Indonesia set to expand privatisation

Indonesia set to expand privatisation
Published: 12 October 2006


The Indonesian government says it will ramp up its privatisation program next year, giving investors a chance to buy shares in a group of state-owned enterprises. The government plans to sell stakes in about 10 government companies.

These include Bank Tabungan Negara, Indonesia Power, toll road operator Jasa Marga, construction firm Wijaya Karya, pipe maker KHI Pipe Industries, power company Pembangkitan Jawa Bali and Bank Syariah Mandiri.

Stockbrokers say the most likely outcome is the government will float stakes in these companies of between 10 and 40 per cent on the Jakarta Stock Exchange.

"They’re not going to be selling control, they’re just going to be selling shares," CLSA head of sales Michael Chambers says.

At the moment, nine publicly listed state enterprises make up about one third of the Jakarta bourse’s market capitalisation. They include blue-chips such as Bank Rakyat Indonesia (BRI), telecommunications firm Telkom and gas utility PT PGN.

Indonesia’s privatisation program began in earnest in the wake of the 1997-98 Asian financial crisis and was initially part of reforms mandated by the International Monetary Fund.

The current plan is to help the state collect funds for infrastructure projects. Also, if state-owned companies are only handled by the government, the performance tends to be bad.