'Privatization law urgently needed'

'Privatization law urgently needed'

Dadan Wijaksana, The Jakarta Post, Jakarta

Government plans to sell five state-owned companies in the
first half of the year may yet again face other obstacles, as
legislators insist the government should first give the proposal
a solid legal basis.

The establishment of a strong legal foundation -- in the form
of a law -- is inevitable to avoid further negative responses
from the public, the lawmakers argued.

Head of House Commission V on trade and industry Suryadharma
Ali stressed the need for the establishment of such a regulation,
so as to guarantee a smooth passage for the crucial program.

"We would prefer the (privatization) program to be carried out
after the establishment of the new law on privatization, not
before it," Suryadharma told The Jakarta Post on Tuesday.

As it would stipulate a clear classification and mechanism as
to which and how state-owned firms are to be sold, the law would
preclude delaying tactics being used whenever a company were up
for sale, he added.

He said that the law in question was still being thoroughly
examined by the state secretary.

This should serve as another blow to the government, as the
statement came at a time State Minister of State Enterprises
Laksamana Sukardi was unveiling plans to sell five companies this
semester.

The five are international call operator PT Indosat,
pharmaceutical companies PT Indo Farma and PT Kimia Farma,
property company PT Wisma Nusantara International and airport
operator PT Angkasa Pura II.

Laksamana said the move was necessary to meet the
privatization target of Rp 3.5 trillion (around US$ 350 million).

Another lawmaker Azwir Dainy Tara, also a member of House
Commission V, stressed the importance of such a law before the
government went ahead with its sale plans.

"I do not understand why the government is rushing to sell
those companies without waiting for the establishment of the
privatization law first," Azwir complained.

"The law would be crucial in determining what firms could or
could not be sold, the system, the pricing and so on. The
government should have waited for this."

The privatization program was required by the International
Monetary Fund (IMF) as a condition for the government to accept
bailouts from the agency to help the country recover from the
economic crisis. It is also supported by many in the country as a
way of ending chronic inefficiencies in state enterprises.

However, last year, the government's privatization program hit
a snag due to, among other things, a lack of support from
politicians.

Growing nationalism among many members of the public, who are
concerned at the growing domination of foreigners in the national
economy, is also considered a factor behind the failure of the
program.

A major example of the failure has been the government's
inability to sell its 51 percent stake in cement maker PT Semen
Gresik due to strong opposition from politicians, locals and
workers, who voiced nationalist slogans in their opposition to
the sale.

Laying less stress on nationalist sentiments, both lawmakers
said that in principle they supported the privatization program,
but it had to be selective.

"Privatization is essential, we need the proceeds to cover our
budget deficit; however, a selective approach must be applied
here. Not all state-owned companies can be sold," Surya added.

The proceeds target from privatization this year stands at Rp
6.5 trillion, to be used mainly to help reduce the state budget
deficit.

Due to the huge sum of money the state budget has to allocate
each year for debt repayment, the country has been relying on
income from privatization and the sale of assets controlled by
the Indonesian Bank Restructuring Agency (IBRA).