Indonesian reformer accused of corruption

Iwan Pontjowinoto is fighting to keep his job as president-director of Jamsostek, the Indonesian state labour insurance company, after directors and workers at the institution presented the government and the House of Representatives with a motion of no-confidence, alleging corrupt practices at the company.

Pontjowinoto is viewed by people in the private sector as a reformer who was recently installed to clean up Jamsostek, which has long been run as a source of patronage. He was a former director of Danareksa Securities and is tied to moderate Islamic reformers in Jakarta looking to clean up government.

But dropping a blunt reformer such as Pontjowinoto into a bureaucratic honey pot like Jamsostek has riled plenty of vested interests, say financial executives. Those people who benefit from the status quo are trying to take him down via this latest political effort.

The motion was filed by the Jamsostek Workers Union (SPJ) to State Minister of State Enterprises Sugiharto and to the House Commission IX for labour and social affairs. It is supported by a number of high-ranking Jamsostek officials, including the finance director, Tri Lestari, and Tjarda Muchtar, director of service and operational affairs.

SPJ chairman Abdul Latief says the union is calling for Pontjowinoto to be replaced "in order to salvage the company from possible bankruptcy and to improve our services for workers". He says the motion aims to deal with PontjowinotoÆs alleged poor performance, as well as a number of unpopular decisions blamed for discouraging them from working hard.

The workers also accused Pontjowinoto of permitting corrupt and collusive practices to flourish, such as appointing cronies to various posts and regional offices. Industry sources say Pontjowinoto has tried to introduce radical change to Jamsostek by bringing in his own people, many of whom come from backgrounds other than finance or pensions.

The union also expressed disappointment in his decision to stop trading in the stockmarket.

In one of his boldest moves, Pontjowinoto has barred Jamsostek from direct involvement in the country's capital market, via typically opaque transactions. Instead he has appointed two domestic securities companies, Bahana Securities and Danareksa Securities, as its main partners in managing the company's Rp30 trillion-worth ($3.3 billion) of funds. Bahana is 85% owned by the central bank and Danareksa is fully owned by the government, so they are considered more transparent.

He is believed to have wanted to entrust Rp6 trillion ($663 million) to the two partner companies to manage, but Jamsostek's board of commissioners opposed the plan.

Well-placed industry sources in Jakarta say Pontjowinoto's close relationship with Minister of State Enterprises Sugiharto is likely to insulate him from much of the fallout of the no-confidence motion.

"Pontjowinoto has a strong personality, and limited experience of working within a state-owned company," says an observer in the financial services industry. "It's not surprising that he is going to upset people, especially when they find their little incentives or kickbacks are no longer appearing."

Sources within the global funds industry in Jakarta offered their support for Pontjowinoto, pointing out that this week's motion of no-confidence is a sign progress is being made. "If he's upsetting people I see it as a sign that his reforms are starting to have an impact," says one.