House agrees SOE merger plan

The Jakarta Post, Jakarta

The House of Representatives has approved the government's plan to merge three state-owned firms in the trade sector as part of efforts to turn them into a more efficient and competitive business entity.

The approval was given on Thursday following a hearing between the companies and House Commission V on trade and industry affairs.

The three firms -- namely PT Pantja Niaga, PT Dharma Niaga and PT Cipta Niaga -- would form a new company called PT Perdagangan Niaga with combined assets of around Rp 5.6 trillion (about US$640 million).

Cipta Niaga president Doris S. Herlambang told the hearing that as all produced the same products and used the same distribution chains, the plan should be helpful in focusing the company and enabling it "to improve its bargaining position with suppliers."

She said a government ruling had been issued to serve as the legal basis for the merger.

Aside from the three, Indonesia currently has another two firms also covering the trade sector. They are PT Sarinah and PT Bandha Graha Reksa.

Of the three firms to be merged, only Cipta Niaga managed to record a pre-tax profit in 2002, amounting to Rp 49.6 billion. Dharma Niaga and Pantja Niaga posted Rp 335 million and Rp 7 billion in losses respectively.

In the hearing, some lawmakers voiced the need for the company not to use the decision as an excuse for massive lay-offs, which would have the potential to create negative side-effects.