State firms' performance poor in 1997, says Tanri
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)