Privatization priority

Privatization priority

The case for allowing a faster rate of privatization in the
Indonesian economy is a compelling one.

From the vantage point of fiscal solvency and macroeconomic
efficiency, we see the calls from some politicians insisting on
further delay in the sale of state assets as completely
flabbergasting.

More confounding still, is the fact that the demands for a
slower pace of this economic change came from members of the
House of Representatives -- politicians who are supposed to be
fighting for the interests of the people.

Are these politicos so harshly arrogant that they are still
blind to the reality that millions of people in this country have
been suffering from dire poverty since the 1997 economic crisis?

Perhaps worse yet, do they purposely ignore the millions of
children deprived of even the most basic education and health
services? Their future is, sadly and unfairly, a bleak one.

Intellectually, are the House members so ignorant of the blunt
fact that, without a faster pace of privatization of state-owned
enterprises (SOEs) -- and sales of assets held by the Indonesian
Bank Restructuring Agency (IBRA) -- a lasting economic recovery
will remain an elusive dream?

Aren't they aware that, due largely to past mistakes -- not to
mention gross mismanagement and pervasive corruption -- the
government is now almost bankrupt with total debts of more than
US$135 billion -- and that the economy is severely strapped for
liquidity?

It is entirely a paradox to observe that it is the House
members and not the government, notorious for its deep-seated
culture of corruption, that has staunchly opposed the
privatization program. It should have been the other way around,
given the bitter fact that SOEs have, so far, been used by senior
officials as cash cows.

The findings of independent audits of a dozen SOEs last year
showed how totally inefficient those state companies had been,
the laxity of their internal control, their poor accounting
standards and how arbitrary government investigations were of
their day-to-day operations.

Needless to say, based on empirical experiences in most other
countries, privatization will bring in additional revenues to the
cash-starved government, enabling it to reduce debt and making
more resources available for public welfare.

Privatization is also greatly effective in improving
macroeconomic efficiency through the creation of more competitive
market activity.

Its microeconomic benefits, likewise, are equally manifold,
including more efficient -- and consequently, more profitable
enterprises -- larger tax revenues for the state and a
significant increase in investment to create more jobs.

Fears the privatization program would bring the national
economy under foreign domination are overblown.

One should not forget that it was mostly the corruption-
infested national companies that were responsible for the
economic malaise.

This can be seen in the thousands of companies being treated
in the IBRA "restructuring hospital." Foreign companies will
always be subject to Indonesian laws and regulations. But they
will help promote good governance practices in the private and
public sectors.

Instead of demanding a special law to govern privatization,
the House should instead require the government to formulate a
broad legal and political framework.

This should be backed up by a credible strategy for SOE reform
and privatization and stipulate clear-cut directives, standard
operational procedures and step-by-step process for divestment to
ensure highly accountable -- and transparent -- privatization
transactions.

State Minister of State Enterprises Laksamana Sukardi was
right in his warning last week that Indonesia cannot afford the
delay in the privatization program because we are in the mid of a
deep crisis: if the economy continues to bleed, more and more
people will continue -- as they are now -- falling into absolute
poverty.

The government needs the full support of the House in fighting
the vested-interest groups and powerful lobbyists, including SOE
managements, who often gang up with SOE employees in opposing the
program.

But the government also needs to demonstrate political courage
and a ability to act firmly, consistently and decisively to
enforce its policies in order to earn such support.

The government's credibility was eroded by its seeming
powerlessness in dealing with the employees of PT Semen Gresik
and their strike to block the company's privatization, and with
the workers of PT Telkom who demonstrated against its asset swap
with another SOE, PT Indosat.

This is perhaps the first time in the nation's history that
the employees of SOEs have been so blatant and daring to the
point of breaking laws in an attempt to dictate their wishes on
the government.

This is not a democratic practice of expressing views, but is
simply an anarchy that could have taken place only under a
government suffering from a crisis in leadership.