Debate on privatization
The strong rejection, voiced by about 120 labor activists, of the government's policy to liberalize trade and privatize this country's inefficient state-owned enterprises, shows how much confusion exists within the public at large about the issues of globalization and privatization. In good part, obviously, this lack of understanding is due to the government's own failure to explain, in easily understandable terms, both the merits and demerits of privatization, as well as the need for it in the country's current state.
As was reported yesterday, the activists, including representatives of factory-based organizations from around the country, met for a three-day conference in Jakarta last week to arrive at a common perception of globalization and the privatization of state-owned enterprises ((SOEs). Warning the government against pursuing a policy of trade liberalization and privatization, labor activist Dita Indah Sari, of the National Front for Labor Struggle (FNPBI) and winner of the 2001 Ramon Magsaysay Award for her fearless fight to improve labor conditions in Indonesia, said, for example, that free trade and privatization had not brought prosperity, equality or peace, but only misery to Indonesian workers.
It is, of course, true that the situation Indonesia is facing cannot be separated from prevailing global economic currents, in which vulnerable developing countries such as Indonesia tend to be constantly pushed into a disadvantaged position. On the other hand, Indonesia is suffering an unbelievably heavy debt burden -- a burden that is further aggravated by the reality of the existence of two business groups that are not economically viable.
The first comprises a collection of large corporations that, since the beginning of the economic crisis in 1997-1998, are faced with insurmountable debt problems. Many banks were hit and had to be taken over by the government, thereby adding to the burden imposed on the country's already sorely inadequate state budget -- inoperative assets that needed to be infused with new life. The obvious answer to this problem is divestment.
The second group embraces various state-owned enterprises that in reality are the spin-offs of policies derived from Article 33 of the 1945 Constitution, which decrees that "means of production that are important to the state and affect the livelihood of the populace are to be controlled by the state." And further, "land and water and the wealth that is contained in it are to be controlled by the state and utilized to the maximum benefit of the people."
In reality, however, experience has proved that this idealistic model has not always worked as imagined by the authors of the 1945 Constitution. Indeed, in many instances, it has led to the birth of monopolies that have become hotbeds of corruption, collusion and nepotism, rather than benefiting the people. Furthermore, many SOEs have turned out to be convenient sources of cash to be reaped by groups for the advancement of their own political interests. In brief, the principle of leaving what can more efficiently be done by private enterprise or individuals to private companies or individuals, remains valid.
The message all this conveys is that the effect of globalization indeed justifies great care in the government's handling of economic policies, in particular with regard to divestment and privatization. At the same time, one should be careful and not indiscriminately put privatization on the same plane as globalization. In Indonesia's current condition, many SOEs may essentially be rent-seeking enterprises run to sustain the power of particular political groupings. Privatization for its own sake could be a bad thing.