'Indonesia committed to privatization'

'Indonesia committed to privatization'

Rebecca Thurlow, Dow Jones Newswires, Bandar Seri Begawan

Indonesia's Senior Economics Minister Dorodjatun Kuntjoro-
Jakti says the Indonesian government will push ahead with
privatization despite popular opposition to the sale of state-
owned assets.

Responding to World Bank concerns that popular pressure to
stop privatization could hurt economic growth prospects in the
world's fourth most populous country, Dorodjatun reaffirmed the
government's commitment to the process.

"Of course, yes, we will continue privatization," Dorodjatun
told Dow Jones Newswires in a recent interview.

Following a meeting of economic ministers from the Association
of South East Asian Nations in Brunei, he said the sale of state
assets is a topic of political contention, not only in Indonesia
but also in the U.K. and Europe.

"It's up to us to explain to the parliament, and up until now,
my impression, my feeling and also my experience, in the past one
year is the parliament has been very supportive," Dorodjatun
said.

"Because we showed them that we cannot stay put. Even state-
owned enterprises have to be more efficient because we are
subsidizing them."

Indonesia's plans to raise cash from the sale of state-owned
assets - which range from a cement manufacturer to banks - have
faced opposition from politicians who are against letting foreign
investors take over local companies.

Some lawmakers are also calling for protection of local
industries from foreign trade.

Last month, the World Bank's country director for Indonesia,
Mark Baird, warned that such populist measures are unlikely to
lead to any sustained improvement in economic growth. Rather,
they are likely to erode investor confidence and undermine what
has already been achieved in terms of economic stability, he
said.

Dorodjatun said decreasing government involvement in the
private sector is key to boosting the pace of economic growth in
Indonesia to 6 percent, the minimum level experts say Indonesia,
with its 220 million people, needs to create enough employment
for new workers.

The Asian Development Bank has forecast the Indonesian economy
will grow by 3.2 percent in 2002 after growing 3.5 percent in
2001.

"We hope to get back to the fact of 7 percent but not the way
of go-go behavior like in the past, which caused this banking
disaster," Dorodjatun said.

"We learnt that the hard way and I want to see to it through
laws and regulations and system building we don't go back to
that."

Growth of 3 percent is "quite natural" for Indonesia as long
as there is good weather because of the country's large rural
population, and 5 percent could be achieved through "hard work".

However in order to surpass that level, the government needs
to boost international trade, he said.

"Beyond 5 percent, we really have to go through a (period of)
very active international trade," he said.

"Once upon a time it was managed trade in the past. I don't
think that we can do that anymore because of the overall
competition."

While Indonesia's interest rates continue to decline, easier
monetary policy on its own isn't enough to return economic growth
to the target level, he said.

"We are a commodity-based economy also, so that is the reason
why the reduction of the present government in the private sector
is now creating growth of commodity and copper and chocolate and
cashew, all of the Eastern part of Indonesia is now enjoying it,"
he said.

"And I hope that by decentralization, it will then move
through international trade, maybe commodities, maybe minerals,
maybe oil, maybe gas, to go back to 7 percent."

Dorodjatun said it would be possible for the Indonesian
economy to achieve 5 percent economic growth this year, however
he warned the outlook depends on what happens in the U.S.

"Considering 5 percent this year and we are working probably
toward 6 percent, but of course that depends also on when the
biggest economy in the world turns around and this is the U.S.,"
he said.

"Nobody can neglect the fact that we are deeply worried,
everybody, about a double dip."