Govt mulls end to barriers on privatization

JAKARTA (JP): The government is considering the removal of regulatory barriers hampering the country's privatization program, a minister said here on Tuesday.

State Minister of the Empowerment of State Enterprises Tanri Abeng said a regulation on the operation of state-owned infrastructure companies should be revised to speed up the process of the privatization of such companies.

Tanri said existing law stipulated that the firms and the government had exclusive rights to manage the country's infrastructure sector and prohibited the selling of shares to private parties.

"The government is considering changes in the law and regulations so the privatization program can be realized," he told members of the House of Representatives Commission VIII on state budget.

The government plans to privatize 12 state-owned firms during the 1998/1999 fiscal year ending in March in order to inject some US$1.5 billion into the state budget through privatization proceeds.

Tanri explained that the law had been hampering the privatization process since the government wished to sell shares in state-owned infrastructure firms such as domestic telecommunications provider PT Telkom, international telecommunications firm PT Indosat, toll road operator PT Jasa Marga, port operators PT Pelindo II and PT Pelindo III and airport management firm PT Angkasa Pura II.

He said other alternatives to the divestment of government shares included developing strategic alliances through joint operations, licensing or franchise schemes.

The privatization scheme, designed with the help of the International Monetary Fund, invites foreign investors to buy into state-owned firms in order for the government to benefit from both fresh cash and new technology.

The government last month reached a deal with Mexico's Cemex SA de CV to buy a 14 percent stake in cement maker PT Semen Gresik with an option to increase it to 25 percent.

It had earlier planned to sell 51 percent of the cement company but scaled back the percentage figure after public protests against foreign domination in the state-owned company.

Tanri admitted that the government would not achieve its target of privatizing 12 state-owned companies in the current fiscal year because of the regulations and the "social-political" obstacles.

He added that another barrier was the current bearish capital market sentiment which was causing difficulties in raising a reasonable amount of cash from the privatization program.

"That's why we're not going to sell Telkom at this point," he said, adding that the government initially expected Telkom to provide the bulk of the privatization proceeds.

Illegal contracts

He said business contracts made by the state-owned companies through collusion, corruption and nepotism were also an obstacle to the privatization process.

"Because of this technical problem, we have to restructure the companies first before privatizing them," he said, adding that his office had canceled illegal business contracts made by state firms and was in the process of reviewing several other contracts, including some made by Indosat, Telkom, Pelindo I and Pelindo II, Angkasa Pura II, Jasa Marga and steelmaker PT Krakatau Steel.

Similar action has also been taken on contracts made by state- owned airline company PT Garuda Indonesia, electricity firm PT PLN, gas provider PT GAS Negara, developer PT Hutama Karya, Pelindo III, Pelindo IV and Angkasa Pura I.

"Our office is committed to stopping contracts (made) with the Cendana family and those made based on collusion, corruption and nepotism," he said, referring to the family of former President Soeharto.

Soeharto's sons and daughters have been accused of treating state-owned companies as their cash cows.

Tanri said that although the 1998/1999 privatization program was not on track, the government had other alternatives to finance the state budget.

He added that the restructuring process of several state-owned companies were expected to increase their net profits and raise government revenue.

Tanri's office oversees 159 state-owned companies with total assets in 1997 of Rp 461.64 trillion (US$46.16 billion at the current exchange rate) compared to Rp 361.49 trillion in 1996. The companies' cumulative gross profit was Rp 11.83 trillion in 1997, compared to Rp 12.7 trillion in 1996.

The economic crisis has badly hit many state-owned companies with the exception of several sectors, especially agriculture. (rei)