City divestment plan a losing proposition, warns noted economist

Mustaqim Adamrah ,  The Jakarta Post ,  Jakarta   |  Tue, 04/22/2008 10:40 AM  |  City

The city administration's plan to divest six of its ailing enterprises to generate income is not strategic, a noted economist says.

Sri Adiningsih of Gadjah Mada University said Monday the divestment plan to generate up to Rp 100 billion (US$10.88 million) was peanuts compared to the city's loss of potential revenue which reached trillions of rupiah.

"It would be better for the administration to find strategic partners to control those ailing companies," she told The Jakarta Post over the phone.

The city economic bureau's city enterprises department head, Eden H. Siregar, said the companies were PT Pakuan Internasional (managing golf courses), PT Jaya Nur Sukses (property), PT Bumi Grafika Jaya (publishing), PT Rheem Jaya (barrel making industry) as well as PT Determinan Indah and publicly listed PT Alakasa Industrindo (both aluminum fabrication companies).

Sri said these businesses were not strategic for Jakartans.

Eden said the divestment plan was made because of "huge losses the companies had incurred recently".

"Even Determinan is not valuable," he said.

"It's impossible for the administration to invest more money, either, because those companies have never earned profits or contributed to city revenue since their foundation," he said.

Pakuan is worth Rp 2 billion, Jaya Nur Rp 13 billion, Bumi Rp 1 billion, Rheem 1.5 billion, and Alakasa some Rp 800 million, Eden said. Determinan was already bankrupt.

He said the administration would forge a team to execute the plan after City Council gave its approval.

On Feb. 6, Governor Fauzi Bowo sent a letter to the council, asking for approval for the divestment plan.

Jakarta Administration Commission B on Economic Affairs secretary Nurmansjah Lubis said the divestment plan would be discussed in May.

"We'll start mulling over the plan after completing a draft ordinance of mass rapid transit," he told the Post.

He and other councillors endorsed the plan, Nurmansjah said.

"Most of (the city enterprises) suffer losses," he said.

Pakuan has Rp 34 million in losses, Jaya Nur Sukses Rp 600 million, Bumi Rp 180 million, Alakasa Rp 8 billion, and Determinan Rp 5.7 billion, Nurmansjah said.

In the latest report of companies' performance made available to the council, only Rheem had managed to book a Rp 1 billion profit, he said.

The administration should also have included PT Graha Sahari Jaya (which runs a hotel on Jl. Gunung Sahari, Central Jakarta), in its divestment plan, Nurmansjah added.

"That company has also suffered huge losses as stated in the report," he said.

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