Fri, 14 Oct 1994

Privatization suggested to lure capital inflow

JAKARTA (JP): An economist suggested yesterday that the government accelerate the privatization of state companies to bring more capital into the country and reinvigorate the economy.

Christianto Wibisono, head of the Indonesian Business Data Center, told journalists yesterday that Indonesia can no longer rely on soft loans from international financial institutions, such as the World Bank and the International Monetary Institute (IMF), because they will focus on least developed countries.

He noted that a good alternative to getting capital inflow is listing qualified companies on the major world stock markets, which control some US$3 trillion.

"This amount of money is not at all controlled by the world Bank and IMF," Christianto said.

Citing an example of PT Indosat, which will list 25 percent of its shares on the New York Stock Exchange next week, Christianto said other state companies are likely to go international.

They are, among others, domestic telecommunications company PT Telkom, electricity company PT PLN, railway company Perumka, seaport operator PT Pelabuhan Indonesia and toll-road operator PT Jasa Marga.

A number of private companies have already gone international, such as the Salim Group in Luxembourg, PT Gadjah Tunggal in Singapore and PT Tri Polyta on the Nasdaq stock exchange in New York.

Christianto said other developing countries, such as Argentina, Chile, China and Thailand, have effectively used stock markets as potential sources of foreign exchange.

Last year, total trading volume on major international stock markets was recorded at 6.3 billion shares with a total value of $200.7 billion.


Christianto noted that privatization is also a potential means to attract foreign investment. Through its privatization program, Indonesia has collected Rp 66 trillion ($30.5 billion) worth of private investments for 69 projects, whose construction will be completed within the coming three to 10 years.

The largest portion of investments is in the energy and electricity sectors with $20.3 billion, followed by land transportation, such as building toll roads and bus terminals with $7 billion, sea transportation at $1.7 billion, telecommunications at $1.2 billion and air transportation at $769 million.

Of the 69 projects, the largest is a coal-fired power plant in South Sumatra, co-sponsored by Malaysian Sikap Ipp Transystem, Bukit Asam Power and Bukaka with an investment of $7.5 billion. The second largest are two refineries in East Java by PT Buana Ganda Perkasa with $3.5 billion, followed by the Manggarai integrated terminal in Jakarta, sponsored by a consortium of PT Citra Lamtoro Gung, Bandar and Bukaka with a total investment of $3.2 billion, and the Jakarta Mass Rapid Transport system to be constructed at a cost of $3 billion.

The large energy projects include a 1,200 megawatt coal-fired power plant in Paiton, East Java (being built by PT Paiton Energy Company with an investment of $2.6 billion), another 1,200 megawatt power in Paiton (by a consortium of Bimantara Bayu Nusa, Siemens and British Power Gen with $2.1 billion) and a 1,300 megawatt gas-fueled power plant in Tanjung Jati (by PT Cepa Indonesia with $2 billion).(rid)