Opposing divestment<\/p>\n
The mounting opposition from the House of Representatives and
\nthe lingering political controversy over the recent sale of the
\ngovernment's majority stake in PT Indosat telecommunications
\ncompany could jeopardize the asset recovery programs of the
\nIndonesian Bank Restructuring Agency and privatization of state
\ncompanies (SOEs) and consequently threaten fiscal sustainability.<\/p>\n
An increasing number of House members of Commission IX in
\ncharge of state finance, banks and state companies have warned
\nthey would simply refuse to hold consultations with the
\ngovernment about privatization and divestment at nationalized
\nbanks until a law on SOEs was enacted.<\/p>\n
Yet more flabbergasting is that while even the status of the
\nbill on SOEs has remained uncertain, several House members have
\ndemanded that government divestment programs be governed by a
\nprivatization law.<\/p>\n
If this position became the official stance of House
\nCommission IX it could immediately cause a revenue shortfall of
\nRp 20 trillion (US$2.2 billion) or increase the current state
\nbudget deficit by almost 58 percent to Rp 54.5 trillion.
\nSuch a political stance also would be quite absurd because
\nprivatization has been accelerated since 1998 on the basis of the
\ndecrees of the People's Consultative Assembly, the highest
\nlegislative body, the Law on National Development Program and
\nthe annual state budget that has to be approved by the House.
\nNo one denies the imperative need for better and stronger legal
\nframeworks such as special laws to govern state companies and
\nprivatization. But abruptly stopping the whole program now at a
\ntime when the government is almost broke, overburdened with
\nhundreds of billions dollars in domestic and foreign debts, is
\nentirely irrational.<\/p>\n
Such an attitude also seems inhumanly arrogant and ignorant of
\nthe plight of millions of people who have been suffering from
\ndire poverty since the onset of the 1997 economic crisis and the
\nmillions of children who have been deprived of even simply basic
\neducation and health services.<\/p>\n
Are the House members so intellectually ignorant of the blunt
\nfact that without a faster pace of privatization and sales of
\nassets held by IBRA there will never be a virtuous cycle to fuel
\na sustainable economic recovery?<\/p>\n
Aren't the House members aware that the government, perceived
\nto be one of the most corrupt in the world, now controls and
\nmanages all the largest national banks and thousands of other
\ncompanies taken over from closed and nationalized banks?<\/p>\n
One does not need to be a genius to realize that the longer
\nthese assets are under the government, the worse would be their
\nquality and the slower would be the recovery of the banking
\nindustry as they will remain highly inefficient and vulnerable to
\ncorruption and collusion.<\/p>\n
The findings of independent audits of dozens of SOEs over the
\npast two years showed how grossly inefficient had been those
\nstate companies, how lax had been their internal control, how
\npoor had been their accounting standards and practices and how
\narbitrary had been government or senior officials' interference
\ninto their day-to-day operations.<\/p>\n
True, as some analysts have argued, as long as the government
\nremains largely corrupt, privatization would not solve the
\nproblems of SOEs. However the empirical experiences in most other
\ncountries have shown that privatization brought in additional
\nrevenues to a cash-starved government to enable it to cut down
\ndebt burdens, thereby releasing more resources for the public's
\nwelfare.<\/p>\n
More important too is that privatization is also greatly
\neffective in reducing rent-seeking activities of government
\nofficials since private shareholders have more leverage to stand
\nup against political pressures from officials with vested
\ninterests and in improving macroeconomic efficiency through the
\ncreation of a more competitive market. Its microeconomic benefits
\nare equally manifold, including more efficient and consequently
\nmore profitable enterprises, larger tax revenues for the state, a
\nsignificant increase in investment to create more jobs.<\/p>\n
Fears that without strong regulatory and competition
\nframeworks the privatization program would bring the national
\neconomy under foreign domination are overblown because the
\ngovernment always retains its sovereign rights to regulate all
\neconomic activities and all other areas affecting the economy.<\/p>\n
The country could not afford the luxury of stopping the
\nprivatization program because we are now in the midst of a deep
\ncrisis whereby the economy continues to bleed and the number of
\npeople falling into unemployment and absolute poverty is
\nincreasing daily.<\/p>\n
Instead of demanding a special law to govern privatization, a
\nprocess that could take more than one year to prepare and
\ndeliberate, the House should require the government to formulate
\na credible strategy for SOE reform and privatization and to
\nstipulate clear-cut directives, standard operational procedures
\nand a step-by-step process for divestment to ensure highly
\naccountable and transparent transactions.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/opposing-divestment-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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