No other choice but to sell our souls

No other choice but to sell our souls

Yanuar Nugroho, Director, Business Watch Indonesia,
Surakarta, yanuar-n@unisosdem.org

From 161 state-owned enterprises (SOEs) in Indonesia, only 145
are registered and the other 16 are unregistered as SOEs, yet
they hold the status of state body corporations (perusahaan
jawatan or perjan). Only 11 of the 145 registered SOEs handed
over dividends worth Rp 21 trillion to the state. The other 134
SOEs, contributed nothing financially to the state.

Hence the office of the State minister for State Enterprises
is in the process of liquidating 17 unprofitable state-run
hospitals, to be either sold out or changed into a "corporate"
hospitals, Suara Merdeka reported last year.

The Jakarta Post on Feb. 18 also reported that the state
forestry firms, Inhutani I-V, would be liquidated. Some firms
would be surrendered to local villagers and others would be
auctioned off to private investors to turn the areas into
plantations. All were not profitable enough and they had failed
to rehabilitate forests abandoned by forest concessionaires.

The plan was strongly opposed but the privatization scheme may
be smoothly on its way -- yet the firms to be privatized control
99 concessions in natural forests covering some 6.5 hectares, and
27 industrial estate plantations covering about 2.4 hectares.

According to Minister of Forestry Mohamad Prakosa, the
ministry had thoroughly studied and concluded that the
performance of the Inhutani firms, in terms of finance and forest
rehabilitation, had been disappointing. The ministry, moreover,
does not see any other option other than closing down the firms
and selling them to private companies.

The word "privatization" seems to have become the dominant,
efficacious formula to overcome any problem in public goods and
services delivery, which is still being managed by the state.

Ferdinand Nainggolan, Deputy Minister of SOEs, was quoted as
saying that three stages have been established to empower the
SOEs: Consolidation in 2002, revitalization in 2003-2004 and
growth in 2005-2006. The first two stages end in the only option
-- to privatize all sectors in which those SOEs are now working
in -- backed up by the preparation of a bill on SOEs and
privatization in order to establish its legal-formal foundation.

The bill now waits ratification. Nobody seems to be aware of
its grave risk to let privatization metamorphose into a sort of
Trojan horse in our human life.

At the heart of the debate is the contradiction of public-
authorized (i.e. state-owned and controlled) against privately
managed businesses which determine, or at least influence, the
life of many people. The choice always seems to be pro-private or
pro-state.

Proponents of privatization often cite "lean, efficient and
effective" in contrast to "bureaucratic, corrupt, inefficient and
ineffective", attributed to state-managed businesses.

Those who are pro-state argue for "state or national
interests" in contrast to "private or group interests". Yet they
are not the fundamental basis that any policies and practices of
privatization should be based on.

The fundamental question is: Could the public interests be
guarded more by privatizing activities which have been under
state control so far, or the opposite, could they be assured more
if those dealings remained unchanged within state authority?

Yet, while the elementary argument seems to be clear, the
forces towards privatization look immense -- first, external
factors forced by multilateral agreements and co-operation and
second, surprisingly, the government as a public agency itself.

Further, privatization targets sectors which are fundamental
needs -- transportation, health care, water, energy/power,
education -- most of which are now managed by SOEs. Worse, Law
No. 25/2000 on national development programs 2000 to 2004, states
clearly the "privatizable" sectors -- telecommunications,
transportation, plantations, hotels and tourism, infrastructure,
oil and gas and -- most dangerous -- other sectors which have
become investors' interests.

Soon, the question might be addressed to the government or
legislative bodies, which formalized such rules to invite the
private sector to take over. This is the intrical part of the
game, the time when financial liberalization and the open market
are extended and reinforced -- and at its heart is the issue of
privatization.

By doing so Third World economies are being deflated; the
governments are withdrawn not only from public enterprise but
also from compassionate support of the basic health and welfare
of the most vulnerable. Former World Bank's economist Joseph
Stiglitz wrote in 1999 that there are real risks associated with
delegating excessive power to international agencies. Such
institutions can become an interest group, concerned with
maintaining its position and advancing its power.

Stiglitz is correct. Indonesia, for one, received loans as
much as US$400 million for the power sector restructuring program
and $300 million for the health and nutrition sector development
program, in addition to another $300 million for its water
resource sector adjustment loan.

The impressive numbers are deadly in consequences. Behind the
beautiful term of "adjustment" or "restructuring" or
"development" lies the imperatives to go for inviting the private
sector -- particularly transnational and multinational companies,
and wiping the government away.

While in the water sector the loan implicates a clear effort
of privatization of state-owned water corporations (PDAM) and
private authority towards water resources, the health and
energy/power sector also suffer from the same perils.

Hiding behind "decentralization of health sector management"
in the loan conditions is a systematic way to withdraw the
government's involvement and to implement "full-cost recovery"
policy in the health care sector.

Apart from paying for the service, patients will also be
billed for the overhead and all other operational costs. The bill
on the health sector also waits ratification this year.

As for power restructuring, the same logic of "full-cost
recovery" emerges in the term of "unbundling" the state power
firm, PLN. It has caused a significant increase in electricity
prices since PLN now retains responsibility only for transmission
and distribution.

Its main function, to generate energy, has been replaced by
independent power producers. Soon, even the function as
transmitter and distributor will also be taken over by the
private sector. More examples could be worse, particularly
regarding the direct implication to the poor. Those who have
money are those who get the goods and services.

And while such development may not have put suffering third
world countries like Indonesia back on a steady economic keel, it
has certainly helped undermine democracy in those nations.
Privatization, a means of delivering goods and services to the
public, has become an end in itself. And since it is being done
brutally in almost of all aspects of our life, we should stop it.

But this argument is not against privatization per-se, but
against the line of thinking that market logic is always superior
to solve societal problems. The market is part of society, just
like the economy is part of the social sphere, and not the other
way around. Thus, we should not surrender our life to market
domination. Otherwise, we would also be counted in history as the
generation that sold its own life.

The writer is also a lecturer at the Sahid University in
Surakarta and a researcher at Unisosdem Jakarta.