More debate on privatization needed<\/p>\n
Winarno Zain, Director, Institute for Policy Studies, Jakarta<\/p>\n
The debate on the government privatization programs for the
\nstate owned enterprises (SOEs) reflects how the issue is narrowly
\nunderstood by the public. The merits or the shortcomings with
\nregard to the privatization of SOEs are never clearly spelled
\nout. It has created confusion from which political rhetoric
\nopposing privatization has gained an upper hand and the chance to
\ndominate the discourse. If not handled properly, these confusions
\ncould jeopardize the privatization program.<\/p>\n
The government has given the impression that privatization of
\nSOEs is linked to efforts to cover its budget deficit. Although
\nearnings from sales of SOEs could help the government budget,
\nlinking privatization merely with the government budget is a big
\nmistake. Privatization has a broader objective and meaning than
\njust a means to increase government revenues. It is a means to
\nachieve higher economic growth by making the whole economy more
\nefficient.<\/p>\n
In a free market and globalized economy, most probably, the
\nbuyer is an international corporation, operating in many parts of
\nthe world with superior international marketing networks. This
\ncould place most SOEs prominently among international networks,
\nimproving the chance to increase sales, exports and production.<\/p>\n
And in the context of economic recovery, rightly or wrongly,
\nsuccessful privatization programs are seen as an important
\ncondition for regaining investor confidence.<\/p>\n
Once privatized, the SOE will be freed from government
\nintervention. The SOE will no longer have the obligation to
\nperform \"social functions\", a vaguely defined requirement meant
\nto assist with social equity.<\/p>\n
Furthermore, in an era where political parties are competing
\nfor political power, there is a temptation from the parties
\nholding the power to fill the SOE boards with their political
\nappointees instead of professional managers. The privatization of
\nSOEs would make such political patronage nearly impossible,
\nallowing the business to be run by professional managers.<\/p>\n
By any standards the performance of the SOEs or (BUMN) in 2001
\nwas very dismal. The Indonesian government has 145 BUMNs. Last
\nyear, they made Rp 27 trillion in collective profit. But 80
\npercent of that profit came from only 11 BUMNs that mostly
\noperate in a monopolistic environment.<\/p>\n
But those who oppose privatization never base their arguments
\non economics. They use nationalist rhetoric instead to instill
\nfear within the public of foreign ownership. The issue has become
\nmore complicated since various vested interests feel threatened
\nby privatization programs.<\/p>\n
The programs could be entangled in national and regional
\npolitics, creating a mess like the one we just witnessed recently
\nwith regard to the privatization of PT Semen Gresik. PT Semen
\nGresik, is now most likely obligated to divest of its ownership
\nof its subsidiary PT Semen Padang because of locally enacted laws
\nand regional politics in Padang which prevented the sale last
\nyear.<\/p>\n
Nevertheless, it should be acknowledged, that there are
\nseveral valid grounds for being critical of privatization. The
\ncurrent SOE employees may legitimately worry over the possibility
\nof lay-offs as the new owner may embark on efficiency programs
\nfor the company. I also wonder how serious any given owner may
\nremain committed for a long-term investment.<\/p>\n
We can not rule out the possibility that the new owner, once
\nthey create better value for the company after successfully
\nimplementing efficiency programs, is tempted to sell the company
\nto another owner for profit.<\/p>\n
It is important, therefore, for the government to lay out a
\ncomprehensive strategy for its privatization program, in which
\nthe main objective should be to obtain the highest sales value
\nand at the same time to gain political support.<\/p>\n
A nation-wide campaign espousing the benefits of privatization
\nshould be conducted, involving many influential social groups
\nincluding members of the legislature, local leaders, students and
\nNGOs. The government should be more aggressive in disseminating
\nthe merits of privatization to the public.<\/p>\n
As long as, the public only gets a one-sided view, and has
\nlittle understanding of the issue, it will be difficult for the
\ngovernment to carry out privatization smoothly.<\/p>",
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