Jakarta – Corruption, collusion and nepotism are rampant in state enterprises, a top government official admits, confirming what many have long suspected.

Mr Mantaris Siagian, secretary of the directorate-general of state-owned companies of the Ministry of Finance, said: "We need to create clean, effective and efficient state enterprises and we need to do it soon." The chief auditor of the Supreme Audit Agency, Mr Usman Damanik, also pointed out that corruption could take place from the time products were first procured until the time they reached consumers.

"No good example from superiors, foreign intervention in the enterprises, the lack of law enforcement and the workers' religious faith, just to mention a few, contribute to corruption in state enterprises," he said.

Mr Usman added: "The government has to appoint directors for state enterprises based on the candidates' professionalism and not on certain interests." He said that audit reports revealing the extent of corruption in areas like banking and mining had been submitted to the Attorney-General's Office, but no action had been taken.

Indonesian Corruption Watch (ICW) coordinator Teten Masduki said: "If there was no corruption, how come state enterprises like electricity company PT PLN and telephone company PT Telkom suffer losses each year although they don't have competitors?" The workers' federation has agreed to work with ICW to create a zero-corruption zone in all state enterprises.

Indonesia's new Attorney-General Baharudin Lopa has also pledged to crack down on corrupt bureaucrats, businessmen and politicians, and has his sights on restarting corruption proceedings against former president Suharto.

The courts dismissed a US$600 million corruption case against Mr Suharto last year after doctors said he was too ill to stand trial.