Economist: SOE streamlining success hinges on implementation

Jakarta (ANTARA) - Economist Yusuf Rendy Manilet from the Center of Reform on Economics (CORE) Indonesia has assessed that the plan to streamline and restructure state-owned enterprises (SOEs) has the potential to improve operational efficiency, although its success will depend heavily on the quality of consolidation and governance.

Yusuf noted that the current structure of SOEs, which often includes parent companies, subsidiaries, and sub-subsidiaries, creates additional costs. “Each layer adds administrative, coordination, and decision-making costs without increasing productivity,” Yusuf said in a statement quoted on Wednesday.

With a leaner structure, Yusuf continued, SOEs are expected to focus more on their core business, achieve a larger business scale, and make business decisions more quickly. He assessed that the experience of merging several sub-holdings of PT Pertamina (Persero), which reportedly generated efficiency savings of around 600 million to 700 million US dollars, demonstrates that the benefits of consolidation are indeed achievable.

However, Yusuf noted that merging hundreds of companies with different systems, work cultures, and financial conditions would require time and is not a simple process. He also stated that the target to complete the consolidation within a short period is ambitious, meaning its success will be largely determined by the quality of implementation on the ground.

Yusuf also highlighted the government’s commitment to avoid layoffs (PHK) during the SOE streamlining process. However, from an economic perspective, he argued that efficiency is not only measured by a reduction in the number of companies but also by an increase in labour productivity. “If employees are merely transferred without adjusting functions and organisational needs, some of the potential efficiency gains could be lost,” he said.

Furthermore, Yusuf believes that governance is the most decisive factor for the success of the SOE streamlining programme. According to him, large-scale consolidation of state assets must be accompanied by a robust oversight system to ensure that liquidation, merger, and divestiture processes are conducted transparently and accountably. He added that the involvement of the Attorney General’s Office, the Audit Board of Indonesia (BPK), the Financial and Development Supervisory Agency (BPKP), and the Ministry of Law is a strategic step to strengthen the credibility of the consolidation process.

The government is targeting a reduction in the number of SOEs from approximately 1,077 entities to between 200 and 300 companies through liquidation, divestiture, consolidation, and restructuring schemes. In line with President Prabowo Subianto’s directive, the streamlining process is targeted for completion by 2026.

Danantara Chief Operating Officer, who also serves as Head of the SOE Supervisory Board, Donny Oskaria, previously revealed that around 52 percent of SOEs are still operating at a loss, with total losses reaching Rp20 trillion. According to Donny, the consolidation programme has the potential to generate direct savings of up to approximately Rp50 trillion through the simplification of corporate structures and improved operational efficiency. Despite this, he confirmed that the SOE streamlining process would not involve layoffs, and all employees would be retained and become part of the consolidated companies.