Merging state-owned enterprises risks worsening the chaos in managing\nstate companies. Sick companies could infect healthy ones.<\/p>\n
LIKE humans, ailing state-owned enterprises (SOEs) can infect healthy\ncompanies when they are merged under one roof. President Prabowo\nSubianto\u2019s order to accelerate the consolidation of SOEs risks\ntriggering a financial epidemic among state companies.<\/p>\n
In line with the President\u2019s speech when he delivered the financial\nnote to the House of Representatives in August 2026, the Ministry of\nState-Owned Enterprises has shut down 290 companies deemed unproductive.\nThe closures will continue until only 300 companies remain by the end of\nthe year. Alongside the streamlining, Danantara, the SOEs superholding,\nis also merging seven companies in the construction sector into three\nholdings over the next three months.<\/p>\n
The three SOE holdings comprise Hutama Karya, which will oversee\nWaskita Karya and Wijaya Karya as contractors for road and bridge\ninfrastructure; Pembangunan Perumahan, which will be merged with Adhi\nKarya as a construction contractor for transportation, buildings, and\nengineering; and Brantas Abipraya and Nindya Karya, which handle water\ninfrastructure projects.<\/p>\n
The problem is that not all of these companies are healthy. Late last\nmonth, Adhi Karya failed to pay a Rp60.82 billion bond coupon. A plan to\nrestructure Pembangunan Perumahan\u2019s Rp534 billion bonds also failed\nafter it could not secure investor approval, prompting Pemeringkat Efek\nIndonesia to downgrade its debt rating from idBB+ to idBB with a\n\u201cNegative CreditWatch\u201d status. Only Hutama Karya is relatively healthy.\nEven then, this is because the company has received a full government\nguarantee.<\/p>\n
Old problems also haunt the construction SOEs slated for\nconsolidation. Wijaya Karya incurs annual losses of Rp1.7 trillion from\nworking on the Jakarta-Bandung high-speed railway project. Waskita Karya\nand Adhi Karya, meanwhile, have rarely recorded profits after becoming\nmired in large, unprofitable projects in the past, including toll roads,\nlight rail, and housing integrated with transportation infrastructure.\nWith total debt of Rp180 trillion, the companies\u2019 assets are\ninsufficient to cover their liabilities.<\/p>\n
Therefore, rather than forcing mergers within a short timeframe to\nmeet administrative targets, Danantara and the government must address\nthe problems of state-owned enterprises one by one and gradually. An\nurgent first step, among others, is to trace the root of each company\u2019s\nproblems and separate the burdens arising from government assignments,\nlosses caused by flawed business calculations, and those resulting from\ninefficiency and corruption. Without these reforms first, restructuring,\nlet alone mergers, will miss the mark.<\/p>\n
Equally important is restoring commercial discipline to the\nmanagement of construction SOEs by prioritizing cash-flow recovery,\ndivesting troubled assets, and focusing on profitable projects. To do\nso, the government must stop burdening construction SOEs with assigned\nprojects that generate no profit.<\/p>\n
Government project assignments made to fulfill the ambitions of those\nin power without sound business calculations have further weakened the\nperformance of state-owned enterprises that have been battered since the\n\u201ccash cow\u201d era. With President Prabowo\u2019s command-style approach to\ngoverning, consolidation will only accelerate the spread of chronic\nailments among state companies, undermining their role as drivers of\neconomic growth and development.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/the-construction-soes-merger-epidemic-1788853836", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }