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.