NGO warns of unrestrained privatization of public services
NGO warns of unrestrained privatization of public services
The Jakarta Post, Jakarta
Selling state companies that provide public services may help
Indonesia's economic reforms, but not necessarily the public who
must let private companies treat them as consumers and the
service as commodities, according to a report by a non-government
organization.
Business Watch Indonesia (BWI) issued on Thursday its study on
Indonesia's privatization program in the sectors of water, energy
and health. But BWI pointed to more fundamental problems behind
the privatization drive as a result of how the
World Trade Organization (WTO) shaped global trade.
Testing the argument that privatization benefits consumers
with lower prices and better services, BWI's report found that
this had not been the case in Indonesia so far. The trend of
privatization could likely be the opposite, it warned.
"Privatization sharpens and creates what is called 'an access
divided society,' a society that is divided based on its ability
to access public services that should have been accessible for
everyone with the same opportunity," the report said.
Indonesia's privatization program began even before the 1997
economic crisis left the government with no choice but to
deregulate and invite private capital into public sectors.
What began at a cautious pace, had to be pushed faster under
the economic reforms program with the supervision of the
International Monetary Fund (IMF).
BWI said that pressure made it difficult for the privatization
program to balance the public's interests with that of private
firms entering the state sectors.
An important downside effect of the privatization program was
the full cost recovery principle, which requires the market to
cover the cost of producing the service.
In Indonesia, the economic crisis sapped the government's
ability to meet the growing demand for public services due to its
unrestrained population growth.
Local government-owned water company, PDAM, has been selling
water at prices below the production costs and must survive on
subsidies.
Since private companies have entered the sector, demands have
risen for the fees to be increased in order to improve services
and infrastructure.
In the energy sector, subsidies provide the public with modest
electric prices, but independent power producers have said they
could not invest in more power capacity unless there is a price
increase.
Indonesia's privatization of the health sector developed
through decentralization, said BWI.
It said that the central government delegating its powers to
local government required hospitals to become self sufficient.
"Through the concept of decentralization, it's just a matter
of time before the entrance of the private sector. Because
hospitals cannot become autonomous without a sound financial
structure," its report said.
BWI attributed the pitfalls behind the privatization drive to
WTO's failure to distinguish commercial and non-commercial
services. This had the consequence that public services, even the
most basic ones, were labeled as commodities subject to market
forces.
And instead of competing with one another to drive prices
down, BWI said, private companies here tended to work in
collusion to control the price they charge to consumers.
The report referred to cases in other countries where
privatization had not yet brought about lower prices or better
services.
BWI said Indonesia's reliance on foreign debt was a problem in
assuring that the privatization program developed in conjunction
with the public's interest.