Laksamana's delicate task

Laksamana's delicate task

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

The decision will reduce the burden of Finance Minister
Boediono to enable him to focus on fiscal management but at the
same time allow Laksamana to coordinate asset sales and corporate
reform within IBRA with privatization of state firms.

But suspicions about the move are also understandable, given
the deep-rooted nature of corruption in the country, extremely
inadequate fiduciary standards in the public sector and upcoming
general election in 2004.

That is because the decision practically put more than Rp
1,300 trillion (US$158 billion) worth of state assets, or 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 and one of her closest aides.

Even though Laksamana, a former private banker, boasts an
impeccable record of high integrity and strong pro-reform stance,
his being a confidante to the President could stand in the way of
his crusade to accomplish his mission.

Needless to say, therefore, that Laksamana, but especially
Megawati, should address the concerns over this potential
conflict of interest early on, otherwise any move Laksamana would
take to push through the reform measures would constantly come
under suspect, notably among the major factions at the House of
Representatives. A hostile public opinion environment would
certainly make it hardly possible for him to accomplish his duty.

The most effective way of pacifying such concerns requires
Megawati right from the outset to consistently uphold high
standards of integrity and to act firmly against all forms of
malfeasance. Perception of Megawati's integrity would go along
way in strengthening public trust in Laksamana.

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

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

He is under tremendous pressures 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 hole but also to prevent the asset quality from
deteroriation.

Expedited sales of the distressed assets is quite crucial to
strengthen the budding economic recovery because without new
investors these productive assets will remain underutilized and
will eventually turn into total losses.

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

On top of that, Laksamana has to conduct a lot of campaigning
to convince the public, especially political leaders in provinces
and districts, that reform of state companies, which can include
such restructuring measures as sales to strategic investors,
listing on the stock exchange or merger, 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 mindset among many political
leaders who often oppose privatization as violation of
nationalism even though many state enterprises have remained in
operations only with subsidies from taxpayers.