Government to set up holding company for SOEs

Government to set up holding company for SOEs

Rendi A. Witular, The Jakarta Post, Jakarta

As part of an effort to help restructure and revitalize state-
owned enterprise (SOEs), which are mostly in bad shape, the new
government is planning to form a holding company that it is hoped
will be more efficient in overseeing SOEs, a senior government
official said.

Mahmuddin Yasin, deputy for privatization to the state
minister of state enterprises, said the government had decided to
adopt the "blueprint" for the management of SOEs laid out by
former state minister for state enterprises Tanri Abeng.

"Our underlying strategy in managing the SOEs for the next
five years will be based on what has been proposed by Tanri. The
study made by him on the SOEs is good and needs to be followed up
on," said Mahmuddin during a breaking-of-the-fast gathering on
Monday.

Tanri, who was the first minister to be specifically charged
with reforming state companies during the twilight of the
Soeharto regime in 1998, proposed the setting up of a state
holding company to manage all SOEs, similar to the Singapore
government's investment arm, Temasek.

However, before Tanri was able to realize his plan, Soeharto
decided to resign after widespread disturbances and student
protests.

Mahmuddin, who was involved in drafting the blueprint and is
likely to be reappointed again as a deputy to the minister,
explained that Tanri's idea of forming a holding company to
oversee the SOEs would be comprehensively studied.

"The blueprint consists of a one-year program. We are still
studying whether to form a holding company or not. But it will
lean toward that direction," he said.

Setyanto P. Santosa, former president of state-owned
telecommunications firm PT Telkom and a close aide to Vice
President Yusuf Kalla, said he had been ordered by Kalla to
advise State Minister of State Enterprise Sugiharto about the
possible formation of a holding company.

"The direction of the new government in managing the SOEs will
be to form a holding company. This is in line with global
demands. With the holding company, we will be able to raise
capital to fund the expansion of the SOEs," said Setyanto.

Aside from that, the holding company would provide a growth
engine for the country's economy by functioning as the
government's investment arm and by integrating and complementing
the businesses of each SOE.

If the plan is realized, executives of the holding company
will be in charge of managing 168 companies, with combined assets
of more than Rp 700 trillion (about US$77 billion).

The most daunting aspect of the plan is that most of the
companies have been poorly managed for a long time and suffer
from very low rates of return on investments and equity due to
the intervention of vested political interests, which often use
the SOEs as cash cows for the political parties.

Elsewhere, Mahmuddin said the government would identify the
SOEs that were important to the public and the overall economy
and those that provided little contribution to the state.

The SOEs that provided little to the country would be sold to
the public or merged with other SOEs in a bid to increase their
value and lessen the burden on the government in managing them.