Privatization of three SOEs

Market has been skeptical when it comes to privatization in the last few years. The only significant 'privatization' was the placement of 5% shares of PT Perusahaan Gas Negara (PGN) Tbk late last year after years of discourse. So, when MSOE Sugiharto claimed that three SOEs (Jasa Marga, BNI, and Wijaya Karya) will be privatized this first half, just reserve that for...

"OK, but we have four months left, pretty much time," said one of Sugiharto's staff at MSOE.
"How long will the approval process, especially to get the clearance from Privatization Committee and then the House of Representative?"
"Depends on how convincing is the government. But it could be weeks or months," he said.
"Given the fast-track approval, is it possible to privatize three SOEs in three months?"
"Why not? The market is there to absorb. Why are you so skeptical on privatization?"
"Because last week, among others, your ministry announced to postpone the privatization of nine companies scheduled this year. I understand you have 13 SOEs remain in the list of privatization this year. But with what's going on out there, I'm skeptical still."
"For the three SOEs mentioned, we're quite optimistic."
Well, let's see whether this time government could deliver.

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69: Walk the Talk

I'm not sure how many times the government officials stated this: Number of state-owned companies would be reduced significantly through merger, privatization, etc. The difference, this time VP Jusuf Kalla put 69 SOEs as the ultimate target by 2009, meaning we have to cut 70 SOEs out of the existing 139 companies. Is it a joke or what?

MSOE Sugiharto has the details: Reducing 37 companies in 2007, 15 next year, and another 18 in 2009. I'm not saying that's not good. In fact we love to have one or two SOEs but they could provide more profits & jobs to the state. What's the benefit of having 139 SOEs except to provide posts of 139 CEOs, thousands of commissioners, board of directors, to colleagues or as part of political bargaining?
But my very humble concern is delivery or execution of the 69 model. Look at what we've experienced with the plan to merge state-owned banks BNI and BTN, or the plantations, fertilizers, construction, consultings, etc. After months of discussion, debate, waste of money, the merger plans went nowhere.
I could imagine the whole plan would be difficult if not impossible, especially if we look at process. First of all, the plan should be approved by related ministries such as finance, coordinating minister for the economy, and then the House of Representatives (DPR).
But MSOE Sugiharto might take short-cut like establishing holding companies for banks, plantations, mining, fertilizers, insurance, construction, etc...and you can easily have 69 group of companies...with more CEOs to share...

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Garuda on the verge of default (again)

In Dec 2005, Garuda Indonesia defaulted USD55 million payment to creditors. In the next few days, the company should make payments, but the promised Rp500 billion state funds injected has not disbursed yet. With mounts of debts to suppliers (including Pertamina), the flag carrier is on the verge of default again.

Last year, government promised to inject fresh capital of Rp1 trillion (around USD110 million) to Garuda in two tranches Rp500 billion each. The first tranch should have been disbursed November 2006. "But ministry of finance postponed the disbursement upon completion of a new business plan," an internal source at Garuda said.
Garuda has outstanding loan of around USD800 million. Garuda has reportedly not paid fuel purchased from state-owned Pertamina for almost six months.
"Without state funds of Rp500 billion, Garuda is inevitably in trouble from cash flow point of view. I just can't imagine if Garuda defaulted on payments to creditors again and that will push Airbus to pull the leased aircrafts. While the aircrafts are not in operational due to high cost of operations, other leasing agencies would pull out their aircrafts as well," the executive said.
"This administration has a very poor capacity to execute," he described the situation at Garuda and Merpati Nusantara(another ailing state-owned airline).
On the other hand, Peter Sondakh from Rajawali Corporation is aggresively lobbying government officers including Privatization Committee led by Sahala Lumban Gaol to buy Garuda shares.
"We've sent the letter to Privatization Committee on Tuesday, but no answer yet," Rajawali managing director Darjoto Setiawan said to me over the weekend.
Rajawali's competitor is, among others, Texas Pacific Group. None of these investment companies disclosed their partners for the acquisition.

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Sinivasan captured in India?

Marimutu Sinivasan, one of the largest debtor with around Rp27 trillion unpaid loans to the state, has reportedly been captured in India and now on his way home.

Sinivasan fled the country in March 15 last year, two days before Police asked immigration office to impose overseas travel ban on him. That time, his lawyer claimed Sinivasan fled the country for medical treatment. Police put Sinivasan in the wanted list to stand trial in a banking loan scam. In June, police claimed a cooperation with Interpol and Indian police to hunt down Sinivasan.
Prosecutors then promised to proceed the in absentia trial but no information since then.
(I remember back in Dec 2001 when AGO issued red notice to 184 countries and asked Interpol to have tycoon Sjamsul Nursalim stand trial back home. He fled the country, reportedly for medical treatment. Some reports said Nursalim, the owner of Gajah Tunggal group & Giti Tire (the largest tire manufacturer in China), lives in Singapore.)
In July, Rakyat Merdeka reported Sinivasan gave the power of attorney to lawyer Hery Suryadi to settle the debts, again no follow ups.
VP Jusuf Kalla was in India last week and met some businessmen, but no reports if he ever met Sinivasan there. Sinivasan's late brother Marimutu Manimaren was Golkar Party's treasurer.
I just can't imagine how difficult for the police to catch someone hiding in India. Is is possible that Sinivasan met the Vice President in private but failed to convince Mr Kalla to pay the debts as promised and then asked the police to lock the businessman in?
In the last two days, media run the conflicting statements from government officers regarding Sinivasan's Texmaco Group. While Secretary to the Minister of SOEs Said Didu said that government would takeover the company and make it a new SOE, Minister of Industry Fahmi Idris strongly rejected the idea arguing 'that's not in line with government's overall privatization strategy."

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PGN divestment turns sweet & sour for Sugiharto

After more than one year of suspension, government finally divests 185.8 million shares of PT Perusahaan Gas Negara (PGN) Tbk, represents 5.31% outstanding shares, through bookbuilding process handled by Danareksa, Bahana, and Credit Suisse on Thursday.

The state-owned investment bank received huge demand from investors with 1.9 times of amount of shares on sale with average price of Rp11.300 per share, even though government actually offered 5% discount from Tuesday's closing. But things changed quickly when one investor, reportedly from Malaysia, submitted an offer to buy the whole shares at Rp12,150 which is 7% premium.
It was 3PM on Thursday. Danareksa stunned with the information because this 'ghost' investor was said to have direct deal with officers at the state-owned enterprises ministry.
"The bookrunners then start to ask who the hell is the guy. We're confused because if we quote the price at Rp11,300 while public get the information that someone actually offered better price for the government, we'll be under public pressure. But if we sell all the shares to that 'ghost' investor, the question is what kind of deal he/she has with the ministry," a dealer at Danareksa said.
"I'm not surprised if the Malaysian investor is the one with under-the-table agreement with certain officers. Or may be there is no Malaysian investor, but a proxy investor," said an investment banker in Jakarta.
"We're quite suspicious with the transaction. We even heard the so-called Malaysian investor was ready to buy at Rp14,000/share. But you know, it's just too good to be true," a Tempo editor said.
But the Rp11.300 is clearly not the best price. It reflects almost 17% discount from PGN's highest price this year. Politicians have something to play, especially those who want to mount pressure toward Sugiharto.
Kompas in its Friday edition quoted two legislators from PAN, Drajad Wibowo & Didiek J. Rachbini, criticizing government's failure to get the best price. They called it too low, too slow.
At the same time, these guys indirectly defended Sugiharto calling the divestment shown poor coordination about privatization and the intention behind it, which is merely to fill budget gap (this year's target is Rp3 trillion from privatization).
"Sugiharto might be blamed or charged for potential loss to the state and it's a corruption, but he could defend himself saying he sell PGN to meet the target set under the 2006 budget law and blame his colleagues in the cabinet. Blame games," a political analyst said.
This is big game. Those who have information about when Sugiharto will push the button might have bought PGN shares at very low price in the last few months and get the upside.
"The shares must have been swept at cheap price, and will get huge amount from the upside once Sugiharto push the button," other investment banker said.
That's a conspiracy theory. JSX suspended PGN shares trading on Wednesday. Prior to the placement, government controls 59.357% shares of PGN. The second largest shareholder is RS + Co International Ltd at 8.843%.

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Salim Group won Philippine water privatization

Salim Group's subsidiary Metro Pacific Investment Co (MPIC) and its partner DMCI Holdings Inc won the competitive bidding to acquire 83.9% shares of Maynilad Water Services Inc from Philippine govt at USD447 million. MPIC is the local unit of Salim Group's Hong Kong-listed First Pacific Co., which also controls Philippine Long Distance Telephone Co. (PLDT), the country’s largest telecom service provider. This is one of the largest overseas investment from Salim in recent years besides the USD5 billion investment in India.

Salim Group's other major investment is Dalu Coal Chemical Industrial Park in Mongolia, which has recently started its construction in Zhunge er County of Erdos City. The company also invests USD240 million on dairy farm in the country.
Few years back, Salim acquired 45% shares in Cosco Property Group with USD500 million. This gave the Salim group an entry into Shanghai’s booming real estate business. How about Indonesia, where Salim started to build up its fortune?

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Indonesia in 2007

12 months ago I chaired a seminar discussing economic outlook for 2006 with several respected talking heads. The conclusion was Indonesia would grow faster in third quarter 2006 as the full impact of fuel price hike in October 2005 faded out after six months or so. Unfortunately, as shown by Central Burea of Statistic (BPS), the economic growth in Q3 has been the weakest at 5.5% only.

Part of the problems is low absorption of 2006 state budget in which spending for capital and goods for in Jan-Oct well below 50%.
The Central Bank's interest rate actually matched the prediction in Q3, but that's not the case with lending rates which remains too high to boost the economy. NPL, especially in state-owned banks, is high still.
Stock market is bullish though, and increasingly attractive for debt issuance. Foreign direct investment has been insignificant. Infrastructure projects are in slow-motion. Manufacturing industry's competitiveness dropped significantly. But export grew impressively? Well, thanks to huge increase in commodity price. Domestic consumption slowed down. Automotive is the worst.
Last week, I attended the same seminar discussing outlook for 2007. The speakers, Miranda Gultom (Deputy Governor of Central Bank), Sri Mulyani Indrawati (Minister of Finance, represented by economist Chatib Basri who is currently special staff for Mulyani), Mari Elka Pangestu (minister of trade affairs). The conclusion, Indonesia in 2007 would be better off. That simple? What kind of Indonesia we have next year?
Political & Security: Stable! (Important political event will be Jakarta gubernatorial election)
Fiscal Sustainability: Cautiously optimistic! (take into account the shortage in tax collection in 2006, slow progress of privatization of SOEs through stock market, slow absorption of budget)
Monetary: Stable! (Low inflation, Central Bank's target for key inflation is 7%). Central Bank's focus will be encouraging banks to improve the intermediation role. But how?
FDI: Remains low! Some wait the deliberation of Investment Law (in the discussion with parliament). Government promised to pass the law before the end of 2006. The new law is expected to give more protections to foreign direct investment and create level playing field for domestic and foreign investment which are currently regulated with different laws.
Energy: Volatile! (in supply & price)
Job market: Slow growth!
Consumer spending: Rebound, slow growth! (the planned increase in civil servants salary, minimum wage hike. Car market is expected to grow from 310,000 unit to 370,000 unit next year, still far below 2005 level at 520,000 unit. Motorycle sales dropped 18% this year and would grow 10% next year, but still below 2005 level. But consumption would still the country's strength supported by what economist Chatib Basri called Indonesia's hidden economy.)
Banking: More consolidation (merger/acquisition), lower NPL, lower interest rates, higher lending! In 2006, despite lower interest rate, lending has been hampered with low absorption. BCA, for example, signed Rp10 trillion new loans in 2006 but only Rp4 trillion that had been absorbed in 10 months (till October). Only plantations and mining performed well.
Property market: Oversupply, falling price! (Property market dropped 10%-20% in 2006 due to lower purchasing power & high lending rates. Lower lending rates could improve the market, but oversupply lingers)
Manufacturing: Stagnant! No significant investment! Main driver would be expansion projects of existing investors.
Infrastructure: Remains slow! Land acquisition & financing issues are still major problems.

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Just outsmart Berkeley Mafia!

A group of economists appeared in a seminar titled 40 Years of Mafia Berkeley vs Alternative Ideas of Indonesia's economic development, yesterday. They're former chief economic minister Rizal Ramli (under Abdurrahman Wahid administration), Kwik Kian Gie (former chief economic minister under Wahid, replaced by Ramli), Ichsanuddin Noorsy, Revrisond Baswir, and Sri Edi Swasono (son-in-law of first Vice President Mohammad Hatta). Guest speaker was Jeffrey Winters (Northwestern University).

It was an unbalanced seminar as none of what they called Mafia Berkeley delivered arguments, no exchange of arguments actually, it's a kind of monologue of ideas, it's like bad idea vs good idea. That was not an academic exercise of thoughts. The speakers believe the alternative ideas they delivered are the only public goods. So that's a seminar with so many personal issues at stakes.
The speakers even failed to explain or acknowledged what they did and didn't while they have power in their hands to drive the economic policies into what they believe the right way and change the course of the nation.
Nor did they explain what's wrong or right during BJ Habibie's strong influence in the economy of the early 1990s. So don't expect them explaining what's right and wrong during the early years of Berkeley Mafia.
How we explain the massive debt settlement of 1998-2001 during which the government's domestic debt jumped to Rp700 trillion (US$80 billion) to bailout corporate debts of the like Texmaco Group's Rp30 trillion, Salim's Rp60 trillion, Sjamsul Nursalim's Rp28 trillion, or Sinar Mas's Rp14 trillion?
It were Soeharto's last year, Habibie, Wahid and Megawati administration's economic team who endorsed the debt settlement through agreements like the Master of Settlement and Acquisition Agreement (MSAA), MRNIA, or Debt Acknowledgement Acts (APU). How we explain the problems at state-owned enterprises like Habibie's aircraft company PT IPTN (now Dirgantara Indonesia), Garuda Indonesia, PLN, Pertamina and so forth?
I believe the Mafia Berkeley had committed some wrongdoings, just like the other mafias of Habibie's, Ginandjar's, Rizal Ramli's or Kwik Kian Gie's.
Look at this. Rizal Ramli and Kwik Kian Gie as the coordinating minister for the economy during Wahid administration had the chance to fix the lousy debt settlements with Salim, Nursalim, or even Sinivasan's Texmaco. But they were hopeless, not because of the Berkeley Mafia, but simply because of the complicated and fluid political situation aftermath of the 1998 reform.
I believe in one thing...when it comes to liberalization, globalization, privatization...they're all political decisions, not just economic models. There are a lot of aspects of the society at play. Simply blaming the mafi is just like you had a headache in the morning and keep blaming the traffic jam on your way to office for your bad day.
What's amazing is the acknowledgement of this alternative group of how powerful the Berkeley Mafia so it could survive almost 40 years and still in the driving seat of the economy even though none of them hold official position in the cabinet. I must say this Mafia Berkeley is so smart to control this big country four decades so far and may be more.
Other mafia groups might have to learn of how Mafia Berkeley keep its power. An old advise, if you really want to beat the members of this mafia, outsmart them all! All you have to do is to convince all the stakeholders of this nation to get their full attention on your alternative ideas. People are smart enough to make decision, they could analyze what's wrong and right with Berkeley Mafia and what's wrong or right with your ideas! Don't get mad, get even!

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Garuda Indonesia to be privatized next year

The flag carrier Garuda Indonesia is scheduled to be privatized next year in a bid to revive the debt-ridden airline.
Minister of State-Owned Enterprises (MSOE) Sugiharto surprised investors today with his statement that government would sell some of its shares in Garuda Indonesia to make it more competitive. He made the statement after an inter-ministerial meeting on Garuda today.
Government decided to postpone privatization of SOEs and failed to achieve the target of Rp3.5 trillion (US$350 million) for the budget year 2005. MSOE tend to completely scrap the policy with zero income target from privatization to the 2006 state budget and set the higher dividend payment instead.
The previous economic team led by Aburizal Bakrie (currently coordinating minister for people's welfare) actually demanded the privatization should be conducted this year. Then minister of finance Jusuf Anwar (sacked early this month) also supported Aburizal. But Sugiharto rejected the privatization arguing dividend payment from SOEs already far above target for the state budget and there was no need for selling government shares. Further privatization of listed-SOEs have been postponed accordingly.
But that might not be the case of Garuda. The company has been forced to restructure its huge debts for a second time few months ago. In 2001, the airline signed a US$1.5 billion debt restructuring with European Credit Agencies (ECA) and other creditors such as state-owned Bank Mandiri to extend the payment period to 16 years from 12.
Garuda's annual principal and interest payments amount to some US$110 million . But rising fuel costs and tighter competition have made it difficult for the carrier to comply with the repayment schedule.
As a result, Garuda would suffer financial losses for 2005 but the management claimed it would be less than last year's loss of 811 billion rupiah (US$80.6 million ). The company largely blamed the impact of the October 1 triple suicide bombing on the resort island of Indonesia, which killed 20 bystanders. Foreign tourist arrivals to Bali, Indonesia's top destination, fell 48.4% in October 2005 compared to a month earlier.
So, what's the privatization plan?
First of all, government should ask the House of Representative's approval. Maximum amount of shares to be sold would be 49%. There are several options. First, selling the shares to strategic investors, either financial institutions or airline companies. "We open the opportunity to financial investors or airline companies. But we prefer airline companies to bring in new culture," Sugiharto said.
Other option is initial public offering (IPO), selling the shares in stock market. Under the 2001 debt restructuring, Garuda was supposedly commence the IPO in 2003.
What's wrong with Garuda?
Garuda used to be the monopolist, which control the market. Garuda, named of Hindu God, is depicted as an immensely big and strong bird of golden or sometimes white colour who can take any shape he pleases.
But, following the deregulation in the aviation business, the competition among airlines has become even stiffer. There are around 27 Indonesian carriers compete against Garuda in local market.
Consumers seems to get benefit of the competition with step increase in number of passengers from 12.5 million in 2002 to almost 25 million this year. But those 27 airlines are in big trouble due to cut-throat price war. Most of them are undercapitalized. On top of that, regional carriers such as Malaysia's Air Asia, Singapore's Tiger Airways, and Australia's Virgin Blue, have gained access to Indonesia market.
Combined with poor management and cultural problem, Garuda has continually shrinked into smaller and weaker bird like Merpati, also an ailing state-owned airline. It's market share drops to below 25%.
Surprisingly in early October 2005, Garuda signed an agreement to buy 28 airplanes from Boeing (10 of Dream Liner and 18 New Generation) with total cost of US$2 billion, during a visit of President Susilo Bambang Yudhoyono to New York.

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SOE dividend target

For a non-economist like me, with so limited ability of econometrics, it is not easy to digest the ministry of state-owned enterprises plan to raise dividend payment in the 2006 Budget to Rp23.5 trillion (US$2.35 billion), a 113% increase from 2005 fiscal year.

I only understand the theory that the current year's dividend are the fruits of the past year's profit and that next year's dividend would only come from this year's profit.

Most of my business journalist friends praised Sugiharto (Minister for SOEs) and his staffs for stopping the privatization of SOEs and prefers to boost dividend instead.

An analyst helped me with little math of how the 113% dividend hike might be reached. Several options. First, raise the pay-out ratio. Second, boost profits. Surprisingly, MSOE said pay-out ratio would be kept at the same level (50%) for only four big SOEs (mainly Pertamina & Telkom), while other SOEs would be lowered to 35% or 40%.

So I decided to review the latest balance sheet of listed SOEs. Telkom, PGN, Aneka Tambang (Antam), Bukit Asam, and Timah booked higher income in the first 9 months of 2005, but none of them grew higher than 100%.

Two state-owned banks, especially BNI and Bank Mandiri, would book significantly lower net profit this year or worse they book net loss. MSOE could rely on BRI, but still with lower profit this year.

How about Pertamina?

This year, Pertamina paid dividend well below Rp3 trillion. The company's net profit target is Rp6.37 trillion. With pay-out ratio of 50%, Pertamina could pay up to Rp3.15 trillion next year.

So where all the dividend will come from?

"Actually, Pertamina's book could be easily cooked. If you need higher dividend from Pertamina, just make higher profit with bigger subsidy payments," said one analyst.

How come a company that always in difficulty to maintain enough cash for its operation could be relied heavily for The 2006 State Budget?

But most of my friends believe that 113% growth in dividend payments reflects good work from MSOE to keep ownership of SOEs, improvement in real operation performance, and prevent further privatization.

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Ministers are busy with Window Dressing

Annus Horribilis! Yes. What a horrible first-year in office for president Susilo Bambang Yudhoyono and VP Jusuf Kalla. Tsunami had killed 120,000 people and devastated Aceh and Nias in Northern tip of Sumatra Island. Avian flu outbreak has claimed human lives. Skyrocketing international oil price pushed government to scrap the 30-yeard old subsidy and hike domestic fuel price twice. Bank interest rates increased, inflation back to double-digit, and rupiah had depreciated significantly. Economic growth target missed. And then tourist heaven island of Bali had been rocked by terrorist bomb for second time with new style in suicide bombing.

Those are facts that been blamed for poor economic performance. People aware of these miseries but people demanding a cabinet reshuffle because they saw poor policy respond from ministers. Their public statements were also horrible. While their boss keep talk in a campaign-style speeches and the deputy always confronting public’s opinion, which sparked further the controversy, the ministers talked to people as if nothing happened.

One-year mark has been passed on October 20, 2005. We’re waiting president SBY deliver his promise to reshuffle his cabinet. It is interesting to mention here some ministers’ last move to polish their image before submitting their one-year report. This is what I call a Window Dressing.

VP Jusuf Kalla defended economic team saying they are better than previous cabinet of Megawati Soekarnoputri, while former MPR speaker Amien Rais said the team is worse than Megawati’s.

Chief Economic Minister Aburizal Bakrie said the economy is improved with higher growth than last year saying his team had worked hard during trouble times. His staff sent photographs of his appearance as speaker in a conference in Philippines before President Arroyo and had been published by some newspapers. After being summoned by SBY at his house in Cikeas, Bakrie told the press that there are 1.5 new jobs created for the whole year, almost double from last year’s 900,000, while people believes that more and more people out of job market.
Bakrie said investment has grown by 300% this year, but Bank Indonesia data shown only US$1 billion of net capital inflow, slightly higher than last year.

Finance Minister Jusuf Anwar published a memoir on his first-year claiming all targets met. In the morning of October 20, he managed to have president SBY to officially give the 10^th million-tax number to a man at State Palace. This is a huge leap from 3.5 million numbers since Indonesian independence.

SOE Minister Sugiharto claimed next year's dividend from state-owned enterprises to be doubled and there is no need for privatization to fill the budget deficit. The ministry's privatization target this year is Rp3.5 trillion (US$350 million) and Sugiharto got zero so far.

Education Affairs Minister Bambang Sudibyo published one full page advetorial in Kompas today (probably for more than Rp100 million or USD10,000) about his accomplishment in one year in office at the time when so many school buildings destroyed for various reasons and a lot of students can't afford to enroll to higher education.

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Privatization rebuff

The state-owned enterprises ministry is pouring cold water into privatization issue and prefers to have SOEs doubling their dividend to the state next year.

Mohammad Said Didu, secretary to the ministry said next year’s dividend target is Rp23.5 trillion, more than 100% of this year’s target at Rp11 trillion.

Didu went further saying there is no need for privatization this year as the state budget is not under heavy pressure anymore and dividend could substitute the income target from privatization. “I don’t see which SOE to be privatized,” he said.

Previous administration set the privatization target for this fiscal year at Rp3.5 trillion. But this administration is just about to start privatization through the selling of 9% shares of state-owned gas distribution company PT Perusahaan Gas Negara (PGN) Tbk. SOE Ministry is in the process to select placement agent for those shares.

Both minister of finance Yusuf Anwar and coordinating minister for economic affairs Aburizal Bakrie had reminded SOE minister Sugiharto to fulfill his ministry’s privatization target. But Sugiharto is unenthusiastic about privatization saying he prefers to raise dividend payment from SOEs.

Anwar disagree with Sugiharto saying dividend payment and privatization income are two different issues. “Dividend amount payable is very much depends on profitability of a SOE. Privatization is a result of divesting stakes, in all or parts,” he said.

Early last month, President Susilo Bambang Yudhoyono issued a new regulation (PP No.33/2005) on privatization. One of its articles (article 9) deliberated that SOE in the fields of natural resources can’t be privatized. But government failed to come up with clear definition of natural resources-based SOE. Some interpret this for companies like PGN, Pertamina (oil and gas), PT Aneka Tambang Tbk (mining), PT Tambang Batubara Bukit Asam Tbk (mining) and all plantation SOEs.

In contrast to the privatization of SOE issue, SBY’s administration is open to private participation in public service sectors including electricity, water supply, telecommunication, toll roads, ports, and others.

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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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Privatization No, Sorry Yes!

What an ignominious statement. State owned enterprises minister Sugiharto said recently that government resumed privatization plan, with targeted fund to be raised up to Rp3.5 trillion for the state budget.

Shortly after assumed the cabinet post for SOEs, Sugiharto was reportedly asked his staffs for not use the privatization word anymore. Some experts then lauded Sugiharto by publicly condemned privatization and termed privatization as a fishy word. Look at Dr Rhenald Kasali’s article, Privatization No, Corporatization Yes!

The fact that his colleague, Chief Economy Minister Aburizal Bakrie, has openly speak about privatization means all other populist anti-privatization hubris will change their minds for the sake of money (budget and lofty fees) again.

For me, it is not surprising. Heavily identified as the closest ally of US, you can imagine the anti-privatization mood was just lip service. The mood will erode soon as all of us having sort of short memory on things.

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