Economist: Streamlining of SOEs Must Create Added Value for the State
Jakarta (ANTARA) - Toto Pranoto, an economist from the University of Indonesia (UI), has reminded that the success of the streamlining agenda for state-owned enterprises (SOEs) depends heavily on the ability to create added value, both for the companies themselves and for the state.
Therefore, according to him, the success of consolidation cannot be measured solely by short-term efficiency. He said the most crucial aspect is ensuring that the process of merging similar companies is able to create added value.
In a statement received in Jakarta on Monday, Toto cited a number of past consolidation cases that actually resulted in a decline in company value, or value destruction, because the post-merger integration process did not run optimally.
For this reason, Toto said, preparatory stages such as due diligence, the establishment of a project management office (PMO), and the execution of post-merger integration must be carried out comprehensively.
In general, Toto assessed that Danantara Indonesia’s plan to streamline the number of SOEs and their subsidiary entities from around 1,077 to around 300 companies is a strategic step to strengthen the competitiveness of state corporations.
He believes the SOE streamlining agenda is an appropriate effort to improve the efficiency and competitiveness of state-owned companies.
“If the President now says that of roughly a thousand companies, only around 300 will remain, the context is certainly about how the competitiveness of SOEs can be strengthened,” said Toto.
He also viewed that merging similar companies allows for a reduction in cost structure through the integration of goods and services procurement, the shared use of supporting facilities, and the optimisation of company resources.
“With a lighter cost structure, the bottom line, or profit figures, will naturally improve as well,” said Toto.
Previously reported, Danantara’s Chief Operating Officer (COO), Dony Oskaria, said the agency is currently streamlining the number of SOE entities from 1,077 companies to around 200-300 companies, targeted for completion in 2026.
According to Dony, President Prabowo Subianto has given directions to ensure that the transformation of SOEs does not harm workers.
He explained that the streamlining is being carried out to address the high number of inefficient and loss-making companies. Of the 1,077 companies currently in existence, around 52 per cent recorded losses, with accumulated losses reaching Rp20 trillion.
Nevertheless, Danantara has chosen to retain the entire workforce after calculating the financial impact of the consolidation process.
According to Dony, the savings generated from the consolidation process are far greater than the costs required to retain all employees.
In addition to ensuring there are no layoffs, Dony revealed that the SOE streamlining programme has the potential to generate direct savings of up to Rp50 trillion per year.
He said that until now there have been practices of layered transactions between parent companies, subsidiaries, and companies below them, which have caused significant inefficiency.