State Control and the Privatisation of the Indonesian Telecommunications Industry: From Ownership to Regulation

The International experience including Indonesia shows that after privatizing their telecommunications, countries employed three new methods of state control: creating a golden share mechanism, establishing an independent regulatory body and employing a licensing system. All these methods represent the paradigm shift of control from state ownership to state regulatory based control. This paper examines Indonesian telecommunications privatization and its implications in terms of the meaning of state control under the Indonesian Constitution of 1945. Privatization, with various definitions and its rhetoric, opposes state intervention in the economy. Meanwhile, telecommunications is a classic example of a strategic sector under direct control of the state. The central issue of this paper concerns the methods of state control applied following the privatization of telecommunications, the adequacy of these methods and their implications in the context of Indonesian legislation stipulating that telecommunications is a strategic sector that should be controlled by the state. The ultimate conclusion of the paper is that privatization of telecommunications is not intended to remove state control, but rather change the manner from a direct into an indirect control – from state ownership to state regulation.