Some Consequences of the Pertamina Crisis in Indonesia

The rise and fall of Pertamina is a remarkable event in the recent economic history of Indonesia which has had wide-ranging economic and political ramifications. Formed in 1968, the state enterprise grew rapidly into one of the most important companies in Asia and Indonesia's most vigorous business organization. By 1974, this burgeoning oil conglomerate led by a dynamic President Director, Dr Ibnu Sutowo, known for his “can-do” philosophy and record of delivering the goods, had expanded its activities to a wide range of diverse business ventures both within and outside of Indonesia. But in late 1974, just as it seemed that the oil boom would surely strengthen Pertamina's already-dominant role in political and economic life in Indonesia, severe financial difficulties overtook the enterprise. In March 1975 the Indonesian Government was forced to step in to shore up Pertamina, and the subsequent investigations which continued on into 1976 revealed a series of remarkable business miscalculations which had led the company to accumulate debts officially put at over US$10 billion, much of it in foreign currency. Corruption in Indonesia has attracted much attention in recent years, so it is perhaps not surprising that it is this side of the remarkable Pertamina affair — and especially the role of Dr Ibnu Sutowo — that has received most comment. But the controversy surrounding the rise and fall of Ibnu Sutowo should not be allowed to obscure other significant issues. There are numerous semi-independent “states within a state” in Indonesia, and the role of particular individuals (whether honest or corrupt) within them should be kept in perspective. After discussing the background to the Pertamina crisis below, several issues will be taken up. It will be argued that while the economic consequences are bound to be farreaching, their impact on the economy should not be exaggerated. It will also be suggested that it is conflict between the need for autonomy and the desirability of public accountability which is at the heart of the debates about Pertamina's role, that many other official institutions (especially state enterprises) are faced with a similar conflict, and that we must look to the long-term development of institutional checks and balances to permanently improve the situation.