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September 06, 2005

A Curious Privatization

Indonesian State Minister for State Enterprises Sugiharto was reported in the press today as saying he favors the proposed acquisition of the government's stake in BTN (Indonesia's 8th-largest) by a consortium of state enterprises including state bank BNI and workers insurance company PT Jamsostek.

In addition to the openly-stated desire to avoid selling the bank to foreigners, the plan is curiously presented as "aimed to meet the privatization target." Selling a state bank to a non-transparent consortium of other state-owned enterprises (especially one led by BNI, the most hapless major bank in Indonesia) is not a privatization in our book.

Sugiharto was very clear about his motivations:

"The consortium comprises state companies through which the government would have full control over BTN. This is also aimed to prevent foreigh companies from taking over the bank," Sugiharto said in a hearing with the House of Representatives` commission on trade, industry and investment here on Monday.

Coming on the heels of the scandal at state-controlled Bank Mandiri, where the entire senior management team was removed for corruption in May of this year, we figured that the government would have lost its taste for the banking business. We hate to see Indonesia back to its old tricks, especially after the banking system has been a rare example of a comprehensive clean-up.

If the Indonesian government is serious about saving BTN, they should immediately cancel this plan and sell a minority stake with management control to a responsible banking entity - which, I am sorry to say, means a foreign bank or foreign-controlled domestic bank. We have seen how the other alternatives work out.

* Acquisition of BTN to Avoid Foreign Ownership (Antara)

Posted by The Banker at September 6, 2005 09:19 PM

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