Pertamina's new decision "kills" local businesses

A recent decision by state-own oil firm Pertamina that requires its contractors to present bank guarantee for any project they will participate is seen as a barrier that could "kill" local businesses.

Pertamina's board of directors' ruling No. 027/COOOO/2000 on the requirements for the procurement of goods and services stipulates that contractors must now present bank guarantee instead of surety bonds issued by insurance companies.

According to the Indonesian Chamber of Commerce and Industry (Kadin) and the Indonesian Insurance Council (DAI) and the Association of Contractors (Gapensi), local businesses - mostly small and medium businesses - currently use surety bonds when they participate in any Pertamina's projects.

"The imposition of that Pertamina ruling will only kills local businessmen. On the other hand, Pertamina should nurture local businessmen," the chairman of Kadin's Balikpapan branch, H Bustani Achmad, said on Thursday.

Bustani said that bank guarantee would definitely burden local businesses because it requires the businessmen to deposit certain amount of money in a commercial bank before the bank can issue bank guarantee.

While for surety bonds, the businessmen only pay for the premiums to an insurance company that will later issue surety bonds.

The chairman of Gapensi's Balikpapan branch, H. Sappe, and the chairman of DAI's Balikpapan branch, Syamsul Rizal, said that Pertamina could not eliminate the use of surety bonds because it was governed by Presidential Decree No. 16/1994, which was then revised by Presidential Decree No. 18/2000.

This presidential decree is then supported by a joint decree no. S 2262/D2/05/2000 issued by the finance minister and the chairman of the National Development Planning Board (Bappenas) that comes into force starting May 3, 2000. (*)