State firms' performance poor in 1997, says Tanri
JAKARTA (JP): State Minister for the Empowerment of State Enterprises Tanri Abeng said yesterday that 160 state-owned companies booked a combined net profit of Rp 11.83 trillion (US$1.03 billion) last year, compared to Rp 12.70 trillion in 1996.
He told members of the House of Representatives (DPR) at a hearing yesterday that the profitability of state companies was very low when compared to their combined assets of Rp 461.643 trillion and total equity of Rp 123.42 trillion.
"Although total assets grew by 2.7 percent (in 1997), the increase wasn't accompanied by an improved ability to make a profit," he told House Commission VIII for trade, finance, and state budgets.
He also said that 53.8 percent of the 160 companies were considered to be unhealthy.
Indonesia has 176 state-owned companies, but only 160 come under the control of Tanri's office. The ministry, established in April this year, was created to improve the efficiency and profitability of state enterprises.
During the 32 years of Soeharto's government, state-owned companies were put under the supervision of the relevant technical ministries. Analysts have said that government departments then turned the state-companies into their own personal cash-cows.
Restructuring
Tanri appointed U.S.-based consultancy firm Booz, Allen & Hamilton to lead the process of restructuring the ailing state- owned companies.
The company, together with the World Bank, Asian Development Bank and several of the country's leading management institutions, will submit a restructuring blueprint in September, including a future privatization agenda.
The government plans to privatize 12 state-owned companies in the 1998/1999 fiscal year, and hopes to raise a total of Rp 15 trillion to support the strained state budget from the sale.
Nine foreign investment banks were appointed to assist with the privatization process last week. They have been charged with arranging a competitive bidding system for the sell-off which will be coordinated by Lehman Brothers and Goldman Sachs,
However, Tanri came in for strong criticism last week over attempts to privatize steel maker PT Krakatau Steel. He was accused of making a deal with Netherlands-based Ispat International without inviting competitive bids for the company.
Tanri was bombarded with more critical questions relating to his deal with the Dutch company during the hearing yesterday.
He denied the allegations and said the deal was far from final. He also said the move had been made on business considerations and was part of the privatization process approved by the International Monetary Fund (IMF) and the World Bank.
He latter told commission members that selling PT Krakatau Steel would not be easy due to bearish sentiment in the stock market and the low profitability of the company.
"Although Krakatau Steel makes a profit, its return on equity is very low compared to its international peers," he said.
Tanri explained that because of bleak market sentiment, the privatization program would be pushed toward private placements, and especially toward strategic investors seeking long-term opportunities.
PT Krakatau's return on equity was 4.4 percent in 1997, against 2.1 percent in 1996 and 5.7 percent in 1995. (rei)