Privatization vs nationalism

Investors are predictably confused about the contentious debates over Indonesia's privatization program. While the government is making final preparations to sell a portion of its stakes or controlling ownership in 24 state companies this year, several groups have been trumpeting nationalism as a tool of social engineering to oppose the program. Some members of the House of Representatives even want the program stopped altogether pending the enactment of a law that governs privatization.

The controversy and xenophobia are certainly giving investors the wrong signal at a time when the country, currently in the fifth year of its economic crisis, can least afford it. This misguided and narrow-minded nationalism makes us like someone falling into an abyss but disliking the look of the lifeline thrown out to us.

The debates about the virtue and benefits of privatization and the arguments against foreign ownership of part of our economic assets are a big setback in so far as domestic politics are concerned. Because privatization, as part of an overall reform of the inefficient and corrupt state companies, has been a government policy since the 1970s.

The privatization program has been reaffirmed annually through the state budget law even after the end of Soeharto's authoritarian rule and the emergence of the reform era. The People's Consultative Assembly, the highest policy-making body, also reiterated the policy measure in 1999 in one of its decrees and the national development program law of 2000 again reaffirmed privatization as one of government's priority programs.

Even during the early years after our independence when the nation's economy was not been intensively and extensively interlinked with the global economy as it is now, foreign ownership of a portion of our economic assets was not seen as a violation of the sense of nationalism. The great contributory role of foreign investors to the nation's economy was even further strengthened in 1967 by the enactment of the foreign investment law.

We should magnanimously acknowledge that had it not been partly for foreign investment, foreign aid and international trade our economy would not have reached its current level of development. That the economy now seems in ruins and the government is almost bankrupt and weighed down under mountains of debts is mostly because of our own mistake in allowing a corrupt, authoritarian government to rule us for more than three decades.

Learning from past mistakes and from the successes of other countries in reforming their state enterprises, the government has decided, with the prior approval from the House, to sell a number of state companies to private investors, including foreign ones.

This policy has been encouraged by the realization that no government anywhere in the world has proven itself to be a good manager of commercial entities, let alone in Indonesia where the government has become internationally perceived as one of the most corrupt in the world.

The government itself has explained time and again, on the back of the experiences of other countries, that privatization of state companies is a highly effective means of improving macroeconomic efficiency through the creation of a competitive market. An efficient market in turn will help businesses grow soundly, make profits, increase investment, add more employment, and yield higher tax revenues for the state. All this will enable the government to allocate more resources to developing public services and utilities, and broadening public welfare programs. Of no less importance is that the proceeds from privatization will help plug the state budget deficit and enable the government to phase out foreign borrowing.

Moreover, the country is especially desperate now for a fresh infusion of capital, and privatization is one of the most effective means now available of attracting new investment. Without new direct investment, the country will not be able to emerge from its present economic crisis, meaning that the estimated 40 million fully-unemployed or underemployed, the tens of millions of unschooled children and the millions of locally- displaced persons will be forced to continue existing in heart- wrenching inhuman conditions.

Given the great benefits of privatization and the critical condition of our economy at present, foreign acquisition of a portion or controlling ownership of state companies is entirely for the sake of the national interest This does not mean the surrender of national sovereignty, especially given that foreign companies in the country remain subject to our national laws.

In fact, opposition to privatization now means disloyalty to the national interest, ignorance of the plight of the unemployed, the millions living in abject poverty and the millions of children who are facing a bleak future because they cannot afford even a basic education.

Politicians and state company employees who campaign against privatization and against foreign acquisition of privatized companies are simply self-serving groups intent only on maintaining their vested interests.