How to manage or mismanage state companies
How to manage or mismanage state companies
Some say politicians would be able to practice what they
preach if they controlled state firms, while others raise
warnings of worse inefficiencies. The Jakarta Post talked to
political economist Revrisond Baswir of the Gadjah Mada
University in Yogyakarta, the director of the Institute of
Development and Economic Analysis and newly appointed deputy for
economic rights at the State Ministry of Human Rights Affairs. An
excerpt of the interview follows:
Question: Politicians have reportedly agreed that the Muslim-
based "axis force" can take over finance-based state firms while
the Indonesian Democratic Party of Struggle (PDI Perjuangan) and
the National Awakening Party (PKB) can control others. How do you
see this development?
This problem should have been anticipated when the Cabinet was
being set up; the scramble for state run firms had already
started in the competition for Cabinet seats. The National
Mandate Party (PAN) insisted on controlling the finance ministry
while (current minister) Bambang Sudibyo had actually admitted he
might not be the right man for the office.
This indicates pressure from the axis force to hold a certain
post with a certain target, including the control of a finance-
based state firm.
Another very strategic post in the Cabinet in regards to
controlling state firms is controlled by the PDI Perjuangan
through the installment of Laksamana Sukardi (state minister of
investment and state enterprises development). PKB is also
represented here through the ministry's secretary (Rozy Munir).
The scramble for ministry posts has turned out to be a race
for access to state firms. This was reflected through the
issuance of a government regulation stipulating the control of
state firms under Laksamana's ministry.
Of course PAN and the axis force protested this regulation and
five days later a new regulation came out, revising the previous
one, containing a kind of "sharing" of the control over state
firms by the finance ministry and the State Ministry of
Investment and State Enterprises Development.
Do you agree that the rivalry is part of political party
efforts to collect funds ahead of the next general elections?
That is still debatable. What is certain is that if a state
firm is controlled by a certain party or political force, it will
have access to facilities from the state firm. If a party
controls a state bank, for instance, its easier access to credit
will benefit campaign activities -- this was reported to been
have done by the People's Sovereignty Party (PDR).
A state firm can also be directed to buy (goods and services)
from supporters of a political party; in its marketing, a state
firm could also be distorted by nepotism tied to a political
force.
If, for instance, the state oil company Pertamina was
controlled by a certain party, gas stations could all be
controlled by that party. So this is more of an effort to control
economic assets which can then be used to buy political support,
which indeed is not a straightforward case of corruption.
Such things can happen because the internal processes of a
state firm do not have to pass the House of Representatives.
In the case of selling (the firm) or privatization, nepotism
is possible if a political grouping controls a state firm.
Again, if a state enterprise is controlled by a political
party, privatization or selling can not take place in conditions
of pure market competition.
For instance, if a state firm is controlled by the axis force,
there would be a tendency to sell shares to business parties
which support that force. Then we might not get the best price
because the market process would be hampered.
Is such rivalry inevitable in a multiparty system?
This is more of a problem during the transition from a corrupt
system of government. Under the New Order, state firms were cash
cows for corruptors close to those in power and the ruling Golkar
party.
When the regime collapsed, of course new powers, which were
not limited to one party, saw a chance to occupy those posts. So
I think this is a transition to ... good governance.
There should be clear distinction between political posts at
the Cabinet level with those in state firms, which should be
occupied by professionals with no political ties.
With no clear rules, even if we had a two-party system, the
ruling party would have the opportunity to control all state
firms and put all their people in the companies.
This happened during the New Order, whereby state enterprises
were filled with Golkar people or those loyal to Golkar. A change
of power would be followed by a change of all the people in the
state firms and their performances would clearly be disrupted.
It seems that each minister automatically becomes a
commissioner in a state firm.
Yes, that's the New Order style. The government does not have
to be represented by a minister in a state firm. It is not clear
what the government's consideration was in appointing A or B as a
commissioner in this or that state firm. Was the post to be
shared by ministers, first echelon officials or military
officers?
In the New Order the post of state company commissioners was
likely part of the economic pie allocated to civilian and
military cronies. This tradition of appointing commissioners from
officials should be stopped.
The post of commissioner has become an additional post (to
officials) and a source of more incentives to those in the
government and bureaucracy, from ministers to director generals.
We must question whether it is acceptable to give incentives
to officials by appointing them state firm commissioners.
In the New Order a retired officer was at least likely to
become a commissioner at a state company. What do retired
generals know about business, or state banks?
The same thing could happen if political parties were to
control state firms, with a party secretary general becoming a
commissioner. He wouldn't really know what a commissioner is
supposed to do; commissioners here have often been swindled by
directors. Many commissioners only care about their annual bonus.
How should we start building a good recruitment system for
important posts in state companies?
This is the task of President Abdurrahman Wahid. He must lay
the foundations of professional management in state firms.
Political parties can control Cabinet posts but this political
process must be separated from state firms. The government must
also create a transparent recruitment process for state companies
and formulate a set of clear criteria for the concerned posts.
I disagree with the statement by minister Laksmana who said it
was not a problem whether state firm executives come from
political parties or not, and that what was important was that
they were professional. What's more important is whether the
process (of appointing executives) is transparent.
The recruitment of managerial posts in state firms must be
subject to fair and open competition on the basis of merit,
regardless of whether the person comes from inside or outside the
state company.
The post of commissioner can be controlled by the government
as a consequence of it being the majority shareholder. But there
still must be a set of clear criteria or rules regarding the post
of commissioner. The problem is whether officials can also become
state firm commissioners. The government needs to convey at least
the need for the above criteria to the House of Representatives;
(the issue) is not about the individual to be appointed.
Has rivalry among political parties made it more difficult to
wipe out corruption in state firms?
That's our problem. The nepotistic political process has
happened since the set up of this accommodative Cabinet. Almost
all political factions, the so-called guarantors (of proposed
ministers) were involved in its establishment.
Each faction arbitrarily chose its person as minister, as long
as he or she could be controlled. The initial motivation was
already nepotistic. One can say this is normal; a minister holds
a political position. The problem is not that simple, because
with the entrance of most political factions in government, the
control function of the House becomes greatly ineffective.
Now it's not only political parties eying state firms. Pak
Amien (Rais, Speaker of the People's Consultative Assembly and
the men identified as leader of the axis force) has put his
people into ministries, and this was not merely because the
people are from PAN (which he chairs) but also because they are
from the same university. Two ministers which he proposed,
finance minister Bambang and national education minister Yahya
Muhaimin are fellow alumni from Gadjah Mada University.
I think others are doing similar things; ministers are
influencing the promotion of first echelon officers who are from
their own organization, schools and universities, regions, etc.
So it has become quite complicated ... wiping out corruption will
likely be very slow, not only in state firms.
Can the President settle all this, given that he seems
relatively independent from political parties and the axis force?
That's true, but we can only depend on the good will of Gus
Dur (Abdurrahman) and the government to stop this rivalry over
state companies. Nepotism is acceptable in the Cabinet but not in
state firms and the bureaucracy.
The problem is that the President himself lives in some inner
circle. To appoint state firm directors he needs input from
people around him. Who can guarantee that the appointment is
objective, whether it is based on professionalism or nepotism?
If the President wishes to free state firms from politics he
could form an independent body to mediate the firms and the
government. The agency would watch over the succession of
managers and commissioners on the basis of professionalism.
What should be the policy over state firms?
This relates to the government's need to cover its budget.
Basically (this can be done) through privatization, or selling or
liquidizing the firm. If a firm is privatized or if part of its
shares are sold, the government can still expect profits if the
firm's performance is good.
I would advise that the government promote privatization
instead of selling state firms. Privatization should aim at
making the firms healthy.
What is the most basic constraint in the contributions from
state firms?
Corruption. Again, it doesn't matter whether the firm is to be
privatized, if it's to go public or to be sold to foreign
parties. The most important thing is how to stop corruption in
state firms, or at least reduce loopholes so corruption is kept
to the minimum.
If the government can cleanse state firms of the pirates of
state money, professionalism will follow suit. An end to
corruption could save up to at least 30 percent of funds in state
firms, which would greatly help increase revenue ...
Now this political party rivalry is a new form of corruption
affecting state firms. How can you wipe out deeply ingrained
corruption when you find the corruptors are friends or
school mates, or from the same kampong as the new rulers of the
firm...?
I can only warn the President that if the (rivalry over state
firms) continues unabated, even more state assets may go down the
drain compared to the former era. While in the past (corruption)
occurred due to a monolithic power, now power is spread but it is
still corrupt ...
How large are state assets?
About Rp 300 trillion. In the New Order, returns on assets
declined from one year to the other. From around 4 percent to 2.1
percent in the last year.
Just imagine ... the interest of dozens of percent to be
expected if we had invested the money in the bank ... now we only
get an interest of two percent (of the above amount).
And not all of it enters state coffers because we have to pay
this and that, leaving little profits to the state.
Then there's the bankrupt firms asking the government for
subsidies of trillions of rupiah, like Pertamina. In the end the
funds from the state budget channeled to state firms could be
larger than the revenue from the firms.
The issue here is whether we expect contributions from state
firms by improving their performances, or do we just wait for the
results from the sale of state assets. That's a matter of choice.
It's easy to sell, but then we would no longer have anything.
They key is to clean up corruption in state firms, which will
encourage improved performance.
Now, about you being recently recruited to the State Ministry
of Human Rights Affairs
That's still being processed (although) the decree from the
minister has already been issued ...
What is the job of the deputy for economic rights?
It basically concerns economic rights such as the right to
fair and decent wages, the right to a decent livelihood for
citizens, the right to strike, the right to special leave for
women, equal treatment and so on. I will work with other experts
on law, gender, economy, politics and the military.
What will your priority be?
Economic rights are not well known so I will first introduce
them to the public. For that purpose I'd like to work with
nongovernment organizations (NGOs) who have so far worked on
human rights; I also come from the International NGO Forum on
Indonesian Development (Infid).
Haven't NGOs so far been largely noncooperative with the
government?
They can be at a distance from the government, but it's not
taboo to have governments working hand in hand with NGOs. This
can be seen as a proactive step by the government in approaching
NGOs, discussing their findings and opening up to their inputs.
The government need not wait for their pressure to absorb their
findings.
Is there any relation to the fact that both you and Hasballah
are from PAN?
I have been PAN's foremost critic recently so I don't know
(of any relation). Many in PAN don't know I've become a staff
member at the ministry. I don't know pak Hasballah personally yet
either. There was speculation that Hasballah wanted PAN people in
his office, while expert staff cannot be from political parties.
So he asked for a list of civil servants of a certain grade and
made a selection from it (Revrisond teaches at the state-run
Gajah Mada University).
My friends said it would be best to take up the offer;
Hasballah was also from an NGO so they suggested it might be
better to accept the post rather than have some person from
nowhere take it ... (Asip A. Hasani)