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)