Govt urged to be open about privatization

Govt urged to be open about privatization

JAKARTA (JP): The government has to be more transparent in conducting its privatization program for the benefit of the market, issuers and the government, a seminar concluded.

"The initial public offering of PT Telekomunikasi Indonesia (Telkom) taught us a lesson that the government should better plan the schedule for its privatization program in order to maintain a stable market performance," the president of the Jakarta Stock Exchange (JSX), Hasan Zein Mahmud, told a seminar yesterday.

Hasan argued that many fund managers need time to raise large amounts of funds to anticipate any initial public offering (IPO) of state companies.

"If the investors liquidate their portfolios on other stocks listed on the JSX in a rush in response to an IPO by a state company, the market will be unstable," Hasan said.

The uncertainty about the schedule of state companies' public offerings is one of the main reasons why companies refrained from making IPOs earlier this year, he said.

"It's the first time since 1989 that no companies got listed on the JSX during the first quarter. And the main reason is the anticipation of state companies' IPOs," Hasan added.

Some speakers at the seminar noted that Telkom's initial public offering last November triggered an uneasiness among the market players about state companies' future IPOs.

A noted economist, Sjahrir, criticized the government for being less responsive to the market as well as to experts' opinions.

Although Telkom has performed very well on the secondary market with a range of capital gains between 75 and 80 percent so far, its IPO was considered less successful.

Sjahrir noted that the lowering of the Telkom IPO price, from Rp 2,800 to Rp 2,050 per share, is still questioned by people.

"It was true that the whole market was weak when Telkom went public. But fundamentally, Telkom didn't deserve such a low price which was determined by the global coordinators," he said.

The main reason, according to Sjahrir, was that the issuer's position seemed to have been controlled by the global coordinators.

"Their last minute decision to lower the IPO price should have signaled that the government would not reach its target with regard to Telkom's privatization."

"And that really happened. But the government reacted by only by downsizing the international offering from 2.1 billion shares to only 600 million shares," he said.

Telkom initially planned to float 1.1 billion shares in the domestic market at a price range of Rp 2,225 to Rp 2,800 and 2.1 billion shares in the international market.

From the offering, Telkom got only Rp 3.8 trillion, far below its expected minimum proceeds of Rp 7.2 trillion if the shares were sold even at the lowest of the price range.

Moreover, Rp 2.3 trillion of the total was derived from the domestic offering which was 8 percent oversubscribed, and only Rp 1.4 trillion from the international offering, in which only 700 million shares were sold.

Sjahrir wondered why the government didn't cancel the international offering when it knew it had failed to meet expectations.

Learning from the experience of Telkom, Sjahrir suggested that the government become more professional in its next privatization program.

Citing an example of the government's lack of professionalism, Sjahrir observed that despite Finance Minister Mar'ie Muhammad's announcement that three more state-owned companies will go public this year, market players have been kept in the dark as to which companies will soon float shares.

In these circumstances, according to Sjahrir, a global coordinator could easily make use of any rumors to downgrade our companies as happened with Telkom.

In order to avoid Telkom's experience, Hasan suggested that the government change its privatization procedures by giving top priority to domestic offerings and listing, rather than go international.

Yesterday's seminar also presented other noted speakers including the Chairman of the Capital Market Supervisory Agency IPG Ary Suta, a senior official of the finance ministry, Dahlan Sutalaksana, and President of PT HG Asia Indonesia Eugene Gailbraith. (08)