'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).