Govt to float seven state firms in 1998/99

JAKARTA (JP): The government is planning to divest holdings in five listed firms and float seven state-owned companies in the 1998/1999 fiscal year.

State Minister of the Empowerment of State Enterprises Tanri Abeng said the government would initially invite strategic investors into the state firms before floating them on stock markets.

"Apart from the divestment in those five firms that are already listed, there will also be a further seven state-owned firms listed," Tanri told the media yesterday after a limited cabinet meeting.

He said the private placement mechanism would be used to invite strategic investors into the state firms.

"Usually, if we do this, the performance of those state firms will improve and their share prices will be higher," he said at his office at the National Development Planning Board building.

He said the government would receive a larger amount of proceeds by floating better value companies.

State-owned companies would have better value because strategic investors have superior technology and strong networks in their respective fields.

He added that the government would only privatize profitable companies to get a better deal, and their initial public offerings (IPOs) would only be done during favorable market sentiment.

Tanri declined to name companies which would be floated because a thorough study of the candidates was still underway and was expected to be completed before September.

He indicated the firms would come from the industrial, plantation, toll road and port sectors.

Six state firms are listed on local stock exchanges. They are domestic telecommunications firm Telkom and international telecommunications operator Indosat, tin miner Tambang Timah, gold and nickel miner Aneka Tambang, cement producer Semen Gresik and Bank Negara Indonesia.

The first three companies are also listed on the New York and London stock exchanges.

The government has said it would divest more of its ownership in all the listed state companies except Aneka Tambang.

Tanri declined to provide the amount of proceeds expected from the privatization program, but said the funds would be used to help finance the huge budget deficit in the 1998/1999 fiscal year.

The government announced yesterday that the current fiscal year would have a deficit of 3.2 percent of gross domestic product resulting from the provision of large subsidies, labor- intensive employment creation, cheap credit for small scale businesses and cooperatives.

Some estimate that the total subsidies in the fiscal year will amount to Rp 27 trillion (US$3.17 billion).

"We must be able to help cover the budget deficit," Tanri said.

The nation is currently facing its worst-ever economic crisis, prompted by the sharp plunge in the rupiah, with detrimental impacts including soaring domestic prices and widespread unemployment.

The government has clinched a new deal with the International Monetary Fund to handle the crisis, a plan which includes the acceleration of the privatization program. (rei/prb)