Government prefers public privatization
JAKARTA (JP): Director General of State Enterprises Bacelius Ruru said yesterday that the government preferred to privatize state enterprises by offering their shares to the public.
"Privatization does not just mean the transfer of ownership to the private sector, the jewel of privatization is going public," Ruru told a discussion on "The future of privatization and the vision for the Indonesian capital market".
"The reason is that by selling shares through the capital market, the government will be able to attain several goals simultaneously," he said.
The goals included raising funds for the government to repay expensive foreign loans and for the listed companies to finance their expansion projects. The goals also included making the companies more efficient and increasing the distribution of share ownership and further developing the domestic capital market.
"For initial public offerings, Indonesia's privatization program is probably the best in Asia, and among the best in the world," President of Merrill Lynch Indonesia Mitchell Shrivers said.
Shrivers disclosed that the public offering of four state- owned companies -- PT Semen Gresik, PT Indosat, PT Tambang Timah and PT Telekomunikasi Indonesia -- had raised about Rp 7.5 trillion (US$3.1 billion), of which Rp 3 trillion were received by those companies and Rp 4.5 trillion by the government.
"And investors who have purchased the initial offerings have also done well. All of the deals are above their offering prices," he added.
Investors who bought Telkom's shares at the initial offering last November had gained by approximately 60 percent by yesterday.
The chairman of the Capital Market Supervisory Agency (Bapepam), I Putu Gede Ary Suta, said the capital market would also support the government's privatization program for the benefit of both the government and the capital market.
Most analysts at the discussion said the Indonesian capital market needed more listings of state-owned enterprises for many reasons; especially to help the exchange expand the domestic investor base and boost market liquidity.
Ruru said that although only four state companies had been listed on the domestic stock exchanges, they currently accounted for up to 27 percent of the Jakarta Stock Exchange's (JSX) total market capitalization.
So far this month, the JSX's market capitalization has been around Rp 179 trillion (US$76 billion).
Future challenge
Shrivers said that although privatization was intended to boost the participation of domestic investors, foreign investors would continue to play an important role in the market.
The recent privatization of Telkom doubled the number of domestic investors to approximately 400,000.
It demonstrated the domestic market's ability to absorb up to $1 billion in new shares. It also proved that privatization was contributing to the development of the capital market, analysts said.
Shrivers said that in the primary market domestic investors had bought up to 1.2 billion of the 1.9 billion shares floated by Telkom; only 700 million shares were subscribed to by foreign investors. But by June, foreign investors held up to 1.3 billion shares, or 68 percent of the shares listed.
"Undoubtedly, the shares of Telkom would be much lower in price without foreign investors," he contended.
One of the future challenges in meeting the goals of privatization, according to Shrivers, was how to educate the public about the long term benefits of share ownership.
He said the rewards for developing the domestic investor base in Indonesia were substantial to both the capital market and the government because only 2 percent of Indonesia's population were currently involved in the market.
Ruru did not say if the limited free float set by the government for previous privatizations was due to the limited ability of the market to absorb new shares.
According to Ruru, there were 166 state companies with assets totaling Rp 312.8 trillion last year. Their sales turnovers amounted to Rp 94.46 trillion and their earnings before tax, excluding Pertamina's, amounted to Rp 9.3 trillion. (alo)