Bill Guerin, Jakarta – Yet another prehensile remnant of the Suharto regime's mismanagement of Indonesia's economy – Bulog, the national foodstuffs monopoly – is about to transformed into something hopefully not a piggy bank for whomever is in power. But don't count on it.
Bulog is Badan Urusan Logistic Nasional, a name that just about nobody ever used. For 35 years, as the government-run logistics agency for basic foodstuffs, Bulog usually nourished the elite at the expense of the poor whom it was supposed to feed. It is now to be privatized and turned into a commodities trading giant to engage in a mishmash of new activities – most of which are light years away from its basic brief of maintaining and strengthening Indonesia's staple food industry and distribution.
As with most government monopolies, it spent most of its existence getting in the way, inducing distortions into the system and raising prices. It may still. Despite International Monetary Fund admonitions to simply wipe it out, it has been turned from a full-blown state agency into a semi-profit-oriented state enterprise, or Perum – a word about as unlovely as Bulog.
It now has new masters – the government's ministries of finance and state enterprises. Its new status stipulates that the flow of money ostensibly will no longer be governed by presidential decree as it was under Suharto, but instead by state laws that demand standard accounting.
Suyitno Afandi, a deputy at the Ministry of State-Owned Enterprises, revealed that the agency's commercial activities are now to include hotels, gas stations and hypermarkets. It will also build a central logistics network and operate mills for rice, crude palm oil, wheat, fodder and processed food. Cut loose from state financial support, it is difficult to imagine where the money is to come from for these activities, but the message coming out of the ministries involved is that its new paradigm is that of a profit-oriented state company, equipped to make it more competitive in the international market.
Bulog was established in the late 1960s to purchase and ensure price stability of basic commodities, especially rice. Its profit ostensibly went directly to the government but its status before the changes ensured that there was no financial transparency or accountability. It metastasized into import and distribution monopolies in wheat, sugar, soybean and cooking oil before the IMF clipped its wings in 1998 and scrapped its exclusive rights.
The IMF was aghast at the way Bulog had distorted the market and enriched the rich. The agency topped their hit list of monopolies that had to go. Its exclusive rights were rescinded and it was left to control just rice. Minister of Defense Matori Abdul Djalil has dubbed it a cemetery for politicians. But it is still here and now it is expanding in new directions.
Bulog has been the source of scandal after scandal since the downfall of former President Suharto in 1998. But it wasn't until 2000 that the scale of the pillage started to surface. Worse, it was still going on. That year an Arthur Andersen audit revealed that Bulog had lost some Rp 6.7 trillion (US$794.8 million) between April 1993 and March 1998. The report cited unfavorable business contracts, irregularities and weak supervision.
For most of its existence the agency was a prime source of easy money for the political elite. Financed from the state budget, it accumulated trillions of rupiah from its operations and stored the funds in no less than 116 different accounts. Huge profits, from what was a nonprofit agency, were easily accessed by those with political clout.
In 1999 then president B J Habibie allocated Rp 40 billion from Bulog for a program, supposedly to feed the poor, and tasked Akbar Tanjung, the House of Representatives speaker and chairman of the Golkar Party, which Suharto had once headed, with oversight. The money was channeled through the State Secretariat in 1999, which Tanjung also headed. From there, it went into channels that, like water when it flows underground, never comes up again. Tanjung admitted channeling the money but claimed it was transferred to meet basic needs of the poor during the peak of the economic crisis in 1999. He in turn appointed an unknown Muslim foundation, Raudlatul Jannah, chaired by Dadang Sukandar, a property tycoon, to distribute the sembako (nine basic food items including rice and other staple commodities). They in turn gave the job to a private contractor, Winfried Simatupang.
There have been strong rumors that all three of the country's three largest political parties – Indonesian Democratic Party of Struggle (PDI-P) led by President Megawati Sukarnoputri, the United Development Party (PPP) headed by Vice President Hamzah Haz, and Golkar itself – helped themselves to Bulog funds during the runup to the 1999 general election, and that the only two parties not to have used state funds were the Justice Party (PK) and the Democratic People's Party (PRD)
Golkar was instrumental pressing to investigate ex-president Abdurrahman Wahid over the Bulogate I, the first scandal to come to light and which eventually led to his downfall. This involved the alleged embezzlement of Rp 35 billion from the agency by people close to Wahid. The next scandal was disclosed by Wahid's National Awakening Party faction, a move believed to be political revenge for Wahid's ouster.
That was Bulogate II, which surfaced when former Bulog chief Rahardi Ramelan told prosecutors he gave Rp 40 billion, for the food relief program, Rp 10 billion to former defense minister/military commander Wiranto to fund civilian security units, and Rp 4.6 billion to retail chain PT Goro Batari Sakti (owned by Suharto's youngest son, Tommy).
There is no evidence any food was ever delivered. After Tanjung had been charged, but before the trial began, Simatupang returned all the money to prosecutors. He later admitted to the court that returning the money to the state was based on "good will and an intention to save Akbar Tanjung", and agreed that the project was fictitious.
Prosecutors said the money went into Golkar coffers to finance its campaign in the 1999 general election. Indonesia's law on political parties, though later amended, limited personal donations to a party in excess of Rp 15 million a year, and stipulated a maximum corporate donation of Rp 150 million.
Tanjung awaits the result of an appeal to the Supreme Court. Convicted in August 2002 for misappropriation of Rp 40 billion in Bulog funds, he remains free and hopes to run for president in 2004. Recent changes in the elections law were engineered to allow a felon to run, provided the conviction has not been confirmed by all avenues of appeal.
Bulogate III involved Suharto's youngest son, Hutomo "Tommy" Mandala Putra, and former Bulog chairman Beddu Amang. Tommy was sentenced to 18 months in jail in November 2000 for his part in a dodgy Rp 5.2 billion land swap with Bulog. He went on the run until being captured in November 2001 and is now serving 15 years for engineering the murder of Supreme Court Judge M Syaifuddin Kartasasmita, who had sentenced him.
Bedung appealed to the Jakarta High Court over his conviction for embezzling Bulog funds only to have his sentence doubled to four years. Even the current president, Megawati, is being linked to the latest embryo scandal over a countertrade transaction to buy four Russian-made Sukhoi jet fighters and two Mi-35 helicopters. Bulog's involvement in the deal is said to have been improper. Minister of Industry and Trade Rini Soewandi tasked Bulog with executing the US$129 million countertrade deal between Indonesia and Russia, though she insists it was the president herself who gave the green light.
Bulog is demanding that the government reimburse its $26 million down payment for the hardware but DPR has barred the government from paying back the money and has set up select committee to investigate how Bulog came to be appointed executor of the deal.
Bulog's 60,000 employees had been bracing for changes as the pressure for reform grew, but could hardly have expected to be cast off from government funding so quickly.
Will Bulog, now emerging from its chrysalis, be free from government intervention? Hardly likely given that the new regulation stipulates that Bulog's new masters can assign any task they choose. Bulog's new status and its plans also beg the question as to whether it will still want to, or be able to, support farmers.
Only a month ago Bulog chief Widjanarko Puspojo had said that the agency would not exceed its brief of maintaining and strengthening the country's staple food industry and distribution network. "Bulog only handles four commodities: soybeans, corn, sugar and rice," he said.
Will Bulog still be interested in giving farmers a better price for their rice? Will the body still supervise and maintain the national food stock? "This is a business plan. The company's future actions will only be determined by profit and loss. You can trust us," Suyitno said.