Andreas Harsono, Jakarta – One of Indonesian President Suharto's favorite pasttimes is to have a talk in front of farmers, small traders and villagers, known locally as "temu wicara," a phrase which translates as a "gathering to talk."
Suharto gave such a talk on April 21 in Desa Batu, a small village about 200 kilometers south of Jakarta, in which he discussed the on-going economic crisis hitting this world's forth most populated nation.
"We still do have capital to rise again and to cure the ailing economy," said the 77-year-old leader, adding that in addition to a $43 billion international package arranged by the International Monetary Fund, Indonesia still has around 160 state-owned companies.
"If we don't get assistance from other countries, we could fall back on these assets to substitute the foreign loans. We could sell these companies," said Suharto, stressing that the sales might help to restore confidence in Indonesia whose rupiah had lost around 70 percent of its value to the American dollar since July 1997.
Suharto did really mean it. Not more than 24 hours after the speech, some government ministers announced in the capital that the government is to sell seven state-owned companies to the public in addition to five other listed companies whose major shareholders is the government.
Minister for State Enterprises Tanri Abeng, once dubbed "the most expensive professional manager in Indonesia," said that the government had estimated that the sales of the 12 companies is to raise 15 trillion rupiah (around $1.875 billion).
The sale is intended to help finance the current state budget which allocates a massive flow of funds to subsidize domestic sales of fuel and staple commodities such as rice.
"We discussed privatization but plans have still to be finalized," said Tanri, adding that the firms are currently being audited by international accounting offices and the blueprint of the privatization will be fully developed in September in accordance with an IMF deadline.
Indonesia has a total of 164 state firms, 70 percent of which were considered to be financially unhealthy as of last year. The general perception here is that the state-owned companies are either badly corrupted or under seriously bad management.
Some of them – such as the national airline Garuda Indonesia, or the power utility Perusahaan Listrik Negara (PLN) – had suffered big losses not only because they were managed by incapable hands but also because they had "to serve" companies controlled by the children and cronies of President Suharto.
The Suhartos usually asked state-owned firms to donate their service. And these politically-connected figures simply did not pay or underpay the service, anyway.
The Indonesian alternative newspaper X-Pos once called the state firms the "milk cows" of the Suhartos, whose widely-diversified business interests range from an airplane manufacturer to power plants, from media companies to highway construction, and form the core of so-called "crony capitalism" in Indonesia.
The seven firms Suharto will privatize include steel manufacturer PT Krakatau Steel, construction firm PT Jasa Marga, PT Pelindo II and PT Pelindo III seaport operators, rubber plantation PT Perkebunan Nusantara IV, coal mine PT Tambang Batubara Bukit Asam and airport operator PT Angkasa Pura II.
The already-listed companies, either on the local stock markets or the international ones, include telecommunication operator PT Telkom (government controls 75,8 percent), PT Aneka Tambang (65 percent), PT Tambang Timah (65 percent), satellite operator PT Indosat (65 percent) and cement producer PT Semen Gresik (65 percent).
But neither Suharto nor Tanri mentioned just what percent of the shares of the seven are to be offered to the market. Tanri said that the government will still control the majority of the company. Other officials also said the government is not going to reduce its controlling stakes less than 51 percent.
Tanri, a former executive of Union Carbide and Heineken, the Dutch beer brewer, said that the privatization is to take place either with a direct placement of stock issues with the help of a strategic partner or via a public offering in the market.
According to the Kompas daily, the seven companies are regarded to as "smoothly-run" firms. PT Krakatau Steel last year had assets of 2.4 trillion rupiah and a profit of 92.63 billion rupiah. PT Perkebunan Nusantara IV reaped a profit of 92.63 billion rupiah in 1996.
Some analysts believed that PT Tambang Batubara is the most attractive among the seven since it is an export-oriented firm. "Of course, the coal price is quite bad lately. But it is a cycle, up and down," said analyst Kevin Evans of the Panin-ANZ Securities.
The others have a so-so reputation. Krakatau Steel's market is comprised mostly of domestic firms which have remarkably decreased their activities if not closed totally during the economic crisis here.
The Jasa Marga tollroad operator controls routes which are not very profitable since the crowded ones are controlled by its main rival, PT Citra Marga Nusaphala Persada, owned by Siti Hardiyanti Rukmana, the eldest daughter of Suharto. Hidayat Jati, a senior researcher with the Castle Group, however, said that it is still difficult to estimate the value of the companies because, unlike Thailand and South Korea, two other countries hit worst by the monetary crisis, "Indonesia fundamentally has not yet reached a point where the market has already been diverted from the economics."
That was an obvious reference to the question of President Suharto's rule. Student protests have been flaring up everywhere. Anti-Chinese riots also broke out in more than 30 cities throughout the country. That has discouraged investors from putting their money into Indonesian assets.
Worse than that, the government also maintained an on-again and off-again stance on the IMF-sponsored reforms. In October, the Jakarta government signed a deal with the IMF, but breached it repeatedly, prompting the international agency to make a replacement deal in January. But again, some say, it was fooled by the Suharto government. The third deal took place in March, but many are skeptical whether Suharto's empire, with all its vested interest, will implement the agreement.
But not everyone believes that Suharto should be replaced before an economic restoration could take place. These analysts tend to be more pragmatic and advocated a business-as-usual approach.
"People should stop looking for who and start thinking about what. What kind of issues would be important to the country? And who is talking about these issues? Who has the most credibility?" said a foreign political economist in Jakarta.
Suharto himself closed his talk with the villagers with a nationalistic remark that a wholesale takeover of Indonesian state-owned companies by foreign investors is possible if the nation failed to resolve the economic crisis.
"Do you know what will happen if these upheavals continue? Domestic industries will be paralyzed and foreign capital will come in and take them over," the aging leader said.