Privatization needs public campaign, IMF says
Berni K. Moestafa, The Jakarta Post, Jakarta
The International Monetary Fund (IMF) said a public awareness campaign promoting the importance of selling state assets was crucial to speeding up Indonesia's privatization process amid frequent opposition from various groups.
The IMF's senior representative for Jakarta, David C.L. Nellor, said on Tuesday that the government should communicate with the public about the long-term benefits of privatization.
"The government must seek public support by explaining the benefit beyond the process (of privatization)," Nellor told a media briefing.
He acknowledged that privatization often becomes a sensitive issue, touching on concerns over ownership, and creates uncertainties for parties involved with the state firm.
"In any privatization, there are groups that tend to be harmed by this event," he said, citing as an example that England had faced opposition from trade unions when that country began privatizing state firms.
In Indonesia, opposition can range from trade unions, regional governments, to legislators concerned with foreign control.
The latest instance has been the planned divestment of cement firm PT Semen Gresik to the Mexican-based cement firm Cemex SA de CV.
Legislators argued the cement industry was too vital to be under foreign control.
Similar concerns were also aired in the planned sale of PT Bank Central Asia (BCA) and last year's sale of large palm plantation units to a Malaysian investor.
Such developments have resulted in the failure of the government to secure a single sale during the past nine months.
In the three months remaining until year's end, the government must rake in its entire 2001 revenue target of Rp 6.5 trillion (about US$640 million).
"There is some light at the end of this difficult process," Nellor added.
He said privatization promotes economic growth through the inflow of investment. Proceeds from state asset sales could also be used to reduce the government's debt burden.
He said countries like Argentina, Mexico and Egypt had successfully lowered their debt to gross domestic product (GDP) ratios with the help of privatization.
That works in two ways, as privatization raises GDP, while its proceeds lowers the debt burden, Nellor explained.
He also said that privatized firms tend to become more efficient so that, in the long-run, they would earn the government higher tax revenue.
Separately, American business consultant James Castle suggested the government and legislators agree on a set of guidelines for privatization. This, he said, should avoid the problems the government faces now.
Economist Dradjad Wibowo has warned that legislators meddling with asset sales could become a new source of risk to foreign investors.