SOE privatization program: Quo Vadis?<\/p>\n
Erwin Tunggul Setiawan, Jakarta<\/p>\n
It is generally understood that privatization is a process in
\nwhich public or state ownership of an enterprise is transferred
\nto a private party.<\/p>\n
It is how this process materializes into reality that has long
\nbeen a big problem here.<\/p>\n
That the process of privatization is indeed a big problem is
\nclearly seen from the hard struggle that high-ranking government
\nofficials in charge of state-owned enterprises have faced all
\nthese years.<\/p>\n
When privatization was \"introduced\" in 1991, Tanri Abeng, then
\nthe state minister for state enterprises, had to go through all
\nthe pros and cons of this matter. At that time Tanri was trying
\nto privatize PT Semen Gresik by transferring part of its
\nownership to a Mexican company, Cemex.<\/p>\n
Then, when Laksamana Sukardi, a former banker, was state
\nminister for state enterprises, he was accused of \"interpreting\"
\nprivatization too liberally by allowing the nation's assets to be
\nsold to foreign investors at \"low prices\".<\/p>\n
When president Megawati Soekarnoputri term ended, those
\nopposed to privatization began to gain the upper hand. A
\n\"rebellion\" of sorts regarding privatization has been seen here
\nand there. Even many in the government are openly against
\nprivatization.<\/p>\n
Several parties seized this momentum to make public their
\ndisagreement with the privatization of state-owned enterprises
\n(SOEs). In October 2004, for example, the Blora Center organized
\na discussion under the theme of \"SOEs Will Remain Sound Without
\nPrivatization\".<\/p>\n
The president director of Bank Mandiri, E.C.W. Neloe, now
\ncaught up in a bad debt scandal, has complained that state banks
\nhave been coerced into taking the privatization road.<\/p>\n
\"In fact, at the same time, it is demanded that we should make
\na bigger profit,\" he said.<\/p>\n
The president director of state-owned telecommunications
\ncompany PT Telkom, Kristiono, who was one of the speakers at the
\ndiscussion, expressed a similar view. However, he went even
\nfurther, saying that in the future there would no longer be any
\nneed for the Office of the State Minister for State Enterprises.
\nEarlier, voices against privatization, particularly from
\nofficials at state-owned enterprises, were hardly ever heard.<\/p>\n
As a result, the process by which the government gives up its
\nshares in state-owned enterprises has become vague. There has
\nbeen no satisfactory explanation from Coordinating Minister of
\nthe Economy Aburizal Bakrie and State Minister for State
\nEnterprises Sugiharto regarding this matter.<\/p>\n
Recently, however, the secretary at the Office of the State
\nMinister for State Enterprises, Richard Claproth, said the office
\nwould only use initial public offerings (IPOs). \"Regarding
\nstrategic SOEs, the government will employ only the TOT
\n(transfer, operation, transfer) pattern without any transfer of
\nownership,\" he said in a discussion held at Parahyangan
\nUniversity in Bandung last May.<\/p>\n
In addition, Sugiharto also hinted that the government will
\nnot sell its shares in SOEs at low prices. And the Office of the
\nState Minister for State Enterprises will not allow foreign
\ninvestors to control over 51 percent of these shares.<\/p>\n
\"Foreign investors will be allowed to control a maximum of 5
\npercent to 10 percent of the shares,\" he said.<\/p>\n
All this is just what we can learn from the media because we
\nhave yet to find out what the real policy is that Sugiharto will
\nimplement regarding SOE privatization.<\/p>\n
Major businesspeople and international economic institutions
\nare extremely eager to learn the policy of privatization that
\nwill prevail in the present administration of President Susilo
\nBambang Yudhoyono. Will this policy be different from that
\nimplemented during the administration of Megawati Soekarnoputri?
\nUnfortunately, they have so far had to be content only with
\ncontroversial statements in the media by Vice President Jusuf
\nKalla and Coordinating Minister for the Economy Aburizal Bakrie.<\/p>\n
Aburizal Bakrie has said that privatization will go on. This,
\nin his opinion, is a mandate of the law that has to be exercised.
\nPrivatization is necessary to ensure that the target of Rp 13
\ntrillion in revenue from SOEs and their share dividends set by
\nthe government will be reached.<\/p>\n
Vice President Jusuf Kalla, however, immediately responded,
\nsaying, \"Of course there must be revenue, but which SOE has to be
\nsold?\" He also said that Indonesia has had bad experiences with
\nprivatization. \"We no longer want to sell this nation's assets at
\nlow prices,\" he noted.<\/p>\n
Surely, this situation cannot be allowed to go on as it is
\nnow. What should be our stance regarding this matter? In this
\ncontext, there are several things that need revamping.<\/p>\n
First, ironically, Indonesia is yet to have a standard
\nregulation on privatization although it has sold several assets.
\nThat is why privatization has been implemented only in accordance
\nwith the wishes of those currently in power.<\/p>\n
There is also an indication that privatization is part of the
\n\"project\" of officials at the Office of the State Minister for
\nState Enterprises.<\/p>\n
The Asian Development Bank is to a certain degree correct when
\ndemanding that Indonesia immediately draft a law on
\nprivatization.<\/p>\n
Indonesia should immediately issue such a law rather than just
\nwasting time by nurturing deep suspicion over demands made by
\nforeign institutions in this respect.<\/p>\n
Second, the government has always said that it is waiting for
\n\"the appropriate time\" and the right market conditions before
\nselling its assets, in the hope of fetching a better price.
\nPredicting when the right market conditions will prevail is
\nindeed a very difficult job.<\/p>\n
Unfortunately, the attitude that high-ranking government
\nofficials have shown regarding this matter hardly helps improve
\nmarket conditions.<\/p>\n
Third, the Office of State Minister of SOEs must not deal
\nsolely with privatization. It must also devote sufficient
\nattention to the management system of national corporations.<\/p>\n
Efficiency and improvement in the financial soundness of an
\nSOE after its privatization will be of little use unless the
\nenvironment and the partners of this particular SOE are likewise
\nefficient.<\/p>\n
In a corrupt and inefficient economic system, a clean SOE will
\nbe as useless as \"sweeping a dirty floor with a dirty broom.\"
\nTherefore, SOE privatization is a national project and not simply
\nthe task of a particular institution.<\/p>\n
Fourth, every privatization incur huge costs, including the
\nsocial cost. This social cost is connected with the cost that
\narises to carry out \"SOE privatization campaigns\" to all the
\nstakeholders of the company: the employees, the board of
\ndirectors and related government institutions.<\/p>\n
An SOE privatization campaign should not be concerned only
\nwith how this privatization will be implemented but, more
\nimportantly, it must deal with how the employees will fare that
\nhave to be laid off or transferred in position as a result of
\nthis privatization.<\/p>\n
Unfortunately, the government is yet to pay serious attention
\nto this social cost. The sales of the government's shares in
\nIndosat to a Singaporean investor is a case in point. After this
\nprivatization, many Indosat employees stage large-scale protest
\nrallies.<\/p>\n
Fifth, there must be a change in the way SOEs are managed. A
\nnumber of SOEs, particularly in the banking sector, are badly
\nmanaged under the \"4 in 1\" principle, in which the government
\nplays simultaneously 4 roles: a regulator, a supervisor, an owner
\nand an operator.<\/p>\n
When the government privatizes an SOE, its management system
\nmust be changed. Migration in the work habit will be necessary so
\nthat a less competitive SOE will become more competitive and more
\nprofessional. In this respect, a particular strategy and program
\nwill be needed because a change in work habit takes a long time
\nto become a reality.<\/p>\n
Several obstacles may be in the way. It is the prevailing
\nbelief that a more professional work habit is necessary only for
\nan SOE that has been privatized. In fact, the government should
\nunderstand that the ownership of this SOE has been shared with
\nanother party.<\/p>\n
An unprofessional attitude, such as the feudalistic principle
\nof \"as long as the leader is pleased\" is still inherent in inter-
\ncorporate relationship. It is this particular attitude that has
\nalways made it difficult for a privatized SOE to develop its
\nprofessionalism. That's why the working environment of an SOE
\nalso needs revamping.<\/p>\n
The writer is a Jakarta-based capital market analyst<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/soe-privatization-program-quo-vadis-1447893297", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }