Reuters reported that an Indonesian parliamentary commission urged the government to sell a stake in the country's largest steel maker, PT Krakatau Steel, through an initial public offering in a bid to protect national interest.

Krakatau Steel which has assets worth an estimated IDR 11 trillion (USD 1.20 billion), is one of 37 Indonesian state firms slated for privatization this year to help fund a widening budget deficit.

The government has decided to sell the firm's shares through an IPO but the plan still needs to be approved by parliament. The defence and foreign affairs commission's recommendation suggests the plan may get the green light from parliament.

The government wants to keep a majority stake in Krakatau Steel, which produced 2.25 million tonnes of steel products in 2007 or about 30% of Indonesia's total steel demand.

The government has said it is aiming to sell a maximum 40% stake in the firm.

Mr Theo Sambuaga chairman of the defence and foreign affairs commission of Indonesia said that selling the shares through an IPO would ensure state ownership of strategic industries that support production of security and military equipment. He said that "The commission agrees with the government that efforts to increase funds for Krakatau Steel should be done by an IPO and not strategic sales to retain state ownership of strategic industries.”