Funding national pride

Funding national pride

It would indeed be great for national pride if Indonesia, with
a per capita income of less than US$1,000, was capable of
manufacturing a jetliner, a feat that until now has virtually
been the monopoly of developed nations. As President Soeharto
rightly noted last week, a country needs national pride.

This could be achieved through the development of the N-2130
jet project by the state-owned IPTN aerospace company in Bandung
in cooperation with PT Dua Satu Tiga Puluh, a private company set
up to finance the project.

The problem lies in the designing, engineering, manufacturing
and marketing of a high-tech product such as a jetliner, which is
not only capital- and technology-intensive but highly risky. That
is why, we think, not many nations base their national pride on a
jet manufacturing project.

Because the project is meant to be a symbol of national pride,
its implementation understandably cannot be based entirely on
economic rationale. However, the success of the jet project will
be determined by market forces.

Therefore, we wonder why the fund-raising drive for the $2-
billion N-2130 jet project is being carried out through a
nationwide political campaign. That is quite different from, say,
a national fund-raising campaign to help natural disaster victims
or to raise funds for poverty alleviation.

The merit of offering the general public shares in a company
(PT Dua Satu Tiga Puluh) which has yet to begin operating is
highly questionable. IPTN has not proven its ability to make and
market turboprop airplanes, let alone a jetliner, nor has it
broken even on its small CN-235 airplane launched in the early
1980s. Even its turboprop N-250 commuter aircraft, currently
under development, has yet to obtain an airworthiness
certificate.

The current campaign to raise funds through a public share
offering is therefore raising many eyebrows, especially because
high-ranking officials, including regents and mayors, are
involved, practically as share brokers.

We are not worried about accountability for the funds. After
all, Soeharto and two former vice presidents sit on the board of
commissioners (supervisors) and several other high-ranking
officials lead the management, all in a personal capacity.

Instead, we are worried about the unusual procedure by which
the shares are being offered. The share offering is not subject
to stock exchange regulations, nor is it supported by a business
prospectus explaining the prospects and risks of the assets or
businesses on which the shares are based and priced. As a
consequence, the regents and mayors are likely to be selling an
asset they do not know much about.

Since the shares are being promoted based on a request from
President Soeharto, the regents and mayors may overzealously prod
people to buy the shares. We fully agree with those House members
who have warned that the people should not be forced to buy the
shares. But we also know from experience that lower-echelon
officials often take a leader's appeal or request as an order.

We are realistic enough to concede that the national share
offering will be pushed at whatever cost. The biggest challenge
is how to minimize the risk of hurting the general public or
misleading the people into buying an asset that may turn out to
be worthless. That, we think, could be done by issuing and
disseminating nationwide a simple booklet explaining the
corporate statutes of PT Dua Satu Tiga Puluh, the importance and
potential benefits of the jet project as well as the risks
involved in the highly-competitive jetliner market.

The shareholders should be prepared for the risk of not
getting any dividends, not making any capital gains for several
years and even for the possibility of losing their money. Such
preconditioning would protect the government from allegations of
having misled the people into buying worthless shares if the jet
project is not successful.