Typescript (photocopy). / Digitized by Kansas Correctional Industries / Department: Agricultural Economics.

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This study investigates the Indonesian experience in managing the privatization of State Controlled Enterprises (SCEs) during the period from 1983 to 1993. The main objective of this study is to assess and explore the following research question: Why has there been little ownership transfer from state to the private sector in Indonesia even though official policy objectives and strategies for proving SCEs have been articulated and firms have been selected for potential privatization? Realizing complex combination of challenges and obstacles faced by Indonesia, attempts to answer the research question are directed at three main issues: (1) the role of SCEs in the overall national economy; (2) factors that led the Indonesian government to undertake privatization policy, and (3) the preferred models of privatization along with the rationale for such preferences. / Five types of data were collected during three separate field work stages from July 1991 to October 1995: State policy analysis, direct observation, analysis of the statistical data, analysis of mass media and personal interviews with key individuals. This triangulation method is employed to ensure a greater presentation of the key elements that deserve to be explored. / The principal argument developed throughout this study is that despite the apparent needs for privatization due to the fiscal difficulties and inefficiencies of the SCEs operations, the Indonesian state seems to be reluctant to transfer ownership to the private sector. In the case at hand, the pursuit of privatization is largely a political decision. Transferring ownership would require an overhaul of the present development policy, a huge step that Indonesian state is not ready to take. Instead, the priority has been given to reform the state sector by improving the efficiency and productivity of SCEs operations, and by isolating SCEs from the rent seeking behaviours of government bureaucrats. This tendency, as this study demonstrates, is explained by a deepening direct state involvement in the economy. This study shows that the Indonesian state has expanded its roles in the economy to include not only regulator, facilitator and stabilizer, but also that direct participant as a competitor to the private sector. Consequently, being kept under tight state control, has caused Indonesian SCEs to operate in a highly regulated environment. This environment has resulted in SCEs tendency to become instrument of development and, therefore has prevented them from becoming efficient and productive business entities.

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