Government plans to privatize 25 state firms
By Reiner S.
JAKARTA (JP): The government plans to privatize 25 state-owned companies in the 1999/2000 fiscal year to help finance the country's escape from the 17-month old economic crisis, according to the blueprint document for the restructuring of the 144 state- owned companies.
Some 90 state-owned companies operating in various economic sectors have been listed as candidates for privatization, including five which had been scheduled for privatization in the 1998/1999 fiscal year until unfavorable market conditions forced the postponement of the plan.
There are also some 64 companies that require extensive restructuring prior to privatization, which will delay their privatization until the following fiscal year.
The decisions on how and when to proceed with restructuring has not yet been finalized, the government said. Restructuring is aimed at increasing the value of the companies through such measures as downsizing, merging and creating an explicit regulative and competitive environment.
The government explained that the precise outcome of the privatization program is hard to determine because it has no control over the decisions of investors, the state of stock markets at home or abroad and the myriad decisions that must be made before a transaction can be completed.
The time needed to build a consensus on the restructuring of any one company prior to privatization is also a variable, the government added.
"Given the uncertainties mentioned, and bearing in mind that the power of the State Minister of the Empowerment of State Enterprises, while expanding, is limited, the government plans, with the assistance of financial and other advisers, to achieve the divestiture of 25 companies in 1999/2000, and 35 the following year," according to the blueprint document, recently unveiled to the public by State Minister of the Empowerment of State Enterprises Tanri Abeng.
"It is, obviously, not possible to proceed with the privatization of all companies simultaneously. If readers of this master plan, who may be interested in acquiring shares in a state-owned company, find that the time indicated is too distant, they are welcome to write to the State Ministry of the Empowerment of State Enterprises and express their interest ... the ministry will be glad to advance the preparations for the sale of companies in which there is active and suitable investor interest," read the 142-page document, which was jointly prepared by foreign and local experts.
First group
The first group of state-owned companies that will be privatized during the period between April 1999 to March 2000 will be the five companies which were slated for divestiture in the last fiscal year. These companies are the coal mining operation PT Tambang Batubara Bukit Asam, toll road company PT Jasa Marga, steel maker PT Krakatau Steel, publicly listed domestic telecommunications company PT Telkom and tin mining company PT Tambang Timah.
The government said that given both the needs of the companies for strengthened international links, management and markets, and the weakness of stock markets, the preferred route to privatization would be to introduce a strategic foreign partner to take a significant minority ownership position. Further share flotations would be considered at a later date.
The government explained that the privatization process for infrastructure companies like Telkom and Jasa Marga may be delayed due to the time needed to design new regulatory mechanisms that would address the issues of who would determine tariffs, how these tariffs would be determined and the likely degree of competition in the industries from existing companies or new entrants.
"The design of regulatory mechanisms that balance the interests of the nation, consumers and investors is being speeded up by the privatization process, but it could cause implementation delays," according to the blueprint document.
The second batch of companies that could be privatized may come from companies grouped in the trade, construction, consultant engineering, fertilizer manufacturing and banking sectors.
Five companies in the trade sector, PT Dharma Niaga, PT Pantja Niaga, PT Cipta Niaga, PT Kerta Niaga and PT Bhanda Ghara Reksa, had combined assets in 1997 of Rp 1.27 trillion and could be merged prior to privatization. This move would give the management of the companies an option to buy the new entity. This management buy out option is possible because the companies greatest assets are their management expertise.
This process may exclude transportation and warehouse firm Bhanda Ghara Reksa, which will begin to focus on fertilizer distribution and, possibly, be sold to a strategic investor.
Nine companies in the construction industry, PT Adhi Karya, PT Pembangunan Perumahan, PT Wijaya Karya, PT Hutama Karya, PT Waskita Karya, PT Nindya Karya, PT Istaka Karya, PT Amarta Karya and PT Brantas Abipraya, with combined assets of Rp 4.51 trillion, may also be merged prior to privatization.
The government said that the nine companies have great expertise and experience in their field but have been battered by the current economic recession. Forming a joint venture operation with a multinational construction company could also be an alternative for the companies.
Engineering firms
The same scenario may be applied to five engineering consultant firms and two special consultant firms, PT Indah Karya, PT Indra Karya, PT Virama Karya, PT Yodya Karya, PT Bina Karya, PT Rekayasa Industri and PT Konservasi Energi, with combined assets of Rp 270.55 billion. A management buy out is also an option for these firms.
Six fertilizer manufacturing firms, PT Pupuk Sriwijaya, PT Pupuk Kaltim, PT Pupuk Iskandar Muda, PT Asean Aceh Fertilizer, PT Petrokimia Gresik and PT Pupuk Kujang, with combined assets of Rp 8.89 trillion, could be merged before being sold to strategic investors through an initial public offering.
The merger of four state banks had been started and was expected to be completed two years before they are privatized. Bank BBD, Bank Bapindo, Bank Exim and Bank BDN will form a new entity called Bank Mandiri.
Other companies which will begin the restructuring process in the 1999/2000 fiscal year in preparation for privatization later in the year include airport operator PT Angkasa Pura I with assets of Rp 2.24 trillion, port operator PT Pelindo I with Rp 1.17 trillion in assets, plantation company PT PN III with assets of Rp 1.06 trillion and salt maker PT Garam with assets of Rp 251.18 billion.
The government had also identified some 21 companies which may only need minor restructuring before privatization. These include soda producer PT Industrial Soda Indonesia, retailing unit PT Sarinah, construction and distribution firm PT Mega Eltra, cargo and shipping company PT Varuna Tirta Prakasya, cargo and passenger shipping company PT Pelayaran Bahtera Adiguna, dredging and land reclamation company PT Pengerukan Indonesia, paper manufacturer PT Kertas Padalarang, pulp and paper maker PT Kertas Letjes, cement paper bags maker PT Kertas Kraft Aceh, audio recording services PN Lokananta, textile makers PT Industri Sandang I, PT Industri Sandang II, PT Cambrics Primissima, book printing unit PT Pradnya Paramita, cement maker PT Semen Baturaja, natural asphalt producer PT Sarana Karya, glass manufacturer PT Industri Gelas, air survey and mapping firm PT Survey Udara Penas, multifinance and leasing unit PT Pann Multi Finance, power distribution transformer PT Unindo and property and hotel operation PT Perhotelan and Perkantoran Indonesia.
The government also decided that the privatization process of state electricity company PT Perusahaan Listrik Negara, airline firms PT Garuda Indonesia and PT Merpati Nusantara Airlines, gas producer PT Perusahaan Gas Negara, trading and telecommunications equipment maker PT INTI, aircraft maker PT IPTN and trading and manufacturing operation PT RNI will be done after 2001 because the complicated restructuring of these companies will demand a longer period of time.