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Indonesia
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LOAN: INO 32517-01
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State-owned Enterprise Governance and Privatization Program
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Location
Nationwide.
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Sector
Law, Economic Management & Public Policy /Economic Management
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Initial Listing
17 September 1999
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Most Recent Update
7 September 2005
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Executing Agency(ies)
Ministry of Finance
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- Missions
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| TA Fact-Finding |
Loan Fact-Finding |
Pre-Appraisal |
Appraisal |
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10-28 May 1999 |
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10-28 Feb 2000 |
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Loan Approval Date
4 December 2001
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Estimated Completion Date
December 2004
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- Cost and Financing Plan (in US$ million)
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| Source |
Foreign Cost |
Local Cost |
Total |
| Bank |
400.00 |
0.00 |
400.00 |
| Cofinancing |
0.00 |
0.00 |
0.00 |
| Borrower |
0.00 |
0.00 |
0.00 |
| Beneficiaries |
0.00 |
0.00 |
0.00 |
| Others |
0.00 |
0.00 |
0.00 |
| Project/Program Cost |
400.00 |
0.00 |
400.00 |
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OCR |
ADF |
Total |
| Loan Amount |
400.00 |
0.00 |
400.00 |
- Description
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The Program will help the Government improve the resource allocation of the public sector by reducing the net cost of operating Indonesia's SOEs, and promote private sector participation in all commercial activities heretofore exercised by the Government. By reforming SOEs and orchestrating a shift from ownership/management to selected regulation, the Government will not only free up scarce resources but also stimulate the much larger capacity of the private sector to drive economic growth.
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- Thematic Classification
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- Rationale
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The Program will address the State-owned Enterprises (SOE) performance in Indonesia which has been affected by weak corporate governance such as Government interference, poor internal controls, loopholes in accounting practices, weak auditing standards and practices and frail protection of minority shareholders.
- Objectives and Scope
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The Program is designed to (i) improve resource allocation in the public sector; (ii) reduce the net costs of operating SOEs; and (iii) promote private sector participation in all commercial activities heretofore exercised by the Government. The objective is to achieved by (i) introducing sound corporate governance practices within SOEs; (ii) separating commercial activities from public service obligations of SOEs; (iii) corporate and financial restructuring of SOEs in the preparation of eventual privatization; (iv) establishing fair and transparent procedures for managing labor redundancies; and (v) application of existing or development of new guidelines for the procurement of SOEs and its effective enforcement mechanisms.
- Policy Dialogue
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The following issues have been discussed during the formulation of the Program, namely: (i) corporate governance; (ii) public service obligations; (iii) corporate restructuring; (iv) labor redundancies; and (v) corruption, cronyism and nepotism.
- Environment Category:
B
- Environment Impact and Mitigation
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- Social Aspects and Remedies
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The Program will make a positive contribution to ADB's poverty reduction through: (i) removing market distorting interventions to stimulate growth; and (ii) improving the quality of governance in a critical area of the public/private sector interface. Most affected group from SOE restructuring will be redundant labor. The Program will enforce the timely provision of severance payments and provide a consultative process to design creative mitigating measures for redundancies.
- Benefits and Beneficiaries
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Through the implementation of the corporate governance in the Program, SOEs will be forced to increase their transparency in dealings with their shareholders, lenders, employees, and other stakeholders. Restructuring and privatization will increase job security for the employees in many of the smaller SOEs.
- Public Consultation
- Arranged by Bank
- Date for Consultation : May 1999 February 2000.
- Groups Consulted : Concerned Government officials and representatives from various SOEs, labor unions, and other stakeholders
- Beneficiary Participation in Formulation
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Extensive consultations with all stakeholders (SOE management, employee representatives, creditors, and government officials) at all stage of project formulation.
- Beneficiary Participation in Implementation
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Consultative process in developing labor retrenchment policy; radically increased transparency through new corporate governance will allow all stakeholders to voice any concerns at every stage of corporate restructuring and privatization, and to scrutinize the process.
- Consulting Services
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Not applicable.
- Procurement
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The proceeds of the loan will be utilized to finance the foreign exchange cost (excluding local duties and taxes) of imports produced and procured from ADB's member countries, other than those specified in the list of ineligible items and imports financed by other bilateral and multilateral sources. All procurement under the Program loan will be undertaken through normal commercial practices for the private sector or the Government's prescribed procurement procedures acceptable to ADB, with due consideration to economy and efficiency.
- Contacts
- Bank
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Asa Malmstrom Rognes
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Senior Financial Economist
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SEFM
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Tel. No.:
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E-mail:
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- Executing Agency
- Ministry of Finance
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Contact Person
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:
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Dr. Mas Widjaja, Director
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Tel. No.
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Fax. No.
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021 381 2859
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E-mail
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Contact Person
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Tel. No.
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Fax. No.
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E-mail
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- Remarks
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None.
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Projects 
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