Reform of state firms
Reform of state firms
We had almost resigned ourselves to the grim fact that Presidential Decree No. 5/1988 on the reform of the around 200 state enterprises would meet the same fate as many other government rulings that have remained largely unenforced. However, the statements by Finance Minister Mar'ie Muhammad and Minister of Trade and Industry Tunky Ariwibowo last week showed that we were perhaps inordinately pessimistic. Their remarks indicate that reform has been taking place though, in our eyes, at a very slow pace.
Mar'ie said one of the reform programs being implemented is the reorganization of several state enterprises under the management of a holding company. This will improve their efficiency. Another program is the merging of some state companies like the merger between PT Semen Tonasa and PT Semen Padang cement companies and the publicly-listed PT Semen Gresik. Similar reorganization is being prepared for the four fertilizer companies. The best of the reform programs so far has been the floating of companies on the domestic or international stock exchanges. Four enterprises have made initial public offerings and three more plan to do so this year.
More encouraging news was announced by Tunky who said that an overall deregulation of state enterprises was being finalized. He did not specify what would be the scope of the deregulation but we hope the core components are: a stronger managerial autonomy for state firms which are assessed as still viable and vital to public interest; the privatization of those which are not of vital interest to the people; the liquidation of the ones which are neither important to public interest nor commercially viable; and accelerating the floating of viable enterprises either on the domestic or international stock exchanges.
It is strange that state companies remain highly vulnerable to intervention by ministers despite the introduction, in early 1990, of a vital element of a built-in supervision mechanism. Each state enterprise has been obliged to make a five-year corporate plan and to operate under an annual program based on the plan. Under the scheme, only the finance minister, as the nominee shareholder for the government in all state enterprises, is supposed to assess the audited annual reports and evaluate the performance of each company. After all, each company has a board of commissioners to supervise daily operations.
It is nonetheless strange that even though the finance ministry has a directorate general specially in charge of administering and overseeing the policies of state firms, many ministries still run separate bureaus in charge of state companies. The ministry of agriculture, for example, has a special bureau in charge of administering state plantation firms.
The multilayered administration and supervision have not contributed anything to improving the transparency of state companies. The report of the President's inspector general which was leaked to the mass media recently showed how the minister of transportation could so easily raise funds from state companies.
We were therefore are under the impression that the reform of state companies had been hindered partly by the vested interest of so many officials currently involved either in administering or overseeing state companies. Take the reform of state plantation companies, for example. After 30 state plantation firms were realigned into nine groups in May 1994 as a first step towards a merger, no follow-up measure has been taken.
In addition to providing managerial autonomy, the government needs to tighten the selection of state companies to be maintained. For example, we don't see any urgency for the government to maintain the state trading firms. After all, the responsibility for maintaining the price stability of essential commodities has been carried out by the State Logistics Agency.