Govt needs to campaign hard on privatization<\/p>\n
Sri Wahyuni, The Jakarta Post, Yogyakarta<\/p>\n
The government has targeted reaping Rp 8 trillion from asset
\nsales to the private sector for the 2003 fiscal year, which seems
\na tall order considering the government's track record. The
\nfollowing is excerpts of an interview with Tony Prasetiantono of
\nGadjah Mada University, who is studying privatization for his
\ndoctorate at The Australian National University in Canberra.<\/p>\n
Question: How do you see the new privatization target?<\/p>\n
Answer: The target of Rp 8 trillion is obviously too high.
\nEven for this year's (2002) target of Rp 6.5 trillion, the State
\nMinister of State Owned Enterprises Laksamana Sukardi said that
\nup to the first semester only Rp 2 trillion was received.<\/p>\n
The target of privatization revenue for both this year and
\nnext year will be very hard to achieve. Besides, there are
\ndeadlocks in some cases including (the privatization of) PT Semen
\nGresik and its subsidiaries PT Semen Padang and PT Semen Tonasa.<\/p>\n
Q: How will that deadlock be overcome?<\/p>\n
A: Semen Gresik's privatization needs careful handling.
\nFortunately the IMF (International Monetary Fund) and Cemex have
\nan understanding about this sensitive issue. The image of our
\ninvestment is not automatically damaged because of the delay. In
\nother developing countries, privatization often faces
\nunpredictable obstacles. Nationalism has been the standard
\nargument for refusing privatization everywhere.<\/p>\n
The government should not tire in opening opportunities for
\ndialog with parties resisting privatization. The problem isn't
\nonly economic calculations. They are against privatization
\nbecause of cultural and historical considerations.<\/p>\n
So, once more, we should be very careful in handling Semen
\nPadang. If we force it, it will be counter productive. Besides,
\nboth the IMF and Cemex do not force the sale. However, we should
\ngo on with the sociological approach. The government, at least,
\nshould seek voluntary acceptance to the privatization of Semen
\nPadang.<\/p>\n
Q: What's the prospect of the sale of three more state-owned
\nenterprises, namely BRI (bank), Adhi Karya (contractor), and
\nPembangunan Perumahan (developer)?<\/p>\n
A: BRI is very attractive because of its vast nation-wide network
\n(with branch offices throughout the country). However the
\nexperience of IBRA (Indonesian Bank Restructuring Agency) in
\nselling Bank Niaga, did not run smoothly, so I'm doubtful whether
\nBRI will attract many investors.<\/p>\n
Selling it through IPO (Initial Public Offering) or offering
\nit through the stock market will be the right way to sell state-
\nowned banks such as BRI and Bank Mandiri. However, it should also
\nbe conducted very carefully.<\/p>\n
The government may need to use the strategy once used in
\nselling Bank BNI which was successful, through its first IPO in
\nNew York. Just test the market with, for example, 10 percent of
\nthe shares. Then if successful, offer another 10 percent.<\/p>\n
We need to be careful with the price. Avoid offering a large
\namount of shares, like 30 percent, as it will receive no response
\nfrom the market. It will make the price fall. This is what
\nhappened to Bank Niaga. The bid was very low, only Rp 25 per
\nsheet of shares although IBRA wanted to sell them for Rp 30. The
\namount of the offered shares should be reduced to leave a chance
\nfor the investor to improve the price.<\/p>\n
When BCA was released, IBRA wanted to sell a large amount of
\nshares with a lesser price. Try to sell them in small amounts
\n(for example 10 percent), and we could sell each of the shares at
\nhigher prices.<\/p>\n
Adhi Karya and Pembangunan Perumahan have a good chance,
\nespecially as the construction sector has shown signs of getting
\nback in business. Besides the property sector is also getting up,
\nand the sector tends to be competitive.<\/p>\n
Q: Is the government's capability adequate now to conduct
\nprivatization?<\/p>\n
A: The dilemma is that public companies with sale value are good
\npublic companies, and it is a pity to sell them, while no one
\nwants to buy bad public companies.<\/p>\n
The formula would be privatization plus deregulation equals
\nefficiency. If privatization is conducted blindly, it will result
\nin monopolies by investors who are new owners of the public
\ncompanies. I welcome the policy to stop PT Telkom's monopoly in
\nthe telecommunication business by letting in PT Indosat as a
\ncompetitor. Efforts to deregulate the telecommunication sector
\nwill speed up efficiency, which will also benefit consumers.<\/p>\n
Q: What about those who believe privatization will only shift
\nmonopolies from the state to private businesses?<\/p>\n
A: I would also resist privatization if it only shifts ownership
\nfrom the state to private businesses; they would monopolize
\npublic companies and it would be the people who suffer the most.
\nAll studies on privatization always conclude that mere
\nprivatization is not enough. It should be accompanied with
\nderegulation to enable more competition. That's why, before
\nTelkom is privatized, a competitor is given -- Indosat. I hope
\nthis will be the pattern for privatization.<\/p>\n
Q: What are the pluses and minuses of privatization?<\/p>\n
A: The plus is that privatization will push former public
\ncompanies into healthier companies, leading to lower prices of
\ntheir products and preventing them from being robbed by
\ngovernment officials, politicians and rent seekers. The minus
\nside is the layoffs aimed to improve efficiency and profits.<\/p>\n
Q: What should be done in the current situation?<\/p>\n
A: Discourse on privatization is based only on partial
\nunderstanding. Selling public companies is \"unnationalistic\" and
\n\"unpatriotic\". Some also say that privatization aimed to fill in
\nthe state budget deficit is a mistake. Others say privatization
\nis only done \"to make the IMF happy\".<\/p>\n
Another argument says that privatization is a product born
\nfrom globalization, which we can only follow. But we cannot must
\nlabel privatization as an \"IMF program\", \"a result of IMF
\npressure\", \"the effect of globalization\", \"to fill in the state
\nbudget deficit\", or consider it as \"a non nationalistic action\".
\nThe urgency of privatization was incited by simultaneous
\nmotivation and not just partial reasons.<\/p>\n
The State Ministry of State-Owned Enterprises has to make
\npeople understand the privatization of public companies. Its
\nsuccess in many countries followed the hard work of governments
\nin convincing their people. Only with intensive campaigning will
\npeople really understand its essence and urgency.<\/p>\n
What has emerged are only partial comments ... As a result,
\nprivatization easily results in \"enemies\". It's the task of
\nLaksamana Sukardi's office to convince the community and give a
\ncomplete perception about privatization of public companies.<\/p>",
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