Govt told not to shift monopoly to private sector

JAKARTA (JP): The currently pursued privatization of state- owned enterprises should not lead to the shifting of the government's monopoly over public utilities to the private sector, a lawyer suggested yesterday.

A. Zen Umar Purba, a lawyer at the Ali Budiardjo Nugroho Reksodiputro law firm, told a regional seminar here yesterday that one of the attractions for private sector companies to get involved in the privatization of state firms is the possibility of securing the state firms' facilities to conduct business.

"A state-owned enterprise that enjoys a monopoly is an extreme example of this," Zen told the seminar on privatization and access to capital markets, organized jointly by his law firm and the Pacific Rim Advisory Council.

"The privatization (of such companies) should not become a means to shift the monopoly power from the government sector to the private sector," he continued.

He suggested that the government, through state firms, maintain its monopoly of public utilities, including oil and gas, water, electricity and, to some extent, telecommunications.

To avoid a shift of the monopoly to the private sector, the government should maintain its controlling power in any company which holds a monopoly over public utilities, Zen said.

In the case that such a state firm is privatized, either by direct placement or a public offering of shares, the government should maintain at least 51 percent of the company's total shares.

The government has so far privatized four state firms through public share offerings. They are cement producer PT Semen Gresik, telecommunications firms PT Indosat, PT Telkom and tin-mining firm PT Tambang Timah. The last three listed their shares on both foreign and local stock exchanges.

The government plans to float shares of three more state firms on both local and overseas stock exchanges this or next year. They are steel manufacturer PT Krakatau Steel, toll road operator PT Jasa Marga and PT Bank Negara Indonesia 1946. The first two will list their shares on both foreign and local markets, while the last will float shares on the local market only.

"The government can offer more of its shares in Krakatau Steel to the public as I believe this sector (steel industry) does not need to be monopolized," Zen said.

In the event that the government decides a particular business sector no longer requires its facilities or protection, it should grant equal opportunity to other private parties to be involved in the same business.

Zen noted that the government should pursue a very transparent privatization process, especially when the privatization is executed through private placement and when the privatized state firm will still enjoy favorable facilities from the state.

Following privatization, a state firm is expected to operate like a private entity, with its main task being to generate and accumulate profit, Zen said.

"Therefore, I'm happy Minister of Finance Mar'ie Muhammad stated recently that state-owned companies, like private undertakings, are obliged to abide by the company law," Zen said.

Supporting Mar'ie's argument, Zen said the recognized bodies in a limited liability company, under Company Law No. 1/1995, are the shareholders, the board of commissioners and the board of directors.

"The finance minister's statement was a positive, congenial explanation, in consideration of the prevailing misperception among government officials that state firms are extensions of certain government agencies," Zen said.

He also supported the government's plan to deregulate state firms to make them immune from the intervention of bureaucrats.

The government currently has 178 state firms, of which 160 are limited liability companies -- which are automatically subject to the 1995 company law. (rid)