Govt to privatize Merpati this year

Dadan Wijaksana, The Jakarta Post, Jakarta

The government has said it would press ahead with its plan to privatize state-owned Merpati Nusantara Airlines this year amid tougher competition in the airline business.

"There is no other way; the privatization has to be done as soon as possible to help it cope with tough challenges in the industry," State Minister for State Enterprises Laksamana Sukardi said on Monday during a signing ceremony between Merpati and local governments in Kalimantan.

He was commenting on recent calls to postpone Merpati's privatization program until next year, as rising political uncertainty during the upcoming general elections might prompt for investors to bid low for Merpati shares.

Laksamana, however, argued that new credible investors would make Merpati better equipped to compete with others at a time when the global airline industry had suffered various shocks, from the Sept. 11 attacks in the U.S. to the Iraq war, other terrorist attacks in a number of nations including Indonesia, to the SARS outbreak.

"That's why we need to find investors soon that are credible, willing to inject capital into the company and to improve the company's performance. This will, in the end, increase tax revenues," he Laksamana said.

Merpati is among the 14 state-owned companies up for sale this year under the government privatization program. The government targets proceeds of Rp 5 trillion from the program to help plug this year's budget deficit, estimated at Rp 24.4 trillion.

The number of shares to be sold has yet to be determined, but the government would prefer to sell a majority stake so as to bring in higher revenues. Selling a majority in Merpati would allow the government to procure a premium fee in addition to proceeds derived from the sale-per-share price.

Aside from Merpati, shares in the national flag carrier Garuda Indonesia are also up for grabs.

The Monday agreement between Merpati and the four provincial administrations in Kalimantan is aimed at setting up a new joint airline, the Kalimantan Air Service.

The Memorandum of Understanding was signed by Merpati president Hotasi Nababan and representatives from West, South, Central and East Kalimantan provinces.

Under the agreement, the new airline will use Merpati planes and flight personnel while fares would be subsidized by the local governments. Merpati can also operate aircraft purchased by the provinces.

The company has a fleet of 42 airplanes servicing 250 routes and 250 daily flights.