BPKP head finds privatization program weak

BPKP head finds privatization program weak

JAKARTA (JP): Head of the Financial and Development
Comptroller (BPKP) Arie Soelendro said on Wednesday the
government privatization program had been weak in its planning
and supervision, causing the state to suffer some US$37 million
in losses.

Arie said the weakness was reflected in the absence of a
competent cost-benefit analysis in deciding which state
enterprises are to be privatized and poor guidance in hiring
privatization consultants and related expertise used in the
privatization program.

"In addition, there was no ceiling set for the cost of
privatization which should have been decided by the Ministry of
Finance," he said during a hearing with the House of
Representatives Commission IX for financial and development
planning affairs.

Arie was referring to the privatization of state-owned port
operators PT Pelindo II and Pelindo III, domestic
telecommunications operator PT Telkom, cement maker PT Semen
Gresik and the divestment of government ownership in private-
owned instant noodle giant PT Indofood Sukses Makmur, which were
conducted in the previous budget year.

He said in addition to the financial loss, the shortcomings in
the privatization program had caused wasteful spending of Rp
74.92 billion plus $6.19 million, and an opportunity loss of Rp
44.90 billion plus $876,670.

Arie did not elaborate on the figures.

Many analysts have criticized past government privatization
programs, particularly due to their lack of transparency.

The government privatized state enterprises in a bid to raise
cash to help finance the state budget.

The government planned to privatize between eight and 10
companies this year to raise some Rp 6.5 trillion in proceeds but
so far none have been realized.

The current unfavorable market condition and domestic
political instability are among the factors seen impeding the
privatization program.

Finance ministry officials have said the privatization program
for this year had been shelved.

The government has said it would continue the privatization
program next year to raise some Rp 5 trillion.

The companies which are in the pipeline for privatization this
year include pharmaceutical firm PT Indo Farma, fertilizer firm
PT Pupuk Kaltim, plantation companies PT Perkebunan IV and PT
Perkebunan III, general mining company PT Aneka Tambang, airport
operator PT Angkasa Pura II and coal mining firm PT Bukit Asam.

Arie also said a total of Rp 54.56 trillion of Bank
Indonesia's emergency liquidity support (BLBI) was misused but it
should not become the burden of the government or state budget.

"The results of our investigative audit shows there have been
irregularities in the utilization of the emergency liquidity
support worth Rp 54.56 trillion before Jan. 31, 2000," he said
during a hearing with a lower house commission.

He said the Attorney General's office was currently
investigating the case.

Arie also added the results were based on the audit of 42
closed banks that were given the BLBI facility.

The State Supreme Agency (BPK) had earlier said that out of
the Rp 144.5 trillion BLBI channeled by the government via Bank
Indonesia, some Rp 138 trillion had been misused by recipient
banks due to the weak supervision of the central bank. BPK
audited a greater number of banks.

The government injected the BLBI via the central bank
primarily to help banks pay depositors amid massive bank runs,
particularly in 1998 and 1999.

The government is supposed to issue bonds to Bank Indonesia to
cover the BLBI but it countered that the central bank should be
responsible for the liquidity support which had been misused.

Bank Indonesia, however, insisted the BLBI facility was a
government program and therefore the state budget should cover
the cost, not the central bank.

The government and Bank Indonesia have formed a special team
to settle the dispute over the controversial BLBI facility. (rei)