers and Pertamina board of directors/commissioners. Both parties signed the memmorandum of understanding in June 2005.

But recent statements made by government officers gave signal that the negotiation back to square one as the suspiciousness between government officers is so high. Nobody dare to make decisions, including the president. With such a disfunctional administration, does SBY think that investors really want to hear his nice speech in New York?

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Conflict over Cepu Oilfield Splinters Indonesian Cabinet

The enduring conflict over giant oil and gas resources in Cepu, Java has splintered Indonesian cabinet. This is a big test for President Susilo Bambang Yudhoyono’s leadership. Previous cabinets also split over the issue.

While Yudhoyono clearly stated in his August 31 speech that Cepu contract should be settled in one or two weeks, doubts remain especially on Pertamina board of director’s resistance on the memorandum of understanding signed in June between government and ExxonMobil.

Internally, Pertamina’s board of commissioners has been at odds with board of directors over the MoU. Both claimed support from ministers. From public statements and communication between parties involved, it is clear that board of commissioners claimed support from Chief Economic Minister Aburizal Bakrie and Vice President Jusuf Kalla that Pertamina should honor the MoU.

Meanwhile board of directors claimed support from Energy Minister Purnomo Yusgiantoro that Pertamina should settle the internal dispute first before government move to a production sharing contract (PSC).

Cepu is under technical assistance contract (TAC) expired 2010 while under the MoU it should be replaced with PSC expired in 30 years.

Key to the settlement is Minister of State-Owned Enterprise Sugiharto who has the power over Pertamina’s management. He is the one who should settle the conflict.

Previously both Sugiharto and Aburizal stated that Pertamina’s board of directors should be replaced before the end of August. Sugiharto had asked his ministry’s secretary Said Didu to conduct a fit and proper test and select new management. Said said it is about time to install the new management at Pertamina. Rumors said Lendo Novo, Sugiharto’s chief of staff on investigationg corruption in SOEs, is investigating the candidates to make sure they never involved in corruption scandals.

But until now it is not clear when Sugiharto will replace Pertamina’s management. He already missed the target.

In the meantime Pertamina’s board of director intensifies its maneuver taking the opportunity of no clear regulation on local government’s participation in oil and gas sector. They offered to three regencies the 10% participating interest in Cepu. They are Blora, Bojonegoro, and Cepu in two provinces (Central and East Java). Horizontal conflict between regencies and provinces along with vertical conflict between regencies, provinces, and central government could put the Cepu block in a war zone.

Rumors of lobby conducted by Pertamina’s board to get support from Vice President Kalla through his son in law Sutanto Supardjo could also worsen the split between Kalla and Yudhoyono on economic affairs. So far, Kalla seems to support the MoU. But no statement made by Kalla on Cepu since his visit to China last week accompanied by Pertamina’s board of director and Sugiharto among others.

No information on whether Kalla and Pertamina met Petrochina executives during the visit. PetroChina was rumored last year to replace ExxonMobil in Cepu and secured support from ruling elites.

Aburizal’s position on Cepu also critical as he is under pressure to be replaced sometimes in October. Minister Purnomo is also on top list of ministers who should be kicked out of cabinet due to his poor performance in dealing with decreasing oil production, fuel and electricity scarcity in the last few months.

Even minister Sugiharto who secured enormous support from Prosperous Justice Party (one of Yudhoyono’s main supporter) is back into the list as part of a deal to replace Aburizal. Golkar Party, led by VP Kalla, is fighting hard to get state-owned enterprises ministry under its portfolio, may be in exchange of Aburizal’s replacement.

Under such circumstances, it is interesting to see whether Yudhoyono could control the situation and get the Cepu deal done this month. Else, Indonesia might have to wait few more years to have significant oil production boost from Cepu and a lot more suffer to the economy as oil price is on its way to reach US$100 per barrel as predicted by some analysts.

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