ASi" kUCTURE FlOR DEVELOPMENT

Box 2.3
It took ten years to corporatize Indonesia's main ports
In Indonesia, there are three formal stages in the adop- Two years elapsed before the government addressed
tion of commercial princples. First, the government de- the overregulation that remained a major inpediment to
partment is transformed into a government enterprise, the success of the new corporations. Moreover, man-
Then the enterpise becomes a corporation that still has a agers did not yet have a lear understanding of their rocombination
of commercial and noncommerial goals. sponsibilities and accountability and ladced the auton-
Finanly, the corporation is turned into a profit-oriented omy to implement refonns they thought were needed.
entity whose ownership can be shared with the private These problems had been addressed by 1988, when an
sector. Ports have just reached this third stage. effective cost contrml program lowered expenses by 5
The reform of Indonesia's port management began in percent and increased revenue by 20 pent for the
1983. Before that, the management of all 300 ports was largest port corporation. Between 1987 and 1992, revcentralized
in the Directorte General of Sea Communi- enue grew almost twice as fast as expenses.
cations, a govemnment departmient Most of these ports Ten years after the reform process started, the port
had obsolete equipment and ailed to meet regional corporations face the market tesL Competition promnises
-needs. In mid-1983 the government decided to decen- to be tough: a recent survey of foreign investors ronked
tralize management for ninety of its ports by creating Indonesia's port infr_astructur at about the same level as
fior new public port corporations, headquartered at the Australia's but below others in the region, such as Hong
four largest ports.
Kon& Malaysia, and Sn'gapore
cessful restructuring are more politically accept- down by 67 percent, allowing its revenue to inaease
able-and hence more sustainable-when sever- from 92 to 111 percent of its full operating costs.
ance pay accompanies dismissals. This has been the Organizational changes are.always simpler on
experience with Argentina's railway reform pro- paper than in practice. It takes time and much effort
gram (Box 2X2).
to convert a government department into a public
The transformation of a government department corporation. The introduction and full implementaor
rministry into a public enterprise is more difficult tion of standard accounting practices alone can talce
for public works than for utilities-and roads pre- up to five years, as many Eastern European policysent'a
special challenge. However, converting high- makers are finding ouL Getting everything else
way departments to public utility corporations (as right is equally difficult Ghana's utilities have been
in New Zealand) is attracting hiterest as a way to undergoing transformation for seven years and still
improve performance, especially im the area of have a long way to go. And it took ten years to cormaintenance.
Highway expenditures are budgeted poratize fully Indonesia's major ports (Box 23).
according to assessments of traffic-related costs, and
user charges are then calculated to reflect the wear Focused goals and accountable management
and tear caused by different types of vehicles. This
experience is very recent, however, and, although it Corporatization provides an .organizational struchas
inspired similar approaches (in Tanzania, for in- ture, but by itself it merely transforms the problem
stance), it is too early to assess its sustainability. of official governance into the more tractable, al-
Commnercial accounting procedures are an imme- though still difficult, task of corporate governance.
diate benefit of corporatization. Explict cost ac- Organizational changes alone neither provide dear
counting identifies nonremunerative activities and goals nor create incentives for managers to meet
reveals sources of inefficiencies, making costs and these goals. Many gouernments argue that their debenefits
more transparent in public enterprises partments and enterprises are already run on comand
govermnent departments. In Ghana, for exam- mercial principles, but this has not helped managers
ple, an attempt to reform the main utilities began to be more effective. Many manngers argue that the
with the development of a good set of accounts for autonomy they do get is too limited to be effective
costs. The government's move to suppress transfes and that it is too easily revoked Many workers argue
to enterprises that could achieve financial autonomy that they have little incentive to be effective because
created a need for the enterprises to use proper cost- good and poor performers are treated equally. And
accounting techniques. Within two years, real oper- many users would argue that corporatization has
ating costs in the state transport corporation were not given them access to unproved or expanded ser-
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