Consultant calls for faster privatization

JAKARTA (JP): The government should accelerate its privatization program to help revive foreign investor confidence in the crisis-hit economy, a World Bank consultant has said.

Peter Scherer said on Thursday that international investors have shown considerable interest in the privatization program because they have confidence in the future of Indonesia.

"They're willing to pay a premium above present market capitalization," he said, pointing to the recent privatization of cement manufacturer PT Semen Gresik and the postponed sale of PT Krakatau Steel.

Scherer, an expert in privatization with experience in Latin America, was speaking at the Indonesian Forum conference.

"If there was the political will, one could overcome some of the resistance that is obviously slowing down the privatization program," he said.

The government has backed down from its initial plan to sell 12 state-owned companies to raise approximately US$1.5 billion in the current fiscal year. Delays in the program have been blamed on bearish conditions in the local capital market in recent months.

The government now expects to raise only $1 billion from the sale of state assets in this financial year.

So far, the government has only managed to sell a 14 percent stake in PT Semen Gresik to Mexico's Cemex SA de CV. It was initially planned to allow the Mexican firm to purchase a majority stake in Gresik, but this was changed following protests from certain groups.

Scherer explained that the privatization program would help revive the badly needed foreign investor confidence in the country.

He said that rebuilding confidence would be an important step towards restructuring the country's massive private sector overseas debt.

"With the debt overhang it is difficult for companies to get fresh financing," he pointed out. (rei)