Good corporate governance vital for privatization: WB<\/p>\n
JAKARTA (JP): The negative perception foreign investors have
\nof Indonesia's corporate governance has hampered the
\nprivatization of state companies, a World Bank official said on
\nTuesday.<\/p>\n
World Bank economist Bernard Drum said foreign investors
\nquestioned the ability of state firms to adopt good corporate
\ngovernance as quickly as private firms.<\/p>\n
\"Those companies that get good corporate governance are going
\nto get the most investment,\" Drum said during a break in a
\nconference on good corporate governance hosted by the Indonesian
\nChamber of Commerce.<\/p>\n
He said it was a common perception around the world that state
\nenterprises were slower to adopt market changes, received more
\npressure from political intervention and had more difficulty
\nimproving accountability.<\/p>\n
\"The government has to release control (of state firms),
\nthey'll have to let go,\" Drum said.<\/p>\n
According to him, speeding up the privatization process would
\nitself create a better perception of Indonesia's state firms. Yet
\nmuch of Indonesia's private sector has fallen into the
\ngovernment's hands as a result of the economic crisis, he said.<\/p>\n
Aside from state enterprises, the government owns some Rp 600
\ntrillion (US$68 billion) in nationalized assets under the
\nIndonesian Bank Restructuring Agency.<\/p>\n
\"When investors see the structure of the Indonesian economy,
\nand they see a large state control, it makes them nervous,\" he
\nsaid. \"It'll make a big difference to foreign perception if the
\ngovernment rapidly privatized.\"<\/p>\n
Drum said Indonesia had made some progress in adopting good
\ncorporate governance, evidenced by the fact there was increasing
\npublic awareness of the need to implement these practices.<\/p>\n
The recent establishment of the National Committee on
\nCorporate Governance, he said, showed the nation was earnest in
\nits efforts to adopt good corporate practices.<\/p>\n
The establishment of the committee was part of the country's
\neconomic reforms, as stipulated in the letter of intent the
\ngovernment signed with the International Monetary Fund.<\/p>\n
The committee formulated last May a code for good corporate
\ngovernance, which it expects will become the backbone for the
\ndevelopment of sectoral policies at the institutional level.<\/p>\n
\"Businesspeople need to understand that practicing good
\ncorporate governance is for their own interests and not something
\nthey do for the good of humanity,\" Drum said.<\/p>\n
However, he said, foreign investors' perception of Indonesia's
\ncorporate practices remained unchanged despite this new
\nawareness. \"It's too early, perception is still bad as the survey
\nresult shows.\"<\/p>\n
Drum was referring to a 1999 survey by McKinsey & Co., which
\nranked Indonesia as among the countries lacking good corporate
\npractices according to Asian and U.S. investors.<\/p>\n
He said foreign investors were waiting for clear signals that
\nthere was more than just an increased public awareness of the
\nneed for good corporate governance. \"Some very highly conspicuous
\nprosecutions for corruption would be very useful.\"<\/p>\n
Prosecuting high-level corruption cases, he said, would show
\nthe government was upholding the rule of law, which was mandatory
\nin ensuring good corporate governance. \"There are threats (of
\nprosecution), but nothing has happened yet. The government needs
\nto send a message that it is serious.\"<\/p>\n
The secretary to the state minister of investment and state
\nenterprises development, I Nyoman Tjager, admitted state firms
\nwere slow to adopt good corporate governance.<\/p>\n
\"In making decisions, they (state firms) depend on the
\nshareholders -- the bureaucrats -- which is why they are slower
\nthan private firms,\" he said during the conference.<\/p>\n
However, Nyoman added, the government was adopting policies
\naimed at improving the corporate practices of state firms. He
\nsaid these policies included the requirement of fit and proper
\ntests for directors.<\/p>\n
Nyoman said his ministry also was planning to establish
\nperformance incentive packages such as those found in the private
\nsector for the boards of directors and commissioners of state
\nfirms.<\/p>\n
Separately, Sofyan Wanandi of the National Business
\nDevelopment Council said foreign investors were looking for
\n\"safe, reliable, low-cost and profitable areas of investment,
\nwith world-class services to investors who comply with the
\nprinciples and rules of good corporate governance\".<\/p>\n
However, he said, investors did not expect a sudden change,
\nbut were looking for gradual improvements that demonstrated
\nIndonesia's seriousness and capability to change.(bkm)<\/p>",
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