Indonesia Downsizes Plans for State IPOs

Indonesia has scaled back its listing plans for state-owned companies this year, reflecting reduced investor appetite for emerging markets and wariness after last month’s disappointing stock market debut of Garuda, the national carrier.

A Garuda ground staff member prepares tickets at the Garuda Indonesia airline ticket office in Jakarta.
Arif Ariadi | AFP | Getty Images
A Garuda ground staff member prepares tickets at the Garuda Indonesia airline ticket office in Jakarta.

The government had sought to take as many as 10 state-owned enterprises public this year. “I have talked with parliament and have asked for permission to list only one state-owned enterprise in 2011,” Pandu Djajanto, deputy minister for state-owned enterprises, told the Financial Times. “It’s more realistic.”

Mr Djajanto blamed global market uncertainties, including political upheaval in the Middle East and the sharp rise in oil prices. “We will be selective and conservative with external factors like this,” he said.

But others cited another potential factor: the flop of Garuda’s initial public offering last month. Shares in the airline, which raised $524 million, plunged 17 percent on their first day of trading in Jakarta. On Tuesday, they closed 30 percent below the original listing price, with bankers blaming the government’s insistence on a high price.

“Politicians should stick to running countries and stop trying to run IPOs,” said one person close to the transaction.

Just last week Mustafa Abubakar, the minister for state owned enterprises, told local media the government intended to list textile maker Cambrics Primissima, paper maker Kertas Padalarang and construction company Sarana Karya this year.

Overseas buying has contributed to a surge in the prices of Indonesian assets, including a 186 percent increase in the Jakarta Composite index in 2009-10. But inflation fears and profit-taking have weighed on the market, which is down 5 percent from its December peak.

Indonesia has more than 140 state-owned companies, many of them loss-making. They employ 780,000 staff and contribute an estimated 40 percent of the country’s gross domestic product. Last year, only two of the 23 companies that raised $3.37 billion from IPOs on the Jakarta stock exchange were state owned.

Mr Djajanto, who is in charge of state privatization's, said the only other company set to go public this year is cement maker Semen Baturaja, which he expects to raise Rp1,000bn ($114m). “We also have a construction company,” he added. “But I will choose this one only if the parliament wants more.”

The fallout from the Garuda IPO will be watched in neighboring countries such as Vietnam and Thailand, where sales of state holdings in a range of businesses are being considered.

Proposed Vietnam IPOs include Vietnam Airlines and Petrolimex, the downstream oil and gas monopoly.

Garuda is the only company to issue shares in Indonesia this year, according to data provided by Dealogic.

So far this year, companies have raised $13.5 billion through IPOs on Asian markets, excluding Japan and Australia, compared with $19.2 billion over the same period last year.