State Minister for State Enterprises Sofyan Djalil said Tuesday that a strategic sell-off of portions of PT Krakatau Steel would be better than an initial public offering in the current adverse conditions of the global market.

A strategic sale means the government will offer a block of shares to a limited number of potential investors.

According to Sofyan, concerns over the current state of the global economy and capital markets was expected to dampen the appetite of public investors, should the company be privatized by an initial public offering (IPO).

"Under present market conditions, it seems impossible to make Krakatau Steel go public through an IPO," he said as reported by Antara , adding that low prices offered for shares would be a consequence.

Capital and financial markets across the globe have been hit hard by concerns over a U.S. recession that could well turn into a global economic slowdown.

However, he said the government would carry out further study before deciding which option should be used to privatize the nation's biggest steel maker.

Both options were first aired by the government during a hearing about the 2008 privatization plan with the House of Representatives in February.

At that time, the government said if Krakatau Steel took the strategic sale method, it would prefer to sell up to 20 percent of the company, while under an IPO, the shares sold would equal a 40 percent stake in the company.

The management of Krakatau Steel has been widely reported to favor the IPO option, saying that it would generate funds faster than a strategic sale.

The minister's statements were hot on the heels of a widely reported interest of Arcelor Mittal, the world's largest steel producer, in Krakatau Steel.

Arcelor has been reported to be eyeing up to a 40 percent stake in the Indonesian company.

Commenting on this, Sofyan said Krakatau Steel's management needed to study Mittal's proposal in order to make sure any steps taken would result in the improvement of the firm's production capacity.

This year, the government plans to sell stakes in 44 state firms including train manufacturer PT INKA, Bank Negara Indonesia and national flag carrier Garuda Indonesia. (uwi)