23 foreign banks bid to back up privatization plan

JAKARTA (JP): State Minister for the Empowerment of State Enterprises Tanri Abeng has said 23 foreign investment banks would compete to become financial advisors and underwriters of the country's privatization program.

He said the selection process, originally scheduled for the middle of this month, would be held in Singapore from today until Tuesday.

"I don't want to delay this selection process again," Tanri told reporters yesterday following a meeting with Hubert Neiss, the International Monetary Fund's Asia-Pacific director.

The selection of underwriters and financial advisers was scheduled to start May 14, but was postponed due to political unrest leading to the resignation of former president Soeharto.

The selection will take place in Singapore because some of the bankers are reportedly still uncomfortable with the idea of traveling to Jakarta.

Tanri said only 10 of the 23 foreign investment banks would be chosen to advise or underwrite the privatization of the country's 12 state enterprises, expected to be completed in the current fiscal year ending in March 1999.

The government plans to sell its stakes in seven unlisted state-owned companies, and a further divestment in five listed companies, including telecommunications companies PT Telkom and PT Indosat, mining companies PT Tambang Timah and PT Aneka Tambang and cement maker PT Semen Gresik.

The privatization is expected to raise Rp 15 trillion, of which Rp 10 trillion would be used to support the 1998/1999 state budget.

The budget has been strained to the limit due to the monetary crisis which had plagued the country since July.

"Having the best investment banks is crucial," said Tanri, who will make a presentation in Singapore about the government's restructuring agenda for the country's 159 state-owned enterprises.

He explained that Indonesia would select banks with the expertise to restructure the state companies and with strong networks able to bring in potential strategic partners.

Tanri said he was optimistic that investors were interested in the country's privatization program, though he admitted that political stability was an essential factor before investors would enter the market.

Indonesia's political unrest has also caused a delay in the schedule for potential foreign strategic partners to assess state-owned companies.

Tanri, however, said eight potential partners, which had an interest in Telkom, Indosat, Gresik and steelmaker PT Krakatau Steel, had resumed the due diligence process following the improved political situation in the country.

"The big game, however, will start when we have completed the selection of the investment banks," he said, adding that 10 local investment banks would also be involved in the privatization process.

He said the U.S.-based consultancy Booz, Allen & Hamilton had been chosen to help prepare a blue print for the restructuring of the country's state-owned companies.

The firm is to work with several management institutes in the country and the World Bank to complete the blue print by September.

The bottom line of the process, Tanri said, was to restructure the state-owned companies to make them efficient, profitable and to boost the potential market value of the companies planned to be privatized in the future. (rei)