Govt to privatize Merpati in Q1 next year
The Jakarta Post, Jakarta
The government plans to privatize state-owned Merpati Nusantara next year to raise money to bail out the ailing airline.
Ferdinand Naiggolan, a deputy at the Office of the State Minister for State Enterprises, said on Tuesday the privatization would likely take place in the first quarter of next year.
Speaking to journalists following a hearing with House of Representatives Commission V for state enterprises, Ferdinand said Merpati would need between Rp 1 trillion and Rp 1.5 trillion (about US$180.72 million) in fresh funds to improve its financial performance.
He said the government wanted to see Merpati sold to a strategic investor. He did not provide any further details.
Merpati's management had requested a low-interest loan from the government, but the request was rejected.
The loan was to have been used to overhaul Merpati's fleet and open new routes. It was also going to be used to cover the bulk of severance payments for Merpati employees in the wake of planned layoffs.
Merpati has long been struggling to overcome its financial woes. As of the end of the first quarter of 2003, the company's assets stood at Rp 879 billion, having dropped from Rp 929 billion at the end of 2002.
For the first quarter of 2003, Merpati recorded a loss of Rp 40 billion, whereas it posted a total profit of Rp 43 billion in 2002.
As of the end of 2002, Merpati's total debt stood at Rp 1 trillion, mostly owed to the Indonesian Bank Restructuring Agency.
Merpati's management attributed the decline in the company's revenue to fierce competition between airlines in the domestic market.
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Djarum to invest in hotels
Ferdinand Nainggolan, a deputy at the Office of the State Minister for State Enterprises, said the government was considering a proposal from PT Djarum, Indonesia's second largest cigarette producer, to jointly manage two ailing state-owned hotels: Hotel Indonesia and Hotel Wisata.
He said that Djarum had submitted a proposal to inject about Rp 1.7 trillion (US$202 million) into the hotels, and in return it would be allowed to manage the hotels for 30 years.
In the proposal, Djarum also asked to build a new shopping mall that would connect the two hotels, he said.
Ferdinand said the office of the state minister was still working with Djarum on the best possible cooperation agreement, which could include either a revenue-sharing operation or a privatization scheme.
The government owns a 100 percent stake in the two hotels.
Ferdinand said the five-star Hotel Indonesia last year booked a loss of Rp 3 billion.
In order to increase its competitiveness, the government needs about $250 million to renovate the hotel, he said.
"Hotel Indonesia doesn't look like a five-star hotel. It has difficulty competing with its nearby competitors such as the Hotel Grand Hyatt and the Hotel Nikko. To attract more guests we need to rejuvenate the entire hotel," he said.