'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."