Jakarta – Current global economic conditions have raised concerns whether the market will be receptive to the government's 2008 privatization plan.

Drajad Wibowo, a lawmaker-turned-economist, said Friday the current turmoil in the global market, triggered by the US subprime mortgage crisis, and an expected global economic slowdown meant the time was not right to sell state assets through privatization.

Global economic conditions could dampen the interests of investors, thus pushing down proceeds from privatization, which are meant to help cover the budget deficit, Drajad said.

"Now, most investors will avoid taking the risk of investing capital in a developing country like Indonesia. They would prefer to invest in the commodity market," Drajad said, adding that even if there are interested investors, they would probably ask for huge discounts.

"That's why I really hope House Commission XI will not approve the government's plan," he said, referring to the commission overseeing state financial affairs.

The government's privatization plan is still subject to the House's approval. The state-sanctioned privatization committee has decreed that 44 state firms will be privatized this year. They include PT Garuda Indonesia, PT Merpati Nusantara Airlines, PT Industri Gelas, PT Krakatau Steel, PT Dok & Perkapalan Surabaya and PT Sucofindo.

The US subprime credit crisis has created havoc in financial and equity markets worldwide, causing many investors to adopt a wait-and-see attitude. The world's economic outlook is even gloomier with many analysts predicting a recession in the US, creating fears of a global economic downturn.

Sri Adiningsih, a Gadjah Mada University economist, said the government should wait for the global market to calm down before pushing forward with its privatization program. "If not careful, the prices will go down because of the current high market volatility," she said.

While acknowledging the risk, capital market analyst Felix Sindhunata said Indonesia's economy could weather any possible external shocks and was still attractive to investors.

Felix said foreign investors were looking at Indonesia as one of their main targets. He said investors were drawn by the strong economic fundamentals of the country.

"At worst, the expected slowdown in the world's economy will hit Indonesia's exports. So, as long as Indonesia can keep up its domestic consumption, the decrease in exports can be neutralized."

As the economy continues growing, so will investor confidence in the country, Felix said. The privatization program is targeted to generate proceeds of Rp 1.5 trillion, a significant decrease from last year's target of Rp 4.7 trillion.

Finance Minister Sri Mulyani Indrawati said during a recent hearing with the House that the main aim of privatization was not to plug the state budget deficit. "The real goal is to make those state enterprises more reliable development agents," Sri said.

Inviting ownership from the private sector would force the state firms, she said, to improve transparency, accountability, efficiency and competitiveness. (uwi)