A Special Consideration: Privatization

The Indonesia Port Corporation II (IPC II), as the representative of the Indonesian Government, successfully privatized the Tanjung Priok Container Terminal (TPCT) in April 1999. Grossbeak, a company owned by Hutchinson Whampoa (HW), has bought 51% of the terminal that since then changed its name to the Jakarta International Container Terminal (JICT). The remaining shares are held by IPC II, one national share which reserves it the right to determine a variety of JICT policies (Indonesian Business Watch,1999).

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An external factor that bore out the privatization was the economic deregulation package issued in mid 1995 by the Indonesian Government. The package enables state-owned companies to enjoy a freedom in making decisions and finding investment. Since then private sectors participation in state-owned companies’ businesses has become more significant. Moreover, the state-owned companies, including the IPC II, became more independent from administrator intervention and other bureaucratic situations, which often lead to a contra-productive payoff to their efficiency.

The privatization is considered as happening at the right time in terms of providing solution to two critical problems. The first problem is lack of investment to finance development projects of the terminal. This problem was solved since Grosbeak had to pay US $215 million in cash and provide technical assistance and software worth US$28 million. Together with IPC II, Grosbeak will have to double the capacity of the container terminal within its first five years of operation. JICT will also invest US$340 million over a twenty-year period.

The second problem to be solved is the terminal inefficiency that is manifested in a relatively high waiting time (WT) and berth occupancy ratio (BOR). Indeed in the last five years the terminal has been successfully improving its performance. The WT declines about 9% per year and the score in 1994 was 15.17 hours became 10.37 hours in 1998. Altough the efficiency in utilization of facilities is improving every year, e.g. in 1994 the BOR was 71.23% and last year was 67.21% (TPP, 1998), as discussed earlier, it is still sub-standard when compared with the ideal standard of efficiency. The involvement of private actors is expected to give a significant contribution in managing the terminal to be more effective and efficient.

The change of status from a state-owned operator to be a private company imposes the terminal to adapt its internal system to the change. But adaptation always takes time. There will be a change in personnel management system due to the fact

that new comers from the investor side will fill half of the manager and executive positions. Some reports said that as the major stakeholder, Grossbeak has a right to make decisions about the internal system of the company together with IPC II. The consequence of this is the performance system will be likely to change or to continue implementing the existing one. Considering this change, the following discussion on recommending improvement programs will cover the possibility of the change of the system.

5.2.5. The Modes of Implementation

It is of importance to consider that the following programs of performance improvement are integrated; that is why they are formulated in packages. The programs are proposed in two modes of implementation, namely the adaptive change package and the total change package. The earlier discussion identified seven sub-systems of HRM that deserve improvement actions. Therefore, each of the packages contains seven programs to cover improvement needs on those seven sub-systems of HRM.

According to Ma (1999a) this division of modes of implementation could be seen as a probabilistic decision making. In this kind of decision making, there are a number of conditions to happen in the future. For the sake of simplicity these conditions are called states. The possibility of some states to happen can be estimated and even one of the states that is surely to happen could be identified in advance. In the case of the terminal, the states are that the new management will continue to implement the existing system or establish a completely new system.

The items of content within the two packages are similar. One thing that makes them different to each other is the mode of implementation. The adaptive change package is based on an assumption that the existing HRM system is still sufficient and no reason to be abandoned. The cause of performance deficiency is not because the system is totally irrelevant to the current situation of the company but rather because it

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is not consistently implemented. The improvement can be done by primarily empowering the HRM/personnel function and modifying some sub-systems of the HRM system to upgrade their effectiveness.

The total change package is rather pessimistic to the existing system. The poor performance of HR is caused by the poor HRM system, which contains irrelevant sub- systems. The existing system is no longer sufficient to be implemented in the new form of organization. As a private company, the terminal needs a sound HRM system that enables it to optimize the utilization of its human resources in a highly motivating environment. Thus from the total change point of view, a completely new HRM system is a must.