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.