What was the Pertamina Crisis?

Abstract

It has been suggested that if Revolution was the rallying-cry of Sukarno's Guided Democracy, its equivalent under the New Order of Suharto has been Development. Development has been invoked as a goal, a call to order, a promise of better times to come. Oil, since 1972 the overwhelming source of Indonesia's nonaid foreign exchange and tax revenue, has been crucial to the realization of that promise. The state oil company, Pertamina, was to be, in the words of its former President Director, Lieutenant-General Dr. Ibnu Sutowo, a national development com pany, the engine that would power the whole economy into sustained growth. Pertamina was then, both economically and politically, a key institution of the New Order. The series of disclosures beginning in November 1974 that Pertamina had accumulated massive debts which it was unable to cover would inevitably have far-reaching consequences for the Suharto Government. Even now, the exact scale of Pertamina's indebtedness is not fully known. In March 1975, it was admitted that Pertamina owed USS1-5 billion in short and medium-term debt. In June 1975, the Minister of Economic, Financial and Indus trial Affairs, Dr. Wijoyo Nitisastro, told the Dewan Perwakilan Rakyat (DPR, the People's Representative Assembly) that Pertamina's total debt was USS3-4 billion. By February 1976, officials were confirming reports that Pertamina owed both domestic and foreign creditors something in the region of USS10 billion or approximately two-thirds of the Indonesian GNP. Asked about the accuracy of that figure, Sutowo's successor, Major-General Piet Harjono, said: I am still counting. It may be more, it may be less. At the same time, there were strong rumours that a Ministry of Defence team charged with investigating the size of the debt had come up with a figure of US$13 billion. In March, the Minister of Mines, Dr. Mohammad Sadli, said that, after repayment of short-term loans, renegotiation of contracts, the cancellation of some projects and the scaling down of others, the debt had been reduced to US$62 billion. However, the Minister's announcement may have been premature. In September, it was admitted that Pertamina owed US$3 -3 billion for tanker purchases and charters alone ? almost US$1 billion more than it was said to be owing when the total debt was US$10 billion. Whatever the actual amount, it is certain that at its height the Pertamina debt totalled more than the combined amounts of foreign government aid raised by the Sukarno and Suharto r?gimes ? approximately US$8 billion. Moreover, the Pertamina debt does not include a whole range of subsidiary costs such as interest charges (allegedly averaging the very high rate of 15%) or the cost incurred by the government in rebuilding depleted foreign exchange re serves or the cost of a shift to greater reliance on loan-financed rather than self financed development or the income that might have accrued from projects now