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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.