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 An out-of-date interpretation of the 1945 Constitution may trap the nation in an anti-liberalization drive," said Kusumo, who is also a member of advisory council for the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.