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The Petitioner’s expert, law professor of Hasanuddin University Juajir Sumardi, delivering his expertise virtually at the judicial review hearing of the BUMN Law, Monday (23/11/2020). Photo by Humas MK/Ifa.

JAKARTA, Public Relations of the Constitutional Court—The formation of sub-holdings is a threat to the business and extension of PT Pertamina (Persero) as a SOE (BUMN) because sub-holdings are an unbundling practice to SOEs. Meanwhile, in fact, SOEs are mandated to carry out the function of state entrepreneurship and is responsible for creating welfare for the people, said law professor of Hasanuddin University Juajir Sumardi, an expert presented by the Petitioner, the Federation of Pertamina United Labor Unions (FSPPB) at the judicial review hearing of Law No. 19 of 2003 on State-Owned Enterprises (BUMN Law).

The sixth hearing of e No. 61/PUU-XVIII/2020 was held by the Constitutional Court on Monday, November 23, 2020 to hear the DPR (House) and the Petitioner’s expert. The House was absent from the hearing. The Petitioner believes the provision on privatization in Article 77 letters c and d of the BUMN Law violates Article 33 paragraphs (2) and (3) of the 1945 Constitution.

Juajir further explained that in order to avoid unbundling of PT Pertamina, the prohibition against privatization in Article 77 letters c and d of the BUMN Law must be interpreted to be “including all of its subsidiary companies, namely BUMN (Persero) along with its sub-holdings and subsidiaries.” Otherwise, it would go against Article 33 paragraphs (2) and (3) of the 1945 Constitution.

Profit-Oriented

Juajir saw that sub-holdings of PT Pertamina (Persero) would be similar to private companies and led to profit-oriented pricing of oil and gas fuel. He believes that this would lead to the state having difficulties in implementing national energy policies, especially in oil and natural gas, through people-oriented arrangements. This, consequently, would lead to management practices of oil and natural gas that doesn’t side with the interests of the people.

Also read: Petitioner of BUMN Law Says Petition Non Nebis in Idem

Legal Standing

Juajir also explained that based on its legal standing, Pertamina’s sub-holdings and subsidiaries are no longer a BUMN (Persero) because the state doesn’t own their shares directly. Thus, they can hold an initial public offering or go public. He explained that this is no longer the object of regulation based on Article 77 letters c and d of the BUMN Law.

“In the absence of state share ownership in the sub-holdings and subsidiaries, the formation has degraded the company and direct state supervision. As a result, the BPK [Audit Board] also loses its authority to conduct audits of sub-holdings and subsidiaries that are no longer BUMN,” he said before the bench led by Chief Justice Anwar Usman.

Also read: Govt: Sale of Subsidiary Shares Not Privatization

Juajir added the absence of state share ownership in Pertamina sub-holdings and subsidiaries means the management of oil and natural gas, which are an important production branch for the state and affects the lives of the people, is not fully under the state’s control. This means the state has lost direct control because the formation of sub-holdings and subsidiary would have degraded the legal standing of PT Pertamina (Persero), originally an operating holding company to a strategic holding company.

“So, PT Pertamina Persero only becomes a company that has shares in sub-holdings. And this is not in accordance with the mandate in Article 33 paragraphs (2) and (3) of the 1945 Constitution. Thus, energy sovereignty and energy security that the state must have are degraded,” he said.

Also read: Pertamina: Privatization Not Unconstitutional

The Petitioner believesArticle 77 letters c and d of the BUMN Law prohibits the privatization of limited liability companies in certain business lines. They argued that based on the amendment to PT Pertamina’s (Persero) articles of association No. 27 of December 19, 2016, it does energy businesses. Therefore, it cannot be privatized based on the provision of Article 77 of the BUMN Law. Its businesses are integrated from upstream to downstream, covering upstream/exploration, processing/refinery, marketing and trading, as well as distribution/transportation and shipping.

The Petitioner stated that to improve competitiveness, increase value, expand business networks, and manage independence of State-Owned Enterprises (BUMN), the government may form a holding company for SOEs/company group/holding companies. One of the ways is to establish sub-holdings and subsidiaries of PT Pertamina as shown in the Decree of Pertamina Board of Directors No. Kpts-18/C00000.2020-SO on the Basic Organizational Structure of PT Pertamina: Subholding Upstream, Refining & Petrochemical, Commercial & Trading, Gas, Power & NRE, and Shipping Co. The privatization of PT Pertamina subsidiaries by the government has been planned to be done through IPO at sub-holding level.

Before concluding the session, Chief Justice Anwar reminded the litigants that the hearing would resume on December 9, 2020 at 11:00 WIB to hear the Petitioner’s expert.

Writer: Sri Pujianti
Editor: Lulu Anjarsari
PR: Lambang S.
Translator: Yuniar Widiastuti (NL)

Translation uploaded on 11/24/2020 17:59 WIB

Disclaimer: The original version of the news is in Indonesian. In case of any differences between the English and the Indonesian version, the Indonesian version will prevail.

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