Wednesday, October 22, 2008
  Another Bakrie Bash.

Why not kick a rich man when he's down, eh? He's maybe going to be out of pocket by about $4 billion dollars, half his fortune before the stock markets and banks went tits up. In order to finance massive expansion so that the Minister of (His Family's) Welfare could become Indonesia's richest man, various banks lent him loads of money which, in many senses, wasn't really theirs to lend.

As collateral, the Bakrie boys had pledged shares, then valued at $6 billion, primarily in PT Bumi Resources, which was their milch cow for a while as they exported Indonesia's coal, ahem, resources, whilst the price was at record highs. The crash, and panic-stricken investors in the Jakarta Stock Exchange, brought the value of those shares down to $1.35 billion. That J.P Morgan wanted its loans paid off seems fair enough; Bakrie, on behalf of their shareholders, gambled and didn't win.

The sentiment among all-right thinking people, and socialists too, is that there should be buy ups and not bail outs. Public money should not be used to line private pockets, and in the case of Bumi Resources, having the State take back an interest, preferably a controlling interest, in State resources, makes absolute moral sense.

Whatever happens, as this Post editorial states quite clearly, there must be absolute transparency in any deal reached between state owned companies and the Bakrie empire - or should that now be called a fiefdom?

However,there are mutterings, conspiracy theories even, circulating about the Minister of Welfare's powerful friends. For example, in today's Jakarta Post, there is a story that the Minister of Finance, Sri Mulyani Indrawati, is facing a "covert attempt" to force her out "following her stern moves to guard the state budget from abuse and clamp down on violators".

Efforts to topple the "iron lady" intensified after she turned down requests from a major conglomerate for government assistance in saving its business empire in the wake of the global financial meltdown, sources said.

Interestingly, the "major conglomerate" is not named in this story. Why?

Ministry sources say businessmen involved in violations in the mining sector, the customs and excise business, and the tax sector were among those teaming up with businessmen who recently got burned in the stock market and could not recover their losses.

Mulyani has been praised for her efforts in reforming the once corruption-infested customs and tax offices, including refusing to allow 10 helicopters belonging to a firm linked to Vice President Jusuf Kalla to pass through customs before paying duties.

Her courage was on show again when she ordered state-run Bank Mandiri to transfer disputed funds worth Rp 1.23 trillion (US$ 126 million) from Hutomo "Tommy" Mandala Putra, son of the late former president Soeharto, to the state account for development use.

However, her latest move in refusing to help a politically wired business group has ignited a backlash of rage which may cost her her job unless Yudhoyono ensures Mulyani remains in her post until his administration ends.

The public is aware that in Sri Mulyana there is at least (at last?) one government minister of clear probity and with the courage to do what is necessary to root out corrupt practices. As SBY clearly wants another term, in not removing Mulyani he will conversely be demonstrating a decisiveness he has rarely shown.

I have absolutely no sympathy with the losers. They haven't lost livelihoods, houses, business, unlike the refugees from the mud volcano in Sidoarjo, East Java.

The general consensus is that a Bakrie company, Lapindo Brantas, drilling in the area was responsible. The company has been charged by SBY with compensating those who've see everything disappear under a sea of mud. Lapindo Brantas denies responsibility claiming that it was all the fault of an earthquake a couple of hundred miles away in Yogya a week previously. So there are some 40,000* displaced folk still waiting for the presidential directive to be carried out by a government minister ...

Taking place in London today is an international conference of noted geologists and academics convened to "professionally discuss" Subsurface Sediment Remobilization and Fluid Flow in Sedimentary Basins as it relates to the Sidoarjo mudflow phenomenon so as to find an explanation as to the causes and origin of the mudflow.

The seminar is sponsored by oil companies BP, Chevron, ConocoPhilips, DONG Energy.

A comment added to a post on a specialist geology blog has me confused.

It relates to some in-fighting within PT Energi Mega Persada, or EMP, which is not wholly owned by the Bakries. I am informed that at the time of the blowout, PT Lapindo-Brantas was a subsidiary of EMP, part of the Bakrie Group and the holding company of PT Lapindo-Brantas. EMP owns a 50 percent share, Medco Energi International has 32 percent, and Santos has 18 percent.

So basically the oil field has three partners - including Australia’s Santos - which has agreed to pay up even though it did not actually drill the well.

Medco use the words “Gross Negligence”, which means, if proven, they would be off the hook it terms of liability. An investigation found that the founders of Medco were securing funding to buy back shares in the company. They had lost control of Medco during the Asian Economic Crisis a few years earlier, and so couldn’t afford another financial disaster.

If the drilling didn't cause the mudflow, then Lapindo Brantas, Medco and Santos would presumably all be off the financial hook, and the Indonesian government would have to pay compensation.
Yet Santos have agreed to pay their share, MEDCO blames the majority stakeholders, the Bakrie Boys, who are the only ones claiming force majeure, or geological and seismic.

I look forward to hearing what the conclusions of the London conference will be. I suspect that the Bakrie Boys will be in even deeper mire. Then, finally, they may have a taste of the sufferings of the Sidoarjo souls awaiting some welfare from the Minister.
Update 23 Oct. 11am
As might be expected,
the government has brushed aside claims there is a conflict among Cabinet members that has placed the position Finance Minister Sri Mulyani Indrawati in jeopardy.

So, presumably her position is secure until next July, the month of the next presidential election.

However, a consortium of State Owned Enterprises (SOEs) and the Bakrie family are still negotiating the sale of shares in their flagship PT Bumi Resources.

*Lapindo Brantas has a site about LUSI, with loads of newsletters in Indonesian.


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