Privatization collide

Earlier this week, Bisnis Indonesia reported that finance minister Yusuf Anwar had asked minister of SOE Sugiharto to fulfill privatization commitment for the fiscal year 2005 which is Rp3.5 trillion (around US$380 million). Mr Anwar also reminded Sugiharto of government’s commitment to issue decree on privatization as prerequisite to disbursement of US$250 million loans by Asia Development Bank (ADB).

Responding that demand, Sugiharto then announced his plan to increase dividend payment from SOE instead of doing privatization. Several noted economists, such as Didik J Rachbini (now a member of parliament) and Faisal Basri (University of Indonesia economist) also supported Sugiharto’s stance to put aside privatization, favoring boosts in dividend payment from SOEs.

Today, Bisnis Indonesia reported chief economic minister Aburizal Bakrie also ask Sugiharto to implement privatization as scheduled to secure 2005 budget. Mr Bakrie even went further asking Sugiharto to communicate government’s policy on privatization. Economist M Iksan who also expert staff at Mr Bakrie’s office said under the law (budget 2005 law), the Rp3.5 trillion target should be reached.

Mr Bakrie’s letter also endorse minister of finance’s stance that issuance of government decree on privatization should be done as disbursement prerequisite of ABD’s loan.

These letters from Mr Anwar and Mr Bakrie is a big contrast with previous statement made by Mr Sugiharto. In December 6, 2004, minister Sugiharto told legislators (DPR) ADB has decided against pushing the government for the privatization of state companies as a condition of a US$400 million loan.

The ADB originally wanted Indonesia to privatize 15 state companies as a condition of the loan. Mr Anwar was director of ADB when previous government signed the loan agreement.

Sugiharto told legislators that ADB agreed to overlook the condition. It is true that ADB had softened the prerequisite for loan disbursement from privatization of SOEs with deliberation of government decree on privatization. But what’s the difference anyway?

Arief Mufti, expert staff of SOE ministry, said that personally, Sugiharto prefer to buy assets than to sell assets (privatization). “But if privatization is a must, as an aide for the president, SOE minister would surely do that (privatization),” Mufti quoted by Bisnis Indonesia today.

The problem is, state budget is not a personal matter. A commitment is a commitment unless this administration could amend the 2005 budget law. It is not about agree or disagree with privatization as well. It is a matter of how this administration could solve privatization collision between ministers andsend clear signal to the society and market at large.

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