An alternative to privatization: Clean govt<\/p>\n
Sri Wahyuni, The Jakarta Post, Yogyakarta<\/p>\n
The government's revenue target of Rp 8 trillion from
\nprivatization sales for the 2003 fiscal year has astonished many
\nincluding economist Revrisond Baswir of Gadjah Mada University.<\/p>\n
Following are excerpts from last week's interview:<\/p>\n
Question: How do you see the government's new target for privatization?<\/p>\n
Answer: There are many factors including social and cultural ones that
\nthe office of the State Minister of State Enterprises has
\nignored. Privatization has so far been seen mainly as a business
\ntransaction -- resulting in resistance.<\/p>\n
Privatization cannot be done, in the way it is now being
\nconducted, especially in regard to the mandate of the
\nConstitution. Many, including legislators, still believe that the
\nConstitution requires the state's involvement in managing some
\npublic companies. If things like that are ignored, resistance
\nwill increase, not only from employees ... and that will increase
\nthe risk of tension.<\/p>\n
Q: Should an agreement on such issues be achieved before going
\nahead with the whole privatization process?<\/p>\n
A: Yes, it should. Take Article 33 (2) on essential products for
\npublic interest that must be in the control of the state. We
\ncannot just ignore this because there are many among the
\ncommunity that still require the state's involvement.<\/p>\n
At the lower level Law No 25\/2000 also gives the government a
\nmandate to make a law on state-owned enterprises. However, the
\nlaw does not exist yet. It is therefore very strange that
\nprivatization is held in the absence of laws on privatization as
\nwell as on state-owned enterprises. This is a serious problem.<\/p>\n
Q: Privatization is supposed to benefit the state, among others,
\nto prevent public companies from being cash cows for particular
\nvested interest groups. Your comment?<\/p>\n
A: That's alright but let's see the evidence. In the U.S., for
\nexample, big companies such as (energy firm) Enron were involved
\nin scandals ... The same thing happens here ...<\/p>\n
The superiority of private enterprises is therefore a myth.
\nThe problem is not in whether it is a private or a state-owned
\none. There are many determining factors. Whether a state-owned
\ncompany is corrupt depends more on the leadership.<\/p>\n
If we have a corrupt regime, either a private or a state-owned
\nfirm will be corrupt and become a cash cow too. With a clean
\nregime there's no chance of a state-owned firm becoming a cash
\ncow.<\/p>\n
Also, a legal basis is vital for privatization. Timing and
\nmethods are of no less importance. Selling anything in a crisis
\nsituation will result in a low price. At present, it is not a
\ngood time to sell anything because we are facing an economic
\ncrisis and a lack of trust from investors.<\/p>\n
The method is questionable, especially whether the ministry in
\ncharge of privatization is credible ... (given) suspicions of
\npublic companies becoming cash cows for groups with vested
\ninterests.<\/p>\n
Q: What would be your other suggestions?<\/p>\n
A: First, we have to look at motivations (of privatization). If
\n(the motive) is the deficit in the state budget, the 2001 state
\nbudget left some Rp 16 trillion while the privatization revenue
\ntarget of last year was only Rp 6.5 trillion. From this we can
\nsee that the state budget deficit cannot be the reason for
\nprivatization because not all the previous budget was spent.<\/p>\n
Let's see the motivation of making public companies healthier.
\nIf the timing is not proper while the method is not credible
\neither, how can we expect healthier companies? Experience shows
\nthat privatization is full of scandals. The selling of Krakatau
\nSteel and the alleged insider trading in the selling of Gresik
\nGroup and Indosat are examples. This also shows that the process
\nof privatization itself has become a cash cow for groups with
\nvested interests.<\/p>\n
Therefore, given an absence of a legal basis (for
\nprivatization) as well as an absence of a credible methods ...
\nthe best way now is to temporarily stop the whole process (of
\nprivatization). Then let's make ourselves free from the
\nintervention of the International Monetary Fund, talk about the
\nlegal basis, and by then we'll be ready to decide whether to
\ncontinue privatization. That would reduce people's resistance.<\/p>\n
Thus legislators should exclude the privatization revenue
\ntarget of Rp 8 trillion from the 2003 state budget.<\/p>\n
Q: Why halt privatization?<\/p>\n
A: Among public companies, some are profitable while others are
\nnot. Some are related to products in control of public interests
\nand some are not. If we want to sell companies on the basis of
\nreasons that have nothing to do with the above Article 33 of the
\nConstitution (which remains unamended), I don't think people will
\nshow resistance against the plan as it won't violate the
\nConstitution.<\/p>\n
Founding father Bung Hatta repeatedly mentioned this issue
\n(related to Article 33) in his speeches. Therefore, selling these
\nwould be a violation of the Constitution.<\/p>\n
Moreover, the method which they sold shares (not a majority)
\nin PT Semen Gresik (Semen Padang's parent company) itself was
\nfull of alleged practices of corruption, collusion, and nepotism
\n(including) the official complaint of alleged insider trading.
\nThis should be overcome first, because (the sale) resulted in a
\nvery cheap transaction.<\/p>\n
An interview in (the London-based daily) Financial Times in
\n1997 with the owner of Cemex (of Mexico that bought Semen Gresik)
\nquoted him as saying that it was the right time to shop in Asia.
\nBefore the crisis, Semen Gresik was equal to US$500 per ton
\ncapacity but it was only US$100 per ton capacity after the
\ncrisis, the owner said. But what surprised me most was that Cemex
\nfinally bought it at only US$47 per ton capacity. This is a clear
\nindication that there must be something wrong with the sale.<\/p>\n
What is of no less importance is that the Semen Padang case
\nalso has something to do with things like history, traditional
\ncommunity ownership (tanah ulayat), and cultural ties between the
\ncommunity and the company that we cannot just ignore. Therefore
\nif we want to be consistent with the Constitution, along with the
\neffort to reveal the insider trading including the cheap price,
\nand given the concern to the people's emotional ties, I just
\ndon't think selling the company will overcome the Semen Padang
\ncase.<\/p>\n
Q: Is having the state running public companies better than
\nprivatization?<\/p>\n
A: I should be very careful in replying because it very much
\ndepends on what kind of country and private company we are
\ntalking about. Taking a public company from an authoritarian and
\ncorrupt government and putting it into private hands would
\nprobably be better. But a democratic and transparent government
\nwould be much better than a corrupt, centralized private company
\nwhose headquarters are so far away from the country that it would
\nbe very difficult for people here to control it.<\/p>\n
Besides, a state-owned company can also be managed like a
\nprivate company. For example, the ownership is spread and it is
\nbound with regulations obliging it to make periodic transparent
\nfinancial public report in newspapers.<\/p>\n
I don't think it would be a problem. The advantage of making
\nthe state in control of public companies is that citizens would
\nhave the democratic rights to control the companies -- assuming
\nthat we have a democratic government. But that would not be the
\ncase if the companies become private property.<\/p>\n
What we should avoid is having both bad government and bad
\nprivate companies.<\/p>",
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