Subject: Garuda Funds Diversion?
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From indonesia-request@svcs1.digex.net Sat Sep 4 02:03:20 1993
Date: Sat, 4 Sep 93 16:00:28 +1000
From: Anthony O'Connor
Message-Id: <9309040600.AA20727@kraken.itc.gu.edu.au>
To: indonesia@access.digex.net
"Garuda funds 'remain intact' "
Australian Financial Review, August 30, 1993
Maggie Ford, Jakarta
Senior Indonesian officials have taken the unusual step of denying
persistent newspaper reports that central babk funds and assets
belonging to Garuda, the state airline, might be improperly diverted
because of political pressure. The Minister of Finance, Mr Mar'ie
Muhammed, assured business leaders last week that a $US 1.6 billion
Government contingency fund would only be used for purposes such as
financing a gap in the State budget. A gap could arise if the
international oil price fell.
"I assure you that those funds remain intact at the Central Bank. The
Government audit agency has verified that account," he said.
His reassurance follows newspaper reports that pressure was being
exerted to spent the funds on larger development projects. Earlier
reports had suggested that major revenue earning facilities owned
by Garuda, such as its modern airline maintenance facility, might
be transferred out of the airline's control.
The $US 132 million Garuda maintenance facility was established under
the initiative of the airline's previous chairman, Mr Soeparno, who
modernized the airline before his removal from office last year. It is
certified to maintain and repair virtuallly all major jets including
Boeing 747's and counts many foreign airlines amongst its customers.
Last week, Mr Wage Mulyono, the present chairman, said Garuda "would
die" and 5,000 staff would lose their jobs if the facility were taken
away. It contributed 40% of Garuda's revenues, he said.
He also spoke out against press reports suggesting that Garuda might
also lose its Indonesian inter-city routes, also good revenue earners
to competitors.
Garuda, hard hit by the world downturn in air traffic, had seen its
profitability fall to only 12 billion rupiah ($A 8.67 million) for
the first six months of the year. The airline made a net profit
of about $US 150 million last year. Mr Mulyono said part of the
reduction could be attributed to the under-use of aircraft that Garuda
had purchased in anticipation of increased traffic on its routes.
But the allocation of a share of two foreign routes, to Perth and
Taiwan, to a private airline had increased the over-capacity. The routes
are serviced by Sempati Air, which also competes with Garuda on other
regional and domestic services. Sempati, part owned by President
Suharto's youngest son Mr Hutomo Mandala Putra, has succeeded in
attracting substantial numbers of passengers because of its good service,
punctual departures and innovative promotions such as onboard competitions.
