Fuad says state firms must be profit-oriented
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)