Government to hire consultants to resturcture state firms

JAKARTA (JP): The government will hire six foreign consulting firms to help consolidate the country's 159 state companies into 10 holding companies.

State Minister of Empowerment of State Enterprises said here on Thursday that there were nine foreign consulting companies on the selection list, including Booz Allen & Hamilton Inc., AT Kerney, PricewaterhouseCoopers, McKenzie & Co. and Boston Consulting Group Inc.

"Last night (Wednesday) we started evaluating the six foreign consulting firms that will be hired to help us with the due diligence to establish a consolidation framework for the state firms," he said.

Tanri said that in under a week his office would have made a decision about which foreign consultants would be hired.

Tanri has set a September target for the consolidation of the state firms into 10 holding companies.

He said the first phase of the consolidation process will be reported to the International Monetary Fund (IMF) and the World Bank for discussion.

Sri Mulyani Indrawati, a critical economist, commented that to her knowledge the World Bank had not agreed to the government project to establish holding companies for state firms, because the move would hinder the government privatization program.

"The World Bank still does not understand the concept of holding companies for the state firms and why it would be more beneficial," Sri said on Thursday.

She said the creation of holding companies could prove more costly, as the holding company would do little but charge fees in a "rent seeking" manner to operating companies under its umbrella.

"I am also particularly concerned for a number of strategic industries that are not fit to be merged together under one holding, but the government has forced them into the consolidation program."

Tanri has argued that the creation of holding companies would raise the sale price of the state firms under the privatization program.

He said, however, that privatization efforts remained a priority over the state firms consolidation project.

"The privatization process still continues, while we are restructuring the state firms by consolidating them into big holding companies of global capacity."

The government has set a target of US$1.5 billion in privatization proceeds in the current 1999/2000 fiscal year.

It has so far raised nearly $800 million from the privatization program.

Government stakes for sale through privatization include Jakarta international airport operator PT Angkasa Pura II, plantation firm PTP IV, fertilizermaker PT Pupuk Kaltim, publicly listed telecommunications firms PT Indosat and PT Telkom Indonesia and mining firm PT Aneka Tambang.

The government first announced the plan to consolidate state firms into 12 to 15 holdings in early May.

In the latest development the government decided to consolidate them into 10 holding firms.

Those holdings are financial services, agroindustry and consumer goods, energy, tourism, telecommunications and media business, strategic industries, logistics, mining, construction and building materials and forestry (including paper and timber related products). (udi)