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State-companies-IBRA
JP/4/Editorial

Laksamana's delicate task

While President Megawati Soekarnoputri's decision to put the
Indonesian Bank Restructuring Agency (IBRA) under State Minister
of State Enterprises Laksamana Sukardi has been welcomed by most
analysts as a strategic move to speed up asset sales and
corporate reform, the new policy is, however, causing misgivings
among political parties.

The decision will reduce the burden of the finance minister,
Boediono, to enable him to focus on fiscal management, while at
the same time allow Laksamana to coordinate asset sales and
corporate reform within IBRA and hasten the privatization of
state firms.

Nevertheless, suspicions on the move are understandable, given
the deep-rooted nature of corruption in the country, extremely
poor fiduciary standards in the public sector and the upcoming
general election in 2004.

That is because the decision practically puts more than Rp
1,300 trillion (US$158 billion) worth of state assets, which is
almost as large as the nation's gross domestic product, under the
supervision of Laksamana, a leader of Megawati's Indonesian
Democratic Party of Struggle (PDI Perjuangan) and one of her
closest aides.

Although Laksamana, a former private banker, boasts an
impeccable record of integrity and is known for his strong
proreform stance, his being a confidant to the President could
stand in the way of his crusade to accomplish his mission.

Therefore, needless to say, Laksamana, and especially
Megawati, should address the concerns over this potential
conflict of interest early on, otherwise any move Laksamana makes
to push reform will come under suspect, notably from the major
factions of the House of Representatives. A hostile public
opinion environment will certainly make it more difficult for him
to accomplish his tasks.

The most effective way to assuage such concerns is for
Megawati, right from the outset, to consistently uphold high
standards of integrity and act firmly against all forms of
malfeasance. Perception of Megawati's integrity will go a long
way in strengthening public trust in Laksamana.

On the other hand, Laksamana needs to go all out to prove his
trustworthiness by consistently maintaining high standards of
accountability and transparency in all the decisions he makes
regarding asset sales, debt restructuring and state company
reforms. Both the ministry of state companies and IBRA are not
short of technically competent staff. What they urgently need is
leadership with integrity and conscience.

Laksamana's job is already an uphill one, even without being
distracted by suspicions from the public or other political party
leaders, as he is tasked with raising Rp 43.5 trillion or 15.2
percent of the total state revenue this year alone.

He is under tremendous pressure to accelerate the recovery of
the billions of dollars worth of assets under IBRA, either
through sales or debt restructuring, not only to help plug the
state budget deficit, but also to prevent the quality of the
assets from deteriorating.

Expedited sales of the assets is crucial to strengthen the
budding economic recovery because without new investors, these
assets will remain underutilized and eventually become total
losses.

Accelerated restructuring of corporate bad debts is equally
vital to help strengthen the banking industry because only after
restructuring can these assets be returned to banks to regain
access to new credit lines. Returning restructured debts to banks
in exchange for recapitalization bonds will not only speed up the
banking recovery by expanding their lending operations, but also
help reduce state budget burdens on bond interest payments and
future bond redemption.

On top of that, Laksamana has to convince the public,
especially political leaders in the provinces and districts, that
the reform of state companies, which can include restructuring
measures such as sales to strategic investors, listing on the
stock exchange and mergers, is the best way to maximize benefits
from the state assets. It is not ownership of assets but optimum
earnings and other economic benefits from the assets that should
be made the ultimate goal.

Laksamana needs to change the mind-set of political leaders
who oppose privatization as they consider it antinationalistic
even though many state enterprises have only managed to remain in
operation because of subsidies from taxpayers' money.