PLAN TO PRIVATIZE STEEL COMPANY DRAWS MIXED REACTIONS

By Andi Abdussalam

   Jakarta, June 6 (ANTARA) - The government's plan to privatize state-owned steel company PT Krakatau Steel (KS) has drawn mixed reactions from various quarters.

        While facing pressure to choose between privatizing through a strategic sale or through an initial public offering (IPO), the government is also under fire for planning to sell the company.

        Legislators want KS to be privatized through an IPO. But critics said the company should not be sold, arguing that the government should instead improve the company's management.

        Reactions have come up to the surface in connection with the government's plan to privatize state-owned steel making company this year.

        Legislators from different factions in the House of Representatives (DPR) on Thursday declared their opposition to the plan if the company was to be privatized through a strategic sale.

        The objecting legislators made their stand known in a joint statement. They included Syarief Hasan (faction chairman of Democrat Party), Zulkifli of Prosperous Social Justice (PKS), Alvin Lie of the National Mandate Party faction (FPAN) and Ade Daud Nasution of the Reforms Star Party faction (FPBR).

        They said the planned strategic sale of the state company would not benefit the state. It was a fact, they said, that the strategic sale of state-owned satellite company PT Indosat had brought a lot of harm to the state.

        The strategic sale system was different from the initial public offering (IPO) system which was applied to state-owned telecommunication company PT Telkom and Bank BRI where the state had enjoyed a lot of benefits.

        The Indonesian Democracy Party-Struggle faction (FPDI) even questioned the government's plan to sell PT Krakatau Steel.

        Privatization should be intended to increase the company's assets, broaden people's ownership in the company, and encourage it to become a corporate leader in its business field, Hasto Kristyanto of the FPDIP said.

        "The best way of privatizing KS is through an IPO which can guarantee transparency and is in conformity with the privatization policy," he said.

        However, some analysts opined that the current negative sentiment in the market would be unfavorable for KS to list its shares at the Indonesian Stock Exchange.

        State Enterprises Minister Sofyan Djalil said state-owned KS' privatization will have to be done though an Initial Public Offering (IPO) which his ministry had scheduled to take place in September 2008.

        "We have decided to privatize Krakatau Steel through an IPO but the decision is still subject to approval by the House of Representatives (DPR)," Djalil told the press Wednesday.

        He said his ministry would "challenge" the House and the KS management to agree to carry out the IPO as soon as possible.

        Djalil's statements come amid a controversy on whether the state's sole steel-making company should be privatized through an IPO or a strategic sale.

        Concerns that the government would sell the company through the strategic sale system was based on the fact that some multinational companies have interested in it.

        Some world-class steel companies such as Arcelor Mittal, BlueScope, Tata Steel, Pohong Steel, and Essar Steel were reported to be keenly interested in acquiring a stake in KS through a strategic purchase.

        Former chief economic minister dr Rizal Ramli said state-owned steel company PT Krakatau Steel should not be sold to foreigners, suggesting that the government improve its management.

        "I think Krakatau Steel should not be sold. Should it be sold I agree if only 5-10 percent of its shares are sold," he said during a discussion on state-owned companies privatization at the parliament building on Wednesday.

        Admittedly the company's production had not increased in the last several years, consuming inefficient energy and making no change in its technological development. So were its subsidiaries.

        "But on paper, this BUMN is profitable. What has to be done with this company is that increasing its capital so that it would reach a production of 2.3 to 3 million tons of steel per year," Ramli said.

        KS President Director Fazwar Bujang said the company was ready to float 20 percent of its shares to the public if the government agreed to the IPO.

        Last year, the company posted a net profit of around Rp370 billion. In the first quarter of 2008 alone, the figure already reached Rp400 billion.

        The company currently produces 2.5 million tons of steel per annum. Nearly 20 percent of its output is exported and the rest sold at home.

        According to Rizal Ramli, the government still had a chance to improve the management of Krakatau Steel and had bright prospects. Therefore, he questioned the plan of the government to sell the company to foreign parties.

        "The plan needs to be questionrd. Is it based on a wish to improve its performance or on other motives linked with the coming general elections," Rizal Ramli added.

        (T.A014/A/HAJM/17:45/a014) (T.A014/A/A014/A/A014) 06-06-2008 18:08:29