Privatization vs nationalism

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.