State managers divulge barriers to going public
JAKARTA (JP): Executives of state-owned companies said they are hindered in their efforts to prepare their firms to go public.
The executives, who participated in a two-day seminar on privatization, cited dependence on other state-owned companies as the main barrier to improving their individual company's performance.
"As a fertilizer producer, the performance of PT Pusri, for example, depends on the government-set prices of raw materials. We know that the natural gas supplied by state-owned Pertamina is more expensive than imports," an official of Pusri reasoned.
"How can we boost our performance if we cannot get raw materials at competitive prices?" he asked.
A similar question was asked by an executive from state-owned electricity company PT PLN.
Director General of State-owned Enterprises Bacelius Ruru's only response was: "I'm not the right person to answer such a question."
"I'll pass the question on to the related ministry," Ruru said at the conclusion of the seminar on Wednesday.
He said the Ministry of Finance prefers to list two of PLN's subsidiaries -- Pembangkit Listrik Jawa Bali I and Pembangkit Listrik Jawa Bali II -- not the mother company.
Ruru told the seminar that the finance ministry uses its Candidates Selection Model to shortlist the state enterprises to be privatized.
"To make an IPO (initial public offering), state-owned companies must have a minimum paid-up capital of Rp 50 billion (US$21 million) and must have booked profits in the past two consecutive years, with an average rate of return on equity of 7.5 percent," Ruru said.
Other criteria are quality variables, including the line of business, the amount of financial dependence on the government, eligible projection of investment funds needed, and a favorable return on investment.
Regulation audit
Chairman of the Supreme Audit Agency, J.B. Sumarlin, noted the need for an audit of regulations pertaining to state-owned companies which have been privatized.
Sumarlin and Gandhi, an agency member, said that state-owned companies are those which the law legitimizes to provide services to the public.
Gandhi and Sumarlin said the regulation audit is needed to help the government determine if a privatized company continues to be a public utility.
"The government should reduce its control over a privatized company to avoid conflicts of interest. It means that the government will lose its monitoring role if state-owned companies obey regulations allowing them to give the public access to satisfactory services at fair prices," Gandhi said.
Gandhi said it isn't easy to audit regulations. It would take five to 10 years after a company is privatized to do the audit.
He said privatized companies should not base operating decisions solely on making a profit.(alo)