House passes bill on SOEs into law

Dadan Wijaksana, The Jakarta Post, Jakarta

The House of Representatives endorsed on Tuesday a bill on state- owned enterprises (SOEs) at a plenary session, which stipulates tighter supervision as part of efforts to improve efficiency, as well as to avoid misuse of state assets.

The bill requires that each SOE must have at least three different internal agencies in charge of supervising how the enterprise is run.

The three are: a supervisory board (equivalent of the board of commissioners in private companies), an internal supervisory task force and an audit committee.

Legislators hailed the bill as one step forward in an attempt to make state firms more efficient and productive so they can compete better amid tough global competition.

Lawmaker Afni Achmad, when presenting the Reform faction's final say on the bill, said that with a tight control mechanism, the bill would not only create better-managed firms, but would also prevent unnecessary intervention from government officials with vested interests, as had often been the case in the past.

"Experience shows us that a hidden agenda often lies behind intervention, which negatively affects performance, as principles of professionalism become neglected," Afni said.

A lack of control mechanisms has often turned state companies into cash cows for many parties, including government officials, to be used either for personal or political gain.

In some cases, the abuse has occurred in the form of irregularities, in which trillions of rupiah in losses have been reported each year by the Supreme Audit Agency (BPK) and the State Development Finance Comptroller (BPKP).

All this serves to show that the country's attempts to stamp out graft and corruption in state institutions -- including state enterprises -- have so far proved somewhat ineffective.

It is these kinds of irregularity that the bill is trying to reduce.

State Minister for State Enterprises Laksamana Sukardi also said the bill not only encouraged better business practices for state firms but also provided the basis for fundamental change in how state firms should be run.

"Based on this bill, state firms will fall into only two types: limited companies (PT) and semiprofit-oriented companies (perum). It means there would no longer be perusahaan jawatan (perjan) any longer," said Laksamana, referring to the latter as state entities that are not profit-oriented.

He added that from now on, PT and perum companies would take over the daily operations of perjan-type of companies, although the details would be determined later on.

In another part of the bill, the government has also to set up a committee tasked to design and enforce the privatization program, to ensure the process runs smoothly, for the benefit of the public.

Antiprivatization campaigners have long questioned the legal basis of the program, using it as ammunition to oppose the crucial program.

Highlights of bill on SOEs

* SOEs will only be in the form of limited companies (PTs) and semiprofit-oriented companies (perum) * SOEs must have an internal supervisory board, audit committee and supervisory board * The board of directors must follow up on what the supervisory agencies recommend * Privatization can only be applied to SOEs that are in the form of PTs, with certain requirements * SOEs to be privatized must be in competitive sectors or industries * The privatization committee will comprise the coordinating minister for the economy, finance minister and the minister responsible for the sector or industry concerned.