Privatization & rightsizing

Privatization and rightsizing are two magic words for Indonesia's state-owned enterprises minister, including the newly appointed Mustafa Abubakar. 

Abubakar said he would continue the programs started by his predecessors. So, there will be no substantial change in the issue of interest of investors. As to whether he could deliver the plans, we may have to see what happened in the past five years. 

His predecessors, especially Sofyan Djalil and Sugiharto, pledged in their early days in office to privatize tens of SOEs. Sugiharto, for example, once said he would bring 40 SOEs to stock market through IPO. Djalil, who replaced Sugiharto, also pledged similar plan. Both also talked about consolidation of SOEs through merger of companies in the same sector or the establishment of holding companies.

Garuda Indonesia and Krakatau Steel are companies repeatedly tipped for privatization, either through direct placement or initial public offering (IPO) in the past five years. Both have "survived" direct placement to strategic investors, as the cabinet was split on such privatization scheme. IPO was considered the "safest" way to privatize. Looks like these companies are scheduled for IPO next year. Let's see whether Abubakar could make it happen.

As for Garuda Indonesia the main concern is restructuring of its loan from state-bank Mandiri. While for Krakatau, it is not clear whether the steel giant itself will be offloaded or subsidiaries like PT KHI Pipe and PT Latinusa.

Talks about holding companies for mining (Antam, Bukit Asam, and Timah) or banks (Mandiri, BRI, BNI, BTN, and BEI) or plantations, fertilizers, have filled media reports in the past five years. None has been established.

We know that only significant privatization in the past five years is Jasa Marga. The other is second offering of state-bank BNI. (fh/ya)

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