Social mission hampers state-owned companies

JAKARTA (JP): The government policy that expects state-owned companies to operate as full business entities while also serving as social organizations is unrealistic, says a senior auditor.

Soedarjono, the chief of the Government Audit Agency (BPKP), said yesterday that such an ambiguous policy often results in a loss of business orientation.

He said that the requirement to set aside between one percent and five percent of profits for small-scale businesses and cooperatives is one of major reasons why many state-owned companies cannot compete with private firms.

Soedarjono described the requirement as a way for the government to maintain the public image of the state-owned companies.

He said their social responsibilities often come at the expense of the state-owned firms' commercial obligations.

"To make it more business-like, such a social mission should be changed into a business partnership," he suggested.

Soedarjono also criticized the bureaucratic approach of most state-owned companies to running their business.

He said such a management approach makes the business organization of state firms not so flexible in facing the changing in the business trends.

Flexibility

"The management of state-owned firms should be more flexible to enable them to quickly react to business changes," he said, adding that shifting state-owned companies to a fully-business oriented entity is the only key in enabling them to compete with private companies.

Director General for State Enterprises Martiono Hadinoto, however, said that state-owned companies should not blame their social mission on their poor performances.

He said that the key to the business success of state-owned firms is their ability to improve their efficiency.

"Even without a social mission, state-owned firms will remain less competitive if they do not improve their business efficiency," he said.

Soedarjono said that business activities of state-owned companies are still inefficient, given the low ratio of their rates of return on assets.

He said the growth of their profits was only around seven percent in 1992, much lower than the average 17 percent growth in their assets.

According to Soedarjono, state-owned companies are expected to contribute 26 percent to the government's domestic non-tax revenues, which are projected to reach Rp 6.4 trillion (US$2.8 billion) this fiscal year.(hen)