Privatization target hard to meet: Government

JAKARTA (JP): Finance Minister Prijadi Praptosuhardjo said on Monday that the Rp 6.5 trillion (US$783.13 million) privatization target this year would be hard to meet due to "uncontrollable factors."

Prijadi said that the country's less than conducive social, political, security and macroeconomic conditions had "very much affected the interest of investors."

"The target to privatize seven state-owned companies and raise Rp 6.5 trillion in proceeds in the 2000 budget year will probably be difficult to accomplish," he told the House of Representatives budget committee during his first session since being appointed to the ministerial position last month.

He said that if the government was forced to continue with the initial privatization target under the distressed conditions, the price would likely be cheaper than expected.

"In addition, the government will not implement a fire sale," he said.

The privatization target was set by the previous team of economics ministers. But so far, none of the program has been realized.

Sentiment in the country has been badly affected by the political infighting and bloody communal clashes in several provinces. The rupiah and the local stock market have also been depressed.

Privatization proceeds were expected to help finance the April-December 2000 state budget.

Prijadi didn't explain how the government would cover the shortfall in the privatization proceeds, but government officials have indicated that windfall profits from stronger than expected oil prices would provide substantial support to the budget.

Revision

Separately, Coordinating Minister for Economics Affairs Rizal Ramli said that the new economics team was revising the privatization strategy.

Rizal said in a press conference that the focus of the program would be on state enterprises that were attractive to foreign investors, particularly in the telecommunications sector, information technology, transportation, plantations, hotels, tourism, infrastructure and the oil and gas sector.

He said that other neighboring countries had enjoyed huge proceeds particularly from the privatization of their telecommunications sector.

Rizal said that the strategy was to maintain majority ownership in domestic telecommunications operator PT Telkom, but to allow foreign investors to have a majority stake in international telecommunications company PT Indosat.

Both companies are publicly listed.

Rizal said that the strategy was to retain majority government ownership in "first operator" sectors either in the telecom sector or other sectors including transportation or infrastructure and to allow foreign majority ownership in the "second operator."

But he added that the government would try to establish a policy allowing it to have a long term share buy-back option in profitable state enterprises.

Rizal said that the new privatization strategy was part of the 10 "basic programs" of the new economics team to help accelerate the country's economic recovery.

He said that the International Monetary Fund (IMF) had agreed to include the 10 basic programs in the letter of intent (LoI) agreed by the previous economics team and the IMF late in July.

He said that the revised LoI would be signed on Thursday. The LoI contains a set of economics reform programs to be implemented by the government within a certain period of time.

The 10 basic programs do not seem to be of any different from the economics programs of the previous economics team.

The highest priority of the 10 economics programs is to achieve financial stability and to boost export revenue.

Rizal said that the economics team would improve cooperation with the independent central bank to achieve financial stability.

He also said that export revenues were expected to become the second engine after consumption to power the country's economic growth.

Meanwhile, Prijadi said that the budget deficit this year was seen at between 3.5 and 3.9 percent of gross domestic product (GDP), lower than the previous projection of 4.8 percent.

He said that this was due to higher oil prices and lower realized government spending.

The state budget assumed an average oil price of $20 per barrel, compared to current price levels of between $28 and $30 per barrel.

Prijadi also said that the economy was on track to achieve economic growth of 4.0 percent this year, and said that the earlier target of 4.0 percent to 5.0 percent GDP growth in 2001 was realistic.

"GDP is expected to grow between 4.0 percent and 5.0 percent in 2001, driven particularly by increasing domestic demand in line with rising household consumption," he said.

He also said that the inflation target of 6.0 percent to 8.0 percent and an exchange rate of between Rp 6,800 and Rp 7,800 per U.S. dollar for next year were realistic.

The figures were the assumptions used by the previous economics team to design the state budget for next year.(rei)