How to manage or mismanage state companies<\/p>\n
Some say politicians would be able to practice what they
\npreach if they controlled state firms, while others raise
\nwarnings of worse inefficiencies. The Jakarta Post talked to
\npolitical economist Revrisond Baswir of the Gadjah Mada
\nUniversity in Yogyakarta, the director of the Institute of
\nDevelopment and Economic Analysis and newly appointed deputy for
\neconomic rights at the State Ministry of Human Rights Affairs. An
\nexcerpt of the interview follows:<\/p>\n
Question: Politicians have reportedly agreed that the Muslim-
\nbased \"axis force\" can take over finance-based state firms while
\nthe Indonesian Democratic Party of Struggle (PDI Perjuangan) and
\nthe National Awakening Party (PKB) can control others. How do you
\nsee this development?<\/p>\n
This problem should have been anticipated when the Cabinet was
\nbeing set up; the scramble for state run firms had already
\nstarted in the competition for Cabinet seats. The National
\nMandate Party (PAN) insisted on controlling the finance ministry
\nwhile (current minister) Bambang Sudibyo had actually admitted he
\nmight not be the right man for the office.<\/p>\n
This indicates pressure from the axis force to hold a certain
\npost with a certain target, including the control of a finance-
\nbased state firm.<\/p>\n
Another very strategic post in the Cabinet in regards to
\ncontrolling state firms is controlled by the PDI Perjuangan
\nthrough the installment of Laksamana Sukardi (state minister of
\ninvestment and state enterprises development). PKB is also
\nrepresented here through the ministry's secretary (Rozy Munir).<\/p>\n
The scramble for ministry posts has turned out to be a race
\nfor access to state firms. This was reflected through the
\nissuance of a government regulation stipulating the control of
\nstate firms under Laksamana's ministry.<\/p>\n
Of course PAN and the axis force protested this regulation and
\nfive days later a new regulation came out, revising the previous
\none, containing a kind of \"sharing\" of the control over state
\nfirms by the finance ministry and the State Ministry of
\nInvestment and State Enterprises Development.<\/p>\n
Do you agree that the rivalry is part of political party
\nefforts to collect funds ahead of the next general elections?<\/p>\n
That is still debatable. What is certain is that if a state
\nfirm is controlled by a certain party or political force, it will
\nhave access to facilities from the state firm. If a party
\ncontrols a state bank, for instance, its easier access to credit
\nwill benefit campaign activities -- this was reported to been
\nhave done by the People's Sovereignty Party (PDR).<\/p>\n
A state firm can also be directed to buy (goods and services)
\nfrom supporters of a political party; in its marketing, a state
\nfirm could also be distorted by nepotism tied to a political
\nforce.<\/p>\n
If, for instance, the state oil company Pertamina was
\ncontrolled by a certain party, gas stations could all be
\ncontrolled by that party. So this is more of an effort to control
\neconomic assets which can then be used to buy political support,
\nwhich indeed is not a straightforward case of corruption.<\/p>\n
Such things can happen because the internal processes of a
\nstate firm do not have to pass the House of Representatives.<\/p>\n
In the case of selling (the firm) or privatization, nepotism
\nis possible if a political grouping controls a state firm.<\/p>\n
Again, if a state enterprise is controlled by a political
\nparty, privatization or selling can not take place in conditions
\nof pure market competition.<\/p>\n
For instance, if a state firm is controlled by the axis force,
\nthere would be a tendency to sell shares to business parties
\nwhich support that force. Then we might not get the best price
\nbecause the market process would be hampered.<\/p>\n
Is such rivalry inevitable in a multiparty system?<\/p>\n
This is more of a problem during the transition from a corrupt
\nsystem of government. Under the New Order, state firms were cash
\ncows for corruptors close to those in power and the ruling Golkar
\nparty.<\/p>\n
When the regime collapsed, of course new powers, which were
\nnot limited to one party, saw a chance to occupy those posts. So
\nI think this is a transition to ... good governance.<\/p>\n
There should be clear distinction between political posts at
\nthe Cabinet level with those in state firms, which should be
\noccupied by professionals with no political ties.<\/p>\n
With no clear rules, even if we had a two-party system, the
\nruling party would have the opportunity to control all state
\nfirms and put all their people in the companies.<\/p>\n
This happened during the New Order, whereby state enterprises
\nwere filled with Golkar people or those loyal to Golkar. A change
\nof power would be followed by a change of all the people in the
\nstate firms and their performances would clearly be disrupted.<\/p>\n
It seems that each minister automatically becomes a
\ncommissioner in a state firm.<\/p>\n
Yes, that's the New Order style. The government does not have
\nto be represented by a minister in a state firm. It is not clear
\nwhat the government's consideration was in appointing A or B as a
\ncommissioner in this or that state firm. Was the post to be
\nshared by ministers, first echelon officials or military
\nofficers?<\/p>\n
In the New Order the post of state company commissioners was
\nlikely part of the economic pie allocated to civilian and
\nmilitary cronies. This tradition of appointing commissioners from
\nofficials should be stopped.<\/p>\n
The post of commissioner has become an additional post (to
\nofficials) and a source of more incentives to those in the
\ngovernment and bureaucracy, from ministers to director generals.<\/p>\n
We must question whether it is acceptable to give incentives
\nto officials by appointing them state firm commissioners.<\/p>\n
In the New Order a retired officer was at least likely to
\nbecome a commissioner at a state company. What do retired
\ngenerals know about business, or state banks?<\/p>\n
The same thing could happen if political parties were to
\ncontrol state firms, with a party secretary general becoming a
\ncommissioner. He wouldn't really know what a commissioner is
\nsupposed to do; commissioners here have often been swindled by
\ndirectors. Many commissioners only care about their annual bonus.<\/p>\n
How should we start building a good recruitment system for
\nimportant posts in state companies?<\/p>\n
This is the task of President Abdurrahman Wahid. He must lay
\nthe foundations of professional management in state firms.
\nPolitical parties can control Cabinet posts but this political
\nprocess must be separated from state firms. The government must
\nalso create a transparent recruitment process for state companies
\nand formulate a set of clear criteria for the concerned posts.<\/p>\n
I disagree with the statement by minister Laksmana who said it
\nwas not a problem whether state firm executives come from
\npolitical parties or not, and that what was important was that
\nthey were professional. What's more important is whether the
\nprocess (of appointing executives) is transparent.<\/p>\n
The recruitment of managerial posts in state firms must be
\nsubject to fair and open competition on the basis of merit,
\nregardless of whether the person comes from inside or outside the
\nstate company.<\/p>\n
The post of commissioner can be controlled by the government
\nas a consequence of it being the majority shareholder. But there
\nstill must be a set of clear criteria or rules regarding the post
\nof commissioner. The problem is whether officials can also become
\nstate firm commissioners. The government needs to convey at least
\nthe need for the above criteria to the House of Representatives;
\n(the issue) is not about the individual to be appointed.<\/p>\n
Has rivalry among political parties made it more difficult to
\nwipe out corruption in state firms?<\/p>\n
That's our problem. The nepotistic political process has
\nhappened since the set up of this accommodative Cabinet. Almost
\nall political factions, the so-called guarantors (of proposed
\nministers) were involved in its establishment.<\/p>\n
Each faction arbitrarily chose its person as minister, as long
\nas he or she could be controlled. The initial motivation was
\nalready nepotistic. One can say this is normal; a minister holds
\na political position. The problem is not that simple, because
\nwith the entrance of most political factions in government, the
\ncontrol function of the House becomes greatly ineffective.<\/p>\n
Now it's not only political parties eying state firms. Pak
\nAmien (Rais, Speaker of the People's Consultative Assembly and
\nthe men identified as leader of the axis force) has put his
\npeople into ministries, and this was not merely because the
\npeople are from PAN (which he chairs) but also because they are
\nfrom the same university. Two ministers which he proposed,
\nfinance minister Bambang and national education minister Yahya
\nMuhaimin are fellow alumni from Gadjah Mada University.<\/p>\n
I think others are doing similar things; ministers are
\ninfluencing the promotion of first echelon officers who are from
\ntheir own organization, schools and universities, regions, etc.
\nSo it has become quite complicated ... wiping out corruption will
\nlikely be very slow, not only in state firms.<\/p>\n
Can the President settle all this, given that he seems
\nrelatively independent from political parties and the axis force?<\/p>\n
That's true, but we can only depend on the good will of Gus
\nDur (Abdurrahman) and the government to stop this rivalry over
\nstate companies. Nepotism is acceptable in the Cabinet but not in
\nstate firms and the bureaucracy.<\/p>\n
The problem is that the President himself lives in some inner
\ncircle. To appoint state firm directors he needs input from
\npeople around him. Who can guarantee that the appointment is
\nobjective, whether it is based on professionalism or nepotism?<\/p>\n
If the President wishes to free state firms from politics he
\ncould form an independent body to mediate the firms and the
\ngovernment. The agency would watch over the succession of
\nmanagers and commissioners on the basis of professionalism.<\/p>\n
What should be the policy over state firms?<\/p>\n
This relates to the government's need to cover its budget.
\nBasically (this can be done) through privatization, or selling or
\nliquidizing the firm. If a firm is privatized or if part of its
\nshares are sold, the government can still expect profits if the
\nfirm's performance is good.<\/p>\n
I would advise that the government promote privatization
\ninstead of selling state firms. Privatization should aim at
\nmaking the firms healthy.<\/p>\n
What is the most basic constraint in the contributions from
\nstate firms?<\/p>\n
Corruption. Again, it doesn't matter whether the firm is to be
\nprivatized, if it's to go public or to be sold to foreign
\nparties. The most important thing is how to stop corruption in
\nstate firms, or at least reduce loopholes so corruption is kept
\nto the minimum.<\/p>\n
If the government can cleanse state firms of the pirates of
\nstate money, professionalism will follow suit. An end to
\ncorruption could save up to at least 30 percent of funds in state
\nfirms, which would greatly help increase revenue ...<\/p>\n
Now this political party rivalry is a new form of corruption
\naffecting state firms. How can you wipe out deeply ingrained
\ncorruption when you find the corruptors are friends or
\nschool mates, or from the same kampong as the new rulers of the
\nfirm...?<\/p>\n
I can only warn the President that if the (rivalry over state
\nfirms) continues unabated, even more state assets may go down the
\ndrain compared to the former era. While in the past (corruption)
\noccurred due to a monolithic power, now power is spread but it is
\nstill corrupt ...<\/p>\n
How large are state assets?<\/p>\n
About Rp 300 trillion. In the New Order, returns on assets
\ndeclined from one year to the other. From around 4 percent to 2.1
\npercent in the last year.<\/p>\n
Just imagine ... the interest of dozens of percent to be
\nexpected if we had invested the money in the bank ... now we only
\nget an interest of two percent (of the above amount).<\/p>\n
And not all of it enters state coffers because we have to pay
\nthis and that, leaving little profits to the state.<\/p>\n
Then there's the bankrupt firms asking the government for
\nsubsidies of trillions of rupiah, like Pertamina. In the end the
\nfunds from the state budget channeled to state firms could be
\nlarger than the revenue from the firms.<\/p>\n
The issue here is whether we expect contributions from state
\nfirms by improving their performances, or do we just wait for the
\nresults from the sale of state assets. That's a matter of choice.
\nIt's easy to sell, but then we would no longer have anything.
\nThey key is to clean up corruption in state firms, which will
\nencourage improved performance.<\/p>\n
Now, about you being recently recruited to the State Ministry
\nof Human Rights Affairs<\/p>\n
That's still being processed (although) the decree from the
\nminister has already been issued ...<\/p>\n
What is the job of the deputy for economic rights?<\/p>\n
It basically concerns economic rights such as the right to
\nfair and decent wages, the right to a decent livelihood for
\ncitizens, the right to strike, the right to special leave for
\nwomen, equal treatment and so on. I will work with other experts
\non law, gender, economy, politics and the military.<\/p>\n
What will your priority be?<\/p>\n
Economic rights are not well known so I will first introduce
\nthem to the public. For that purpose I'd like to work with
\nnongovernment organizations (NGOs) who have so far worked on
\nhuman rights; I also come from the International NGO Forum on
\nIndonesian Development (Infid).<\/p>\n
Haven't NGOs so far been largely noncooperative with the
\ngovernment?<\/p>\n
They can be at a distance from the government, but it's not
\ntaboo to have governments working hand in hand with NGOs. This
\ncan be seen as a proactive step by the government in approaching
\nNGOs, discussing their findings and opening up to their inputs.
\nThe government need not wait for their pressure to absorb their
\nfindings.<\/p>\n
Is there any relation to the fact that both you and Hasballah
\nare from PAN?<\/p>\n
I have been PAN's foremost critic recently so I don't know
\n(of any relation). Many in PAN don't know I've become a staff
\nmember at the ministry. I don't know pak Hasballah personally yet
\neither. There was speculation that Hasballah wanted PAN people in
\nhis office, while expert staff cannot be from political parties.
\nSo he asked for a list of civil servants of a certain grade and
\nmade a selection from it (Revrisond teaches at the state-run
\nGajah Mada University).<\/p>\n
My friends said it would be best to take up the offer;
\nHasballah was also from an NGO so they suggested it might be
\nbetter to accept the post rather than have some person from
\nnowhere take it ... (Asip A. Hasani)<\/p>",
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