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May 27, 2008

Minister: Krakatau must be privatised this year

Indonesian State Enterprises Minister Sofyan Djalil said on Monday that the privatisation of the steel company Krakatau Steel Inc will have to be carried out this year.

Earlier, Indonesian Vice President Jusuf Kalla said that the country prefer to seek a strategic partnership scheme for the company.

"Whatever the option of scheme will be taken, the privatization must be conducted this year," Minister Djalil said at the parliament building.

The minister said that the government attempted to boost the production of the company from 2.5 million tons to 5 million tons per year to meet the national demand of 7 million tons per year. To meet the goal, Djalil said it was needed at least $2 billion in funds.

The minister said that the government and the parliament would discuss to choose the best type of schemes to be taken.

"We will discuss it later with the House of Representative to get the best choice for the Krakatau Steel," said Dhalil.

ArcelorMittal, the world largest steel producer, Tata Steel, Essar Steel and BlueScope Steel, are among the bidders in the partnership, according to the vice presdient.

The company has not been able to raise its production capacity due to lack of funds and technology, according to Kalla. This causes Indonesia to import 6 million tons per annum, according to the country's investment board.

Nearly 20 percent of the production was exported and the rest sold at home, according to President Director of the company Fazwar Bujang.

Besides, he said that currently the steel producer must control not only the down stream sector but also the upstream sector of the industry, otherwise the company would not have smooth supply of its materials.

Last year, the company posted a net profit of around 370 billion rupiah (some 40.66 million U.S. dollars). In the first quarter of 2008 alone, the figure already reached 400 billion rupiah (43.96 million U.S. dollars), according to the company.

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