Revolt at state companies

Revolt at state companies

State company employees seemed to have tasted blood when the
government succumbed last year to the demand of Semen Gresik
workers and some vested-interest groups to cancel the sale of the
cement company to Mexico's Cemex, the world's third-largest
cement group, which is listed on the New York Stock Exchange.

Trade unions at several other state companies moved to reject
new boards of directors, alleging that their integrity was
questionable.

For a few days during the third week of last month, the
employees of the Central Java unit of Telekom went on strike and
demonstrated in Yogyakarta and Jakarta in an attempt to block its
asset swap with another state telecommunications concern,
Indosat.

Union leaders at Bank Central Asia, which is now at the final
stage of its tendering process, are organizing a mass strike to
force the government to stop the bank's strategic sale to foreign
investors, demanding that the country's third-largest bank remain
majority-owned by the state.

Why, at a time when more than 40 million people are either
under-employed or entirely jobless, are state company employees
so radical and easily provoked to rebel against sensible
corporate policies that have legally and properly been decided by
the majority shareholders?

Almost all analysts agree that the deals, undertaken as part
of the reform of state companies, are economically quite sensible
and greatly conducive to restoring sorely-needed investor
confidence in the economy.

The transactions would bring in additional revenue to the
cash-starved government to plug its huge budget hole. But most
importantly, the deals would unshackle the state companies from
the grip of corruption and would make them less vulnerable to the
demands from politically well-connected vested interests.

The Semen Gresik deal, for example, would have injected at
least US$530 million into the state's coffers and put the cement
company under better management. This, in turn, would have made
the company more competitive on both the domestic and
international markets and consequently would have enabled it to
raise capacity utilization, thereby increasing sales, generating
more employment and tax revenues for the government.

The asset swap between state Telekom and Indosat has been
designed to gear them up for keener competition as a result of
the termination of Telkom's monopoly in fixed-line services and
Indosat's duopoly in international call services.

Telkom will be able to provide international call services and
get a much larger share of the cellular phone market while
Indosat will, in turn, enter fixed-line operations by acquiring
Telkom's facilities in Central Java. So, by and large, both state
telecommunications companies would be in a better position to
face stiffer competition after the liberalization of
telecommunications.

Likewise, BCA's strategic sale has been designed to put the
country's largest retail bank in the hands of more credible
owners and bring its operations up to international standards, to
bolster confidence in the fragile banking industry.

It may be OK in principle for the employees, as one of the
stakeholders of the companies, to freely express their views and
assert their arguments. But acting in such a violent manner to
oppose policies that are so clearly for the future good of the
companies and their employees is totally antidemocratic and
utterly intolerable.

Because most of the demands are not directly related to worker
welfare and future career development one cannot help but get the
impression that the employee revolts were partly instigated by
vested-interest groups, which have thus far used state companies
as their cash cows.

However, such near-anarchy and worker radicalism could not
have occurred had President Megawati Soekarnoputri demonstrated a
modicum of leadership and credibility. Her government, instead,
seems incapable of knowing when to act firmly and appears
politically incompetent in preventing Cabinet members from
becoming engaged in highly public squabbles over policy
decisions.

The government also seems ignorant of the blunt reality, in
the current learning phase of the democratization process, that
nothing is simple and easy any more when it comes to policy-
making. The government can no longer simply mandate policies,
however rational and sensible they may be, as did the past
authoritarian government under president Soeharto.

It is most imperative for Megawati to work harder to earn
public confidence in her leadership and her government and for
her Cabinet ministers to "go the extra mile" in selling policies
through effective communication with the House of
Representatives, all affected stakeholders and the general
public.