Govt to go ahead with privatization

Govt to go ahead with privatization

JAKARTA (JP): The government will go ahead with its privatization plans despite the unsatisfactory performance of the initial public offering of PT Telkom, the state-owned domestic telecommunications firm.

Minister of Finance Mar'ie Muhammad said at a hearing with the House of Representatives' Budgetary Commission here yesterday that the government would push ahead with its plans to sell shares in state enterprises on the overseas markets to amortize the high-interest portion of its external debts fast.

Mar'ie explained that the government was currently preparing three state firms for flotation on overseas markets. These are PT Krakatau Steel, toll-road operator PT Jasa Marga, and electricity firm PT PLN.

The government also plans to privatize Bank Negara Indonesia and float it on the local stock markets.

"Krakatau Steel and Jasa Marga are the best prepared. PLN still needs restructuring before it can float its shares abroad," Mar'ie said.

Director General of State-Owned Companies Bacelius Ruru said that Krakatau Steel and Jasa Marga are expected to make their capital market debut next year.

Indonesia has so far privatized three of more than 200 state firms on overseas markets. The first was international telecommunications firm PT Indosat last year, the second tin mine operator PT Tambang Timah last month and PT Telkom this month.

Ruru stated that the government has established a new "assistance" team to the finance minister to help prepare and oversee privatization efforts.

The new team is to replace the disbanded seven-member team of government officials, headed by former secretary general of the finance ministry Jusuf Anwar.

Members of the new team include Ruru, Chairman of the Capital Market Supervisory Agency I Gede Putu Ary Suta, stock market adviser to the finance minister Dahlan M. Sutalaksana, Chairman of the Agency for Financial and Monetary Analysis Marzuki Usman, head of the legal bureau at the finance ministry Agus Haryanto, and Hari Supangkat from state-owned pension fund PT Taspen.

Mar'ie's and Ruru's remarks were apparently designed to counteract speculation from securities analysts that Telkom's disappointing initial share offering would be likely to affect the government's privatization plans for the future.

Telkom initially planned to sell 12.5 percent of its 9.33 billion shares locally and 15 percent internationally. However, Telkom cut its offering price and scaled down its foreign issue by 57 percent to only 30 million American Depository Shares (ADS) at the last minute.

One Telkom ADS comprises 20 ordinary shares.

In the end, Telkom raised some US$520 million from its share offering on the New York and London stock exchanges, much less than the government had initially expected.

Telkom's issue also failed to push up the bearish local markets, securities analysts said.

The Telkom share price could be maintained above its listing price of Rp 2,050 (US$.90) largely by heavy buying on the part of its domestic underwriters, they said.

They contended, however, that Telkom's weak listing price had been much influenced by a market slump in Jakarta and the region, and by the dismal debut of Tambang Timah last month. Timah's price fell by 17 percent from its initial offering price of Rp 2,900 after just five days of trading.

Tambang Timah, which floated its shares on the London Stock Exchange, in addition to local markets, collected some $150 million from its overseas offering.

Mar'ie noted that the proceeds from the divestment of the government's shares in state-owned companies on overseas markets would be used to repay its external debts which carry interest rates of over 10 percent per annum ahead of schedule.

Indosat raised some US$800 million from the sale of its shares on the New York Stock Exchange in October last year and Rp 650 billion (US$283.5 million) on the domestic stock market.

"That's why we sell shares of state-owned companies on overseas markets. If we sell them only on the local markets we cannot raise foreign exchange to repay our debts," Mar'ie said.

Mar'ie promised that the government would float only good equity on the markets, especially on foreign markets. "I assure you that we will not sell bad equity." (rid)