MOF: Privatize SOEs through IPOs

MOF: Privatize SOEs through IPOs

The Jakarta Post, Jakarta

To fulfill its privatization target of Rp 3.5 trillion (US$368
million) focusing on state banks and mining companies, the
government should sell them through initial public offerings
(IPO), says a minister and analysts.

Minister of Finance Jusuf Anwar said on the sidelines of a
joint hearing at the House of Representatives on Monday that the
privatization of state enterprises would receive less opposition
if it was done through an IPO rather than strategic sales to a
limited number of investors.

"Through an IPO, shares of a state enterprise are sold to the
public, not just to one strategic investor, such as Temasek or
Farallon," he said.

Anwar added that by privatizing state enterprises, the
government expected to cover its budget deficit, which is
expected to reach Rp 20.3 trillion this year.

State Minister of State Enterprises Sugiharto said on Monday
that the government would privatize some state banks and mining
companies although he declined to give names due to capital
market regulations.

Iman Sugema, an economist at the Bogor Institute of
Agriculture, said the finance minister's proposal was sound as
state firms' privatization through the IPO would maximize revenue
for the government.

"Strategic sales usually result in lower prices compared to
IPOs," he said in a discussion on the matter on Tuesday.

He added that sooner or later the government should sell most
of its stakes in nearly all 166 state companies, except for those
dealing with public services, handing over control of the day-to-
day operations of the corporations to the private sector.

"The government has enough on its hands," said Sugema. "If
they keep meddling in the affairs of state firms, it only
increases opportunities for corruption."

However, he questioned why the suggestion came from the
finance ministry. "The Office of the State Minister of State
Enterprises should be the one taking the initiative."

Economist Umar Juoro of the Center for Information and
Development Studies (Cides) also supported the idea of
privatizing state firms, saying that the public would benefit
from the increased transparency required of public companies.

For example, he said, the recruitment of directors and
commissioners for state enterprises -- which currently is handled
by a government team -- would be more professional and
transparent if the companies were privatized.

"As it stands right now, there are a lot of gray areas in the
recruitment process," said Juoro. (002)