JAKARTA: The recent allegations of corruption within state-owned oil and gas company PT Pertamina have once again cast a dark shadow over the nation’s energy sector.
The Attorney General’s Office (AGO) has estimated potential state losses of Rp 193.7 trillion (US$11.87 billion) due to mismanagement and corrupt practices between 2018 and 2023. This revelation underscores the persistent governance failures that have plagued Pertamina for decades, reinforcing the deeply entrenched culture of economic patronage that dates back to the Suharto era.
The roots of Pertamina’s governance crisis can be traced to the 1970s under the leadership of Ibnu Sutowo, a high-ranking Army officer, who transformed the company into an economic and political powerhouse, using its vast oil revenues to fund military interests, political campaigns and even social projects, such as the construction of hospitals and the renovation of the presidential office.
However, this unchecked financial power led to mismanagement and a lack of accountability, culminating in Pertamina’s near bankruptcy with a staggering US$10 billion debt burden. Although Ibnu was dismissed in 1976, the precedent for using Pertamina as a tool for economic patronage had been set (Crouch 1978; Robison 1990).
The fall of Suharto in 1998 and the subsequent reform era promised a new chapter for Indonesia’s energy sector. Yet, more than two decades later, Pertamina remains mired in the same old problems.
Despite repeated pledges for reform, the company continues to serve as a political instrument, with leadership positions often awarded based on political affiliations rather than professional merit. Directors come and go, but the culture of patronage and corruption remains largely intact.
One of the most notable attempts to clean up Pertamina’s governance came in 2014 when the government established the Anti-Oil and Gas Mafia Task Force under then-energy and mineral resources minister Sudirman Said. Led by renowned economist Faisal Basri, the task force was assigned with identifying systemic issues in fuel procurement and distribution and proposing reforms.
Their findings were damning: A deliberate lack of investment in new refineries, opaque procurement processes and heavy reliance on costly fuel imports had left Indonesia vulnerable to exploitation.
One of the task force’s most significant achievements was the forensic audit conducted by KordaMentha, an international investigative firm. The audit revealed anomalies in fuel procurement worth US$18 billion over three years, leading to the dissolution of Pertamina’s controversial trading arm, Petral, in 2015.
However, as the most recent graft allegations indicate, these measures were insufficient to eradicate the entrenched corruption within Pertamina. The latest scandal, which allegedly involves Pertamina top executives and private sector actors, highlights the systemic nature of corruption within the company.
State losses stem from various illicit activities, including domestic crude oil exports), crude oil imports through brokers, fuel imports through brokers, compensation payments, and fuel subsidies. These illustrate not only the magnitude of the corruption, but also its deeply institutionalised nature.
The continued involvement of brokers and middlemen in fuel procurement, coupled with the lack of transparency in tender processes, underscores the ongoing vulnerabilities in Pertamina’s governance structure. What makes the situation particularly frustrating is its historical continuity.
The same patronage networks that were established under Ibnu have evolved but never disappeared. Political and business elites continue to exploit Pertamina for personal gain, often with impunity.
Indonesia’s ongoing struggles with graft are reflected in its performance on Transparency International’s Corruption Perceptions Index (CPI). In 2024, Indonesia scored 37 of a possible 100, placing it 99th out of 180 countries.
This stagnant score highlights the limited progress in tackling systemic corruption, despite high-profile arrests and institutional reforms. The persistent governance failures in the energy sector, particularly at Pertamina, significantly contribute to Indonesia’s low CPI ranking.
The lack of accountability for powerful figures and the continued exploitation of state resources for private gain reinforce the perception that Indonesia remains a high-risk environment for investors. Now, as President Prabowo Subianto takes the helm, the commitment to reform is being put to the test.
Addressing Pertamina’s governance issues is only one piece of the puzzle. Equally critical is the need to reform the broader ecosystem of law enforcement, ensuring that it is impartial, transparent and decisive.
The oil and gas industry requires massive capital investments and cutting-edge technology, making it highly dependent on foreign investor confidence. Without a fair and predictable legal environment, Indonesia will struggle to attract the investment needed to revitalise its energy sector.
The resolution of corruption cases must be swift and just to send a message that the era of impunity is over. The recurring corruption scandals at Pertamina, coupled with Indonesia’s stagnant CPI ranking, paint a grim picture of the challenges ahead.
The shadow of patronage and corruption continues to threaten not only Pertamina’s future, but also Indonesia’s energy security and economic stability. The Prabowo administration has a historic opportunity to break this cycle by implementing bold reforms, strengthening law enforcement and fostering a culture of transparency and accountability.
Without decisive action, Pertamina will remain a symbol of Indonesia’s unfulfilled potential, a company trapped by the ghosts of its past and the failures of its present. If Indonesia truly aspires to economic progress and energy independence, it must confront the legacy of corruption head-on.
Prabowo’s leadership will be judged not only by his ability to reform Pertamina but also by his commitment to creating a fair and just legal environment that restores investor confidence and paves the way for Indonesia to achieve energy independence in the future.
*** Vishnu Juwono is an associate professor in public governance at the Faculty of Administrative Science, University of Indonesia. - The Jakarta Post/ANN
