Govt to merge state firms

Govt to merge state firms

Rendi A. Witular, The Jakarta Post, Jakarta

The government will merge a number of state enterprises and set
up several holding companies to oversee smaller state firms in an
effort to help restructure and revitalize state enterprises, the
majority of which are in bad shape.

State Minister of State Enterprises Sugiharto said the policy
was taken to help improve efficiency and help each of the firms
be a leader in its respective industry by controlling both
upstream and downstream businesses.

"The policy is to be implemented this year, but some of the
processes will need an initial study from independent
institutions and coordination with other ministries," he told a
press conference after the opening ceremony of the State
Enterprises Summit at the State Palace on Tuesday.

Sugiharto said that from a total of 158 state firms as of last
year, 54 of them would be merged into 21 while 38 would be
included in 10 holding companies and 66 would remain the same.

According to the minister, companies to be merged include port
operators PT Pelindo I to IV, airport operators PT Angkasa Pura I
to III, timber firms PT Perhutani and PT Inhutani I to IV,
surveyor firms PT Sucofindo and PT Surveyor Indonesia, and
pension fund firms PT Jamsostek, PT Taspen and PT Jiwasraya.

The mergers also cover companies engaged in shipyard,
pharmaceutical, publishing, fisheries, construction, pulp and
paper and civil engineering businesses.

State enterprises to be converted into holding companies
include oil and gas firm PT Pertamina, power firm PT PLN, gas
distributor PT Perusahaan Gas Negara (PGN) and cement producer PT
Semen Gresik.

The government will also form holding companies to oversee
mining companies such as PT Antam, PT Timah, PT Bukit Asam
Batubara and PT Sarana Karya, and for supervising plantation and
fertilizer companies.

The holding companies will be tasked with forming new
subsidiaries to support their core businesses upstream and
downstream.

In a bid to improve transparency and governance, the
government will eventually sell shares of the holding companies
to the public via initial public offerings.

"The holding companies will 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
state enterprise," said Sugiharto.

However, he added, the most daunting aspect of the plan was
that most of the companies had been poorly managed for a long
time and suffered from very low rates of return on investments
and equity due to the intervention of vested political interests,
which often use the companies as cash cows for political parties.

President Susilo Bambang Yudhoyono underscored the need for
state enterprises to be sold to the public or merged with other
state firms in a bid to increase their value and lessen the
burden on the government in managing them.

"I have ordered Pak Sugiharto to select state firms that are
not strategic or profitable to be privatized in order to reduce
the government's risk and burden," he said in front of state
enterprise executives.