Government plans to sell unprofitable SOEs
Rendi A. Witular, The Jakarta Post/Jakarta
As part of the major restructuring of all state-owned enterprises (SOEs), the new government plans to sell or close those considered to be in bad shape and with no business prospects, according to a senior official.
Mahmuddin Yasin, deputy for privatization at the Office of State Minister of State Enterprises, said the policy was part of the government's planned "SOEs blueprint" aimed at efficiently managing state companies for the next five years.
"SOEs with poor performance, a lack of business prospects and have no public-service obligations will no longer be maintained by the government. They will either be sold or shut down," said Mahmuddin.
He explained that SOEs that were still considered to have business prospects but poorly managed would undergo a restructuring program by merging them or injecting fresh capital from public investors.
Many of the country's SOEs have been poorly managed for a long time and suffered very low rate of return on investment and equity due to intervention by vested political interests, which have often treated the SOEs as cash cows.
The previous government of Megawati Soekarnoputri planned to shut down or merge a number of poorly managed SOEs, including forestry firm PT Inhutani I to V, railway construction firm PT Inka, paper firms PT Kertas Leces and PT Kertas Kraft Aceh, fertilizer firm PT Pupuk Sriwidjaja, shipping firm PT Pelni and aircraft maker PT Dirgantara Indonesia.
However, the administration has thus far only merged trading companies PT Pantja Niaga, PT Dharma Niaga, PT Cipta Niaga, PT PP Berdikari and PT Sarinah; and construction consultancy firms PT Virama Karya, PT Indah Karya, PT Indra Karya, PT Yodya Karya and PT Bina Karya.
It decided last month to close down PT Aceh Asean Fertilizer, although a final decision has yet to be made by the new government and the governments of the Philippines, Singapore, Thailand and Malaysia, as investing partners in the firm.
SOEs with public-service obligations have also been a victim of mismanagement. Most of the companies have been forced to provide public services without sufficient facilities and subsidies from the government.
The companies have been forced to make a profit, causing the public to bear expensive costs to use their services. Among these companies are electricity firm PT Perusahaan Listrik Negara, oil and gas company PT Pertamina, postal and courier firm PT Pos Indonesia, railway firm PT Kereta Api Indonesia, bus companies PT PPD and Perum Damri, and a number of hospital and seaport operators.
Mahmuddin said SOEs with public-service obligations, which were mostly in poor condition, would be maintained by providing them with subsidies and other facilities that could support the continuity of their operation.
"SOEs with public-service obligation will be restructured by the government to efficiently serve the public. In the SOEs blueprint we will clearly define and separate such companies from those of profit-oriented SOEs," said Mahmuddin, who was involved in drafting the blueprint and is likely to be reappointed again as a deputy to the minister.
Under the planned blueprint, the new government is also planning to form a holding company that it is hoped would be more efficient in overseeing SOEs, similar to Singapore's government investment arm Temasek.
If the plan is realized, executives of the holding company will be in charge of managing 162 companies, with combined assets of more than Rp 700 trillion (about US$77 billion).