Wed, 16 Jul 2003

Misperception stalled privatization: Analysts

Fitri Wulandari, The Jakarta Post, Malang, East Java

An incorrect perception that privatization of state-owned enterprises (SOEs) was an effort to cover the deficit in the state budget had contributed to the lack of progress in the privatization program, analysts said Tuesday.

A lack of detailed information about privatization for the boards of directors of SOEs and lawmakers had also incited resistance, which eventually stalled the process and made the companies even more unprofitable, they said.

"Privatization in essence is how to make management in SOEs more transparent and boost their performance," former state minister of SOEs Tanri Abeng told a discussion at the 15th Congress of the Indonesian Economists Association.

"If it aims only to cover budget deficits why bother selling our assets in a less conducive market? The public will only see that the reason for privatization is to bring food to the table."

Hendrawan Supratiknyo of Satya Wacana University said privatization had become a negative word in public.

"Privatization (is perceived) as equal to something that neglects public interest," he said.

Privatization of SOEs has been moving slowly due to resistance from various groups of people amid fears that the program was mainly a sale of state assets at bargain prices to foreigners, and could lead to massive layoffs. Last year, the government failed to meet its privatization target, and it may again fail to raise the Rp 8 trillion proceeds target for this year.

Tanri said that poor campaigning about the program had prompted resistance among management at SOEs as they feared losing their positions.

"Resistance often comes from the board of directors and not employees," he said.

However, there were several ways to appease employees' resistance over privatization, by, among other things, offering early pensions and sufficient severance pay.

Hendrawan said that stock options could be another way to prevent resistance from employees as it gave them a share of the company.

Analysts in the ISEI congress agreed that if done correctly, privatization could generate wealth.

"If the company is healthy and conducts good corporate governance, they could be listed on the stock exchange, which eventually boosts the company's profitability," Tony A. Prasetyantono of Gadjah Mada University said.

Samuel Tobing of the Jakarta Initiative Task Force added that privatization was one way to make insolvent SOEs solvent through a debt to equity swap mechanism.

He said by using this method, "The government, the creditors, SOEs and strategic investors get the benefit from privatization."

The government could sell its shares in the insolvent SOEs, creditors could get rid of bad debts and the SOEs became solvent.

Meanwhile, the secretary of the Office of State Minister of State Enterprises, Bacelius Ruru, said that to help minimize resistance, it was important the privatization program was carried out in a transparent way.