Govt considers dissolving BPIS

JAKARTA (JP): The government is considering to dissolve the operation of state owned holding company PT Bahana Prakarya Industri Strategis (BPIS) in a bid to give more independence and flexibility to its 10 subsidiaries.

The office of the State Minister of Investment and State Enterprises Development said that the 10 companies, which are now under direct control and supervision of BPIS, would be allowed to operate independently.

"The holding company does not bring any added value to its subsidiaries," according to a written statement of the office issued at a hearing with the House of Representatives' Commission IX.

The 10 state companies are aircraft manufacturer PT Industri Pesawat Terbang Nusantara (IPTN), ship manufacturer PT Pal, steel producer PT Krakatau Steel, and weapons and ammunition producer PT Pindad, producer of explosives PT Dahana, train manufacturer PT Inka, heavy industry company PT Barata Indonesia, infrastructure developer PT Boma Bisma Indra (BBI), telecommunication manufacturer PT Telekomunikasi Indonesia (Inti) and electronic component producer PT Len.

BPIS, which was established in 1989 as an agency for the development of strategic industries, changed its status into a holding company in 1998.

According to the office, some of BPIS' subsidiaries expressed support for dissolving the holding company, saying that the expected synergy among them could not be realized.

"Putting the companies under the same holding company places a greater burden on well performing ones because they have to cross subsidize their money losing affiliates," the statement said.

It added that abolishing BPIS would also help the debt restructuring process of several BPIS' subsidiaries as an independent company, they would have more flexibility to change policies needed to support the proposed debt restructuring deals.

Three of BPIS subsidiaries have been placed under the Indonesian Debt Restructuring Agency (IBRA) since March and December of last year due to their inability to pay debts.

IPTN along with Inti and Barata Indonesia owe debts of Rp 1.25 trillion (US$145 million) in principal and another Rp 1.24 trillion in interest payments.

IBRA has said it was facing difficulties in restructuring IPTN's debt and suggested the government find the state company a strategic partner.

However, earlier this week, BPIS warned the government about selling the companies to foreign "vultures" at rock bottom prices.

The state holding company instead urged IBRA to convert the three companies' debts into equity participation to keep them in Indonesian hands.

It further suggested the three companies go public, which however, could only take place after the restructuring process has been finalized.(bkm)