Garuda to sell shares to foreign investors
JAKARTA (JP): The government will sell a stake of the national flag carrier Garuda Indonesia to foreign investors through direct placement before offering part of its shares on the capital market, Minister of Finance Mar'ie Muhammad says.
"The buyer of the stake must be a foreign airline which has recorded a good reputation internationally," he told a hearing with the Budgetary Commission of the House of Representatives (DPR) in a hearing here yesterday.
He said the government will tender the sale of the stake among prospective foreign investors, which will be able to help improve the performance of the 45-year-old airliner.
"The privatization plan has been approved by President Soeharto," he said, adding that the sale of the stake will be part of the airline's restructuring program.
Mar'ie said the government has not decided on the portion of the stake which will be sold to foreign parties.
The minister said that under the restructuring program, the equity participation of foreign parties in Garuda is expected to help improve its financial structure and management.
When Garuda operate healthily, part of its shares will be offered to the public through the capital market, he said.
Garuda's financial reports got qualified opinions from the Government Audit Agency (BPKP) in the years before 1992. Its financial reports, according to an official report received by The Jakarta Post, for the following years had not been audited.
In 1993 the government classified the airline's financial performance as unhealthy. The financial performance, based on the airline's profitability, liquidity and solvability, was regarded as less healthy in 1989, 1991 and 1992, but it was very healthy in 1990.
Garuda's after-tax profit dropped to Rp 73.44 billion (US$33.50 million) last year from Rp 92.98 billion in 1992. Its total assets are estimated at Rp 3.67 trillion as of this year, as compared to Rp 2.80 trillion as of last year and Rp 2.43 trillion as of 1992.
Independence
Mar'ie said the privatization of Garuda will also make it more independent financially from the government, which will no longer support the raising of commercial loans for it.
"The government, which is improving its budget management, will be more disciplined in allocating foreign aid for its projects," he said. "The government will allocate its budget, including the funds gained from foreign aid, to finance projects which are not developed by the private sector."
He assured the commission members that once the government has selected prospective foreign investors for joining the airline, it will tender the sale of the Garuda stake.
A commission member, Tadjuddin Noer Said, hailed the government's decision on Garuda's privatization but suggested that the government maintain the majority of the shares, considering the airline would still be carrying out a social mission.
"I even expect that the privatization plan should also be applied to other state owned companies which are facing difficulties to survive," he told The Jakarta Post yesterday.
Garuda, operating a fleet of 57 aircraft, flies to 39 cities on its international service routes, including, Honolulu, Los Angeles, London, Frankfurt, Amsterdam, Zurich, Madrid, Berlin, Sydney, Darwin, Townsville, Riyadh, Jeddah, Bangkok, Ho Chi Minh City, Beijing, Tokyo, Osaka and Manila.
In domestic service, the airliner serves 13 major cities, such as Jakarta, Solo, Denpasar, Biak, Jayapura, Surabaya, Medan, Batam, Balikpapan, Yogyakarta, Banda Aceh, Ujungpandang, and Manado.
Its fleet includes two Boeing 747-400, six Boeing-747-200s, one Boeing-747-200B, eight Boeing-737-300s, seven Boeing-737- 400s, nine Airbus-300-B4s, 10 Airbus-300-600s, six MD-11s and eight DC-10-30s. (fhp)