Open bid planned for Krakatau's shares

JAKARTA (JP): The government is to invite international bidders to buy part of the country's largest steel producer, PT Krakatau Steel, next week, State Minister of the Empowerment of State Enterprises Tanri Abeng said yesterday.

"The competitive bidding process will be held next week after we appoint the investment advisor tomorrow (today)," he told reporters following a meeting with Coordinating Minister for Economy, Finance and Industry Ginandjar Kartasasmita.

He said that the 10 foreign investment banks which would back up the privatization of the country's 12 state-owned companies in the 1998/1999 fiscal year would be announced today.

The bidding process for Krakatau Steel would be handled by an appointed investment bank which must have expertise in the steel industry, he said.

He explained that after the investment bank selected the best investor candidates for Krakatau Steel, a one-month due diligence period, which would include technical and economic evaluations, would be conducted. The company's management would be involved in this process.

After that, another one-week evaluation process would be undertaken to come up with an economic-technical recommendation which would be handed over to the country's privatization team. This is headed by Coordinating Minister for Development Supervision and State Administrative Reforms Hartarto Sastrosoenarto.

Together with the Minister of Finance, Tanri is a member of the privatization team.

"The final decision is in the hands of Coordinating Minister Hartarto," Tanri said, adding that Hartarto would consider all issues, including the sociopolitical aspects of the deal.

He promised that the stratified privatization process would be done in a transparent manner.

Tanri was strongly criticized by Krakatau's management early this week about allegations that he had quietly made a deal with the Netherlands-based Ispat International to sell 49 percent of Krakatau's shares for the relatively low price of US$400 million.

The deal would have given Ispat a monopoly in the domestic steel wire and rod industry.

Tanri denied the accusations, saying that it was not a final deal.

He also said that the government would make sure the Krakatau privatization deal would not create a monopoly in the steel wire and rod market.

"We will negotiate (with the potential investor)," he said, pointing out that to prevent a monopoly the government may handle the marketing side.

Tanri also said that the nation would gain by selling a larger stake of Krakatau because it would get a better price.

The 1998/1999 privatization program is expected to raise a total of Rp 15 trillion (US$1.3 billion), mainly to support the state budget which is heavily burdened by huge subsidy commitments caused by the economic crisis. (rei)