Govt should give up control in electricity

Govt should give up control in electricity

The Jakarta Post, Jakarta

In the era of free competition, it is not necessary for the
government to have a controlling stake in "important commodities"
to protect the public interest, as it still has political and
legal power to prevent market forces from hurting the public, a
businessman said on Thursday.

A law expert and a legislator, however, disagreed with this
opinion, saying that maintaining a controlling stake in
commodities was a must for the government in order to protect the
public against possible exploitation caused by businesses' drive
for profit.

They were commenting on the controversial decision made
recently by the Constitutional Court to annul Electricity Law No.
20/2002, which aims to liberalize the electricity industry that
has been monopolized for decades by state electricity company PT
PLN.

The Court said the law went against Article 33 of the 1945
Constitution, which stipulates that branches of production that
are important to the state and that affect the lives of the
people must be controlled by the state.

Businessman Kusumo A.M said that the government and the court
should understand the reality of the changing world in which
protection of important commodities should not have to mean the
government maintaining controlling stakes in state enterprises.

"We should realize that we are now living in an age of
competition not monopoly. An out-of-date interpretation of the
1945 Constitution may trap the nation in an anti-liberalization
drive," said Kusumo, who is also a member of advisory council for
the Indonesian Chamber of Commerce and Industry (Kadin).

The Constitutional Court said last week that based on Article
33, the government must maintain a controlling stake in all
companies that provide electricity to the nation.

However, the same court decided early this week to uphold the
Oil and Gas Law No. 22/2001 despite the fact fuel is as important
as electricity and both the electricity and oil and gas laws
aimed to scrap the decades-long monopolies of state companies in
both industries.

Kusumo said the government could still control important
commodities without having majority stakes in companies that do
business in those commodities, by regulating the businesses and
their prices.

Meanwhile, law expert Rachmat Bastian said that the court had
made a correct interpretation of the constitution from a legal
perspective.

"The interpretation of Article 33 is that the government must
maintain a controlling stake in all companies or industries that
provide important commodities to the nation, meaning that the
private sector may not have majority stakes in such businesses,"
said Rahmat.

Lawmaker Dradjat Wibowo agreed with Rahmat, saying that the
government should maintain its role as both regulator and player
for commodities deemed important to the nation, such as
electricity, fuel and water.

"We have learned that liberalization in the power sector has
only brought us losses. Many private power companies produce
electricity at prices higher than those produced by PLN," said
Dradjat.

Dradjat explained that the private sector's involvement in
important commodities should be limited to only having a minority
stake in joint-venture companies with the government.

They could also buy PLN stock via the stock market, should the
government sell off some of the firm's shares.