Tanri urges next government to continue privatization

JAKARTA (JP): State Minister of the Empowerment of State Enterprises Tanri Abeng has urged the country's next government to continue his state enterprise reforms to help drive the recovery of the crisis-hit economy.

Tanri said on Wednesday the reform programs were designed to introduce corporate governance in order to boost the competitiveness of the country's state enterprises.

He said the most urgent task was to restructure the board of directors and board of commissioners of state firms in a bid to make them more professional.

"There must be a political commitment to isolate the management from the intervention of the bureaucracy and politics," he told a seminar on the economy.

Tanri also called on the next government to continue the privatization program, saying it was a key criteria for introducing corporate governance.

Indonesia is scheduled to select its next president on Oct. 20. The most popular presidential candidate is Indonesian Democratic Party of Struggle (PDI Perjuangan) leader Megawati Soekarnoputri. Her top economic advisers have often criticized Tanri's programs, particularly the privatization program.

Tanri's first privatization deal turned sour after analysts and politicians lambasted his move to sell between 49 and 51 percent of state steelmaker PT Krakatau Steel to a relatively small Dutch firm, Ispat International, which is based on Cayman Island.

Strong political intervention in the privatization program enabled Tanri to only be able to raise US$380 million in privatization proceeds, which fell far short of the $1 billion target set in the 1998/1999 fiscal year.

Tanri has set a target of raising $1.5 billion in privatization proceeds in the current fiscal year ending in March 2000.

To date, the government has raised $1.04 billion.

Analysts have said the country's political unrest has discouraged investors from buying into state firms.

Tanri has been under fire for his alleged role in the Bank Bali scandal, which revolves around the "illegal" transfer of some $80 million from the bank to a well-connected private firm for alleged political purposes of the inner circle of President B.J. Habibie.

Tanri explained that efforts to introduce corporate governance in state firms started with the issuance of a special presidential decree in 1998. The decree paved the way for the establishment of the State Ministry of the Empowerment of State Enterprises, and the handing over of the management of some 159 state firms to the ministry from 17 related technical ministries.

Former president Soeharto's last Cabinet team formulated the ruling before the authoritarian leader stepped down in May 1998 amid mass student protests and the deepening economic crisis.

"With the ruling, there's a formal separation between the regulatory function of the technical ministries and the operational function (of my office)," Tanri said.

"The referee no longer has to act as a player."

State companies have long been a cash-cow for politicians and well-connected businessmen.

Tanri said introducing corporate governance in the first phase of state enterprise reforms would occur through restructuring, profit orientation and privatization.

He said the second phase would involve issuing a blueprint of policies to consolidate 144 state enterprises fully owned by the government into 10 strategic industries.

But Tanri said 30 of the 144 firms must be able to "stand alone".

"Merging or consolidating them would not create more added value," he said.

He declined to name the 30 firms.

"The final decision will be in the hands of the upcoming new government."

Tanri said a complete study on the 144 firms was expected to be completed on Thursday.

He said that based on the study's results, a group of state firms would be enabled to continue to exist, but other companies would be merged or consolidated into holding companies. (rei)