Economist: Streamlining of State-Owned Enterprises Could Boost Efficiency and Competitiveness

Economist Mohamad Faisal from the Center of Reform on Economics (CORE) Indonesia has stated that the programme to streamline and restructure state-owned enterprises (SOEs) must improve efficiency, competitiveness, and trust in order to have a tangible impact on the economy. Faisal noted that the government’s target of reducing the number of SOEs from around 1,077 companies to 200-300 is a massive undertaking requiring significant effort. “I see this as a policy that has a considerable impact and requires a great deal of effort. Because to carry out streamlining through liquidation, divestment, restructuring, or consolidation, from 1,077 to 200-300 companies, is actually massive,” said Faisal, who is also the Executive Director of CORE Indonesia, in Jakarta on Monday. He added that the government needs to anticipate various technical issues that could arise during the SOE streamlining process to ensure the reform objectives are achieved. He admitted he could not yet assess whether the target of reducing the number of SOEs to 200-300 entities is realistic, as it requires an analysis of the condition and performance of each company. Nonetheless, Faisal suspects the government has considered that some SOEs are currently operating inefficiently or have overlapping functions, thus necessitating restructuring. He reminded that SOEs are not solely profit-oriented but also have a public service obligation (PSO). Therefore, according to Faisal, the success of the streamlining programme should not be measured merely by the reduction in the number of companies, but by its ability to improve operational efficiency, professionalism, and competitiveness without diminishing the quality of public services. “For instance, whether it can increase efficiency in SOEs, make them more competitive against the private sector and at the global level, and boost trust in SOEs, depends on how the process is carried out,” he said. Faisal added that if the reform can resolve the problems that SOEs have faced so far, the impact on the national business climate will be positive. He noted that increased trust in SOEs would foster better synergy with the private sector to support economic growth. “SOEs and the private sector are not entities that should be pitted against each other, but can synergise. So they help each other in driving economic growth,” he said. The government has formed a Task Force for SOE Streamlining involving the Attorney General’s Office, the Audit Board of Indonesia (BPK), the Financial and Development Supervisory Agency (BPKP), and the Ministry of Law. The government aims to reduce the number of SOEs from around 1,077 entities to 200-300 companies through liquidation, divestment, 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 is also the Head of BP SOE, Donny Oskaria, previously revealed that around 52 percent of SOEs are still experiencing losses, totalling up to IDR 20 trillion. According to Dony, the SOE consolidation programme could potentially yield direct savings of up to IDR 50 trillion through simplifying corporate structures and improving operational efficiency. He nonetheless assured that the SOE streamlining process would not be followed by layoffs, and that all employees would be retained and become part of the consolidated companies.