Faltering privatization program 'affects banking'

Faltering privatization program 'affects banking'

JAKARTA (JP): Government failure to raise the US$1 billion
privatization proceeds targeted for the 1998/1999 fiscal year
ending in March, may create another obstacle for the bank
restructuring program, according to economists.

Research associate at the Management and Economic Research
Center at the University of Indonesia Rasaka Mahi, said failure
to obtain the revenue may hamper the bank restructuring program
unless the government manages to accelerate the privatization
program in the next fiscal year.

"The government should either increase overseas loans or slow
down the bank restructuring program to meet the privatization
target," he said.

Earlier, a government source said funds generated from
privatization programs -- primarily allocated to finance the bank
restructuring program -- would total $380 million in the current
fiscal year, falling far short of the $1 billion target.

The government has only managed to raise proceeds from the
sale of its stake in the publicly listed cement maker Semen
Gresik and a unit of port operator PT Pelindo II. It also
divested publicly listed instant noodle maker PT Indofood.

State Minister of the Empowerment of State Enterprises Tanri
Abeng acknowledged on Thursday that proceeds from the
privatization program were below target.

The government is planning to recapitalize nine private banks
by providing up to 80 percent of funding requirements with 100
percent financing slated for state-owned banks and provincial
development banks.

The government will finance the recapitalization program
through the issuance of bonds. Payment on the interest rates will
be partly covered by the budget, amounting to Rp 17 trillion in
the first year.

The government announced recently that nine locally
incorporated private banks are qualified to join the massive
restructuring program, but it has not revealed when the program
will start.

Rasaka said the government must ensure that proceeds already
raised not be used for other purposes if the recapitalization
program was not carried out this fiscal year.

Separately, several legislators lambasted Tanri for lack of
transparency in the privatization program, particularly for the
latest privatization process of port operator PT Pelindo II and
PT Pelindo III.

Paskah Suzetta and Uray Faisal Hamid, members of the House of
Representatives Commission VIII for the state budget and finance,
indicated at the weekend that the privatization process at
Pelindo II and PT Pelindo III was not transparent.

Uray insisted that each state company's sale should have been
first discussed with the House for approval.

It is rumored the government sold Pelindo II's Jakarta
International Container Terminal to Grosbeak, a unit of Hong
Kong's Hutchinson Whampoa, at a lower price and extended the
management period than that proposed by the winning investor.

Doubts about the tender process for the sale of Pelindo III
have also been aired.

To ensure transparent and fair practices in the privatization
program, House members should be involved in each individual
sale, Paskah said.

"We have to provide approval case by case. There has to be a
mechanism control," he said, adding that Tanri had failed to
honor a promise that the House would be involved in individual
privatization programs.

He urged that until such a control was set up, the
privatization program should temporarily cease.

The two legislators said it was best if the privatization
program recommenced after the June general election. (rei)