Fuad says state firms must be profit-oriented

JAKARTA (JP): Minister of Finance Fuad Bawazier has issued guidelines to help state firms draft budgets and long-term plans which are more orientated toward accumulating profits and improving shareholder value.

Ministry of Finance spokesman Agus Haryanto said in a statement yesterday that Fuad had also improved the criteria and mechanism for evaluating the health of state firms.

In decrees no. 196, 197 and 198/KMK.016/1998, dated March 24, the finance minister ruled that state firms could no longer declare losses simply because they operated on behalf of the government.

State companies now have to differentiate between profitable activities and obligations to the government in their work plans and budgets.

"State firm directors have to analyze their companies obligations to the government," Agus said in a statement.

If obligations to the government are likely to result in losses, they must be excluded from company work plans.

"This regulation is necessary because state firms were established to create profitable entities and improve shareholder value," Agus said.

The new guidelines are in accordance with government regulations signed by President Soeharto which treat state firms as limited liability assets. The new status is designed to enable state firms to compete with the private sector.

However, state firms were still obliged to nurture small business and cooperatives, Agus said.

He added that the government had introduced new classifications and improved criteria to gauge the performance of state firms.

Profitable state firms will be graded from AAA for the best performing down to AA and A. The second division of state enterprises will be graded from BBB down to B, and the worst business ventures owned by the state will be classified from CCC to C.

Criteria for evaluating the condition of state firms have been expanded to cover financial, operational and administrative aspects of the business, Agus said.

Indicators such as the return on equity, return on investment, and the current ratio will also be taken into consideration.

The public duties of state firms, such as support of the small business sector and cooperatives will also be evaluated.

Criteria for evaluating the operational side of state firms will vary depending on the firm, the sector in which it operates, and whether or not it provides or manages part of the national infrastructure. Shareholders will be responsible for setting these criteria.

Through decree No. 125/KMK.017/11998, the finance minister obliged state firms to transfer government dividends and proceeds from the sales of shares to Bank Indonesia within one month of receiving shareholder approval of balance sheets and financial reports. (rid)