Whither privatization?<\/p>\n
We cannot find any conducive economic and political factors
\nthat could have prompted the government to more than double its
\nrevenue target from privatization to Rp 8 trillion (US$920
\nmillion) for the 2003 fiscal year from Rp 3.9 trillion this year.<\/p>\n
The government seems highly optimistic nevertheless, stating
\nin its 2003 budget document that three more state companies --
\nBank Rakyat Indonesia, PT Adhi Karya and PT Pembangunan Perumahan
\nproperty developers -- would be privatized, in addition to the
\ntwo dozen which the government has been trying to be sell without
\nsuccess since 2000.<\/p>\n
Yet there has not been a single privatization deal that could
\nhave built such great confidence to prompt the government to set
\nsuch an ambitious target. Nor has there been any progress in the
\neconomic, social and political situation to support the
\naccomplishment of such an uphill task.<\/p>\n
Still more discouraging is that there has not been any
\nimprovement in the leadership of the government, especially at
\nthe office of the state minister for state enterprises, nor at
\nthe House of Representatives that would accelerate the
\nprivatization program.<\/p>\n
The government has since 2000 put out an impressive annual
\nlist of around 12 state companies to be sold but virtually none
\nof them have been privatized in the real sense. The program has
\nbeen bogged down by inadequate preparations, resistance from
\nmanagement or trade unions and opposition from the House, which
\nseems inordinately afraid that the national economy will be
\ndominated by foreign interests.<\/p>\n
The government even succumbed last October to the opposition
\nof the management of PT Semen Padang and the West Sumatra
\nadministration to the sale of Semen Padang's holding company,
\nstate-owned PT Semen Gresik, to Cemex of Mexico.<\/p>\n
The failure of what could have been a great confidence-
\nbuilding deal cost the government $520 million in potential
\nrevenue. Yet the biggest damage was the loss of a great
\nopportunity to have Semen Gresik, the country's second largest
\ncement group, extensively reformed by and linked in synergy with
\nthe world's third largest cement company.<\/p>\n
Even more mind-boggling was that the government simply sat
\nback and relaxed when the West Sumatra administration and
\nlegislative council unilaterally decided to put Semen Padang
\nunder their control last October.<\/p>\n
State Minister for State Enterprises Laksamana Sukardi
\nvirtually did nothing to intervene after publicly traded Semen
\nGresik failed to have the recalcitrant management of Semen Padang
\nreplaced through an extraordinary shareholders meeting.<\/p>\n
No wonder, therefore, almost all banks have now shunned the
\nrebellious Semen Padang as a high-risk enterprise, driving it to
\nthe brink of defaulting on its debts to domestic and foreign
\ncreditors and also putting Semen Gresik's credit rating at a
\ngreat risk of being degraded.<\/p>\n
The government slashed the target of its privatization
\nrevenues to Rp 3.9 trillion this year from Rp 6.5 trillion last
\nyear. But again not a single cent has so far been raised from
\nprivatization. It did collect Rp 2.1 trillion as of this month
\nbut that was derived from additional sales of Indosat and Telkom
\nshares.<\/p>\n
But these sales cannot be defined as privatization in the real
\nsense because both companies have been traded on the domestic and
\nforeign stock exchanges. Moreover, the sales covered only a tiny
\nportion of their shares, not majority sales that would allow new
\ninvestors to take control of management.<\/p>\n
Privatization should amount to more than raising revenues.
\nMost important is to unshackle state companies from the grip of
\ncorruption and inefficiency and put them into the hands of highly
\ncredible investors capable of reforming the companies into
\nprofitable and competitive businesses.<\/p>\n
The inordinate concern about the possibility of our economy
\nbeing dominated by foreigners or of shifting state monopolies
\ninto private businesses is simply a subterfuge by vested interest
\ngroups to maintain the public companies as their convenient cash
\ncows.<\/p>\n
Even though state companies are divested to private investors,
\ndomestic or foreign, they have still to abide by Indonesian laws
\nand regulations regarding tax, labor, the environment and laws on
\nantimonopoly and unfair business practices as well as numerous
\nother business regulations.<\/p>\n
Needless to say, it is now imperative that the government
\ndemonstrate strong leadership for the privatization program and
\ngo all out at convincing all the stakeholders of the great
\nbenefits of the program.<\/p>\n
Most of the around 145 state companies operate in businesses
\nthat can be more efficiently run by private investors. And the
\ngovernment may not always realize that it now indirectly owns
\nthousands of other companies, including all the largest national
\nbanks, through the Indonesian Bank Restructuring Agency, which
\ntook over those assets from insolvent or nationalized banks.<\/p>\n
Owning companies that are inefficient and corrupt do not
\ncontribute anything to the public welfare but benefit only the
\nvested interests. But profitable, efficient private enterprises
\nwhich practice good corporate governance bring about multiplier
\neffects on the economy and the people through tax payments,
\nemployment, exports and the development of suppliers,
\ndistributors and other related businesses.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/whither-privatization-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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