Bank Mandiri to initiate IPO amid negative sentiment

Bank Mandiri to initiate IPO amid negative sentiment

Dadan Wijaksna, The Jakarta Post, Jakarta

The management of Bank Mandiri is hopeful that the initial public
offering (IPO) of the giant state-owned bank can be carried out
in April at the latest, despite market jitters created by ongoing
protest over the recent sale of government shares in
telecommunications firm PT Indosat.

Bank Mandiri president ECW Neloe stressed over the weekend
that as all preparations were nearing finalization, the planned
privatization program would be put into action by March or April.

Under the program, the country's largest bank would sell 30
percent of its shares via an IPO on the stock market.

"We're now only awaiting a presidential decree on the IPO,
which is still under discussion," Neloe said, adding that the
decree would serve as the legal basis of the sale program in the
absence of privatization law.

The bank's privatization program was supposed to be completed
by December last year, but had to be delayed for various reasons.

The most profound was that the government had to postpone the
state assets sales program, pending establishment of the law on
privatization.

The Oct. 12 Bali bombings, which killed many foreign
holidaymakers in the famous resort island, was another factor in
the delay.

Critics have argued that such a special privatization law
would be of crucial importance, not only to act as the program's
legal basis, but also to avoid a future backlash from the public.

The argument gained some momentum when a nationwide protest
broke out following the sale of the government's 41.9 percent
stake in publicly listed Indosat to Singapore Technologies
Telemedia (STT) late last year.

The protesters had urged the government to cancel the
transaction, a move that for some could be seen as protecting
national interests, but for others was seen as deterring foreign
investors from investing in Indonesia.

It has been against this background that calls from some
analysts have mounted for the government to await positive
signals before going ahead with the Mandiri privatization plan.

Moving ahead now amid lingering uncertainty would only result
in disappointment. It is expected that it would attract minimal
interest from investors, and would likely produce low bidding
prices.

However, seemingly undeterred by the suggestion, Neloe
confirmed his stance on the program, saying, "there will no
longer be any delay."

Bank Mandiri is among three companies slated for privatization
in 2002, but carried over to this year. The other two are
Soekarno-Hatta International Airport operator PT Angkasa Pura I
and pharmaceutical firm PT Kimia Farma.

On top of that, the government also plans to sell 10 more
state firms this year, with the goal of raising Rp 8 trillion
(about US$880 million) to help cover a greater-than-expected 2003
budget deficit due to the Bali bombing.

Proceeds from the privatization program will be used to cover
part of the deficit, which the government revised upward to Rp 34
trillion from Rp 26 trillion before the bombings.