Floating state firms<\/p>\n
Minister of Finance Mar'ie Muhammad was quite right in his
\nobservation on Tuesday that listing on domestic or international
\nstock exchanges is the best mode of privatizing state companies.
\nPublic offerings of shares ensure fair prices for state assets
\nthrough open market forces, place tough disclosure requirements
\non the companies, protect them from excessive, direct government
\nintervention and make their managements highly accountable and
\ntransparent.<\/p>\n
Public share offering is one of the seven measures allowed by
\nPresidential Instruction No.5\/1988 regarding the reform of state
\ncompanies to improve their efficiency.<\/p>\n
Divestment through private placement, as done with some state
\ncompanies a few years ago, is highly vulnerable to political
\nlobbying as the mechanism is not transparent. Other modes -- a
\nchange in legal status, management contract or joint ventures
\nwith private companies, merger and organizational restructure --
\nare not so effective either. These measures are incapable of
\nremoving the biggest obstacles currently faced by state companies
\n-- contradictory missions, excessive government intervention and
\nlack of transparency and public accountability.<\/p>\n
As long as state companies remain shackled by excessive
\ngovernment control their managements will never be able to work
\non the basis of viable, long-term corporate plans because they
\nare vulnerable to sudden interventions either by the finance
\nministry, which acts as the nominee shareholder for the
\ngovernment, or by the ministries under which they operate.<\/p>\n
Recent disclosures of the way the minister of transportation
\nallocated and used funds from PT Garuda Indonesia airline and
\nseveral other companies under his supervision, and how the
\nminister of tourism, post and telecommunications took funds from
\nPT Telkom showed how ministries, faced with limited budgetary
\nappropriations and restricted by tight budgetary procedures, have
\nused state companies as cash cows. These practices have been made
\npossible by the extreme lack of managerial autonomy on the part
\nof the boards of directors. No wonder the reform of the 178 state
\ncompanies which was instructed by the President in 1988, has been
\nso slow. There are many vested interests which strive to maintain
\ndirect control of state assets.<\/p>\n
However, state companies which are listed either on domestic
\nor international stock markets, though still majority owned by
\nthe state, are subject to stock exchange regulations on
\ndisclosures, public accountability and decision-making mechanism
\nthrough open shareholders meetings. These rules and requirements
\nwill make it rather impossible for the government, despite its
\nmajority shareholding, to force its interests onto the companies.
\nOf more importance is that the managements will have clear-cut
\noperational directives and targets against which their
\nperformance will be assessed in a transparent manner.<\/p>\n
The problem, though, is that state companies should first
\nbecome financially sound to qualify for listings on stock
\nexchanges. Official reports from the finance ministry showed that
\nonly 92 or 51.7 percent of the state companies audited were
\ndeemed financially sound in 1995, while the other 86 or 48.3
\npercent were classified as unsound or \"less sound\". So far only
\nfour state companies -- PT Semen Gresik, PT Telekom, PT Indosat
\nand PT Timah -- have privatized through stock exchanges.<\/p>\n
Therefore, if the government is really serious with its plan
\nto improve the efficiency and performance of state companies it
\nshould accelerate their reform through concerted efforts on two
\nfronts: speeding up the preparations of sound companies for
\npublic listings and at the same time consolidating or
\nrestructuring the unsound ones or, if economic imperatives
\ndictate, even liquidating those which have no commercial
\nviability nor serve the basic needs of the people.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/floating-state-firms-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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