State Enterprises in Indonesia: Present Issues and Future Prospects

Abstract

Introduction State enterprises in Indonesia are presently at the crossroads. The future depends on a number of developments which can be roughly identified in general terms. In the first place, there is an underlying pragmatism on the part of the government concerning state enterprises. On the one hand, the government of President Suharto has moved away from the ?tatiste attitude of insisting that the state undertakes every venture in the country. On the other hand, it has not gone full swing to the liberal tradition of leaving everything to the private sector, because that is likely to result in leaving the strong to develop at the expense of the weak. Secondly, there is the question of performance. Indonesian state enterprises on the whole have not had a history of brilliant economic performance. Where a high growth rate did take place was in petroleum, a special case to which we will turn below. But on the whole, state enterprises have performed dismally. This has led, among other things, to the government's decision to decontrol and to force the enterprises to compete with the private sector. Some have been dissolved. It has been hoped that these changes would force the state enterprises to operate on business criteria, that is, to operate more profitably. However, the disappointing performance of the past should not lead to the ready conclusion that state enterprises have no future. But a great deal more must still be done to improve the performance of these enterprises and for the moment one detects some ambivalence on the part of govern ment circles as to the extent to which these enterprises could be used effectively for development purposes. A third factor which is likely to influence the development of state enterprises is the question of the role of these enterprises in the country. This is a policy question of significant and far-reaching implications. The question centres on the extent to which the government wishes to use state enterprises for development purposes. What is to be the role of these enterprises and what special types of activities are likely to be assigned to them as an instrument for public policy? Is it possible to have some rough assessment as to the possible patterns of operation of these enter prises in the performance of their duties in areas regarded as important for national political purposes? Since the government is presently engaged in some major assessment as to the future use of state enterprises for development purposes, and since important data and figures are still not available, this essay will deal only with the major trends and issues, giving the general pattern of the existing situation and practices, and some qualitative assessments of probable future areas of operation with their possible prospects. The central focus of observation is the possible role of state enterprises the modernization of Indonesia's industrial structure taking into account some