SOEs yet to live up to expectations

The Jakarta Post, Jakarta

Despite a staggering combined income of Rp 495.2 trillion (some US$53 billion) -- comprising 25 percent of the nation's combined economic activity -- the performance of state-owned enterprises (SOEs) has yet to live up to expectations, a seminar on good corporate governance revealed last week.

In fact, the relatively weak performance of SOEs is one of the factors to blame for Indonesia's poor showing in global business competitiveness indexes, according to Gadjah Mada University economist Sri Adingsih.

Quoting figures from the Office of the State Minister of State Enterprises, Sri said that last year, of the 158 Indonesian SOEs only 89 managed to book profits, contributing about Rp 9.1 trillion (US$973 million) to state coffers.

As for the rest, all suffered losses amounting to more than Rp 4.49 trillion, which Sri attributed mostly to "inefficiency, complicated bureaucracy and politicization of the SOEs."

Worse still, "irregularities" were still rampant. In 2004 alone, SOE losses due to "misuse" of funds amounted to about Rp 1 trillion.

This misuse and inefficiency caused the country's competitiveness index to lag well behind its East Asian peers, Sri added.

Last year, the World Economic Forum ranked Indonesia 44th out of 104 countries in terms of business competitiveness, placing it way below Singapore (ranked 10), Malaysia (23), Thailand (37) and Japan (8).

"Overall, the performance of SOEs is far from satisfactory. Over the years, not much progress has been made our SOEs," said Sri.

Even though 89 SOEs returned dividends, 75 percent of SOE profits came from a handful of firms such as telecommunications firm PT Telkom, Bank Mandiri, Bank Negara Indonesia (BNI), Bank Rakyat Indonesia (BRI), oil company PT Pertamina, fertilizer producers PT Pupuk Sriwijaya, PT Jamsostek, gas distributor Perusahaan Gas Negara (PGN), port operators PT Pelindo II, and health insurer PT Askes.

Separately, a member of House of Representatives' commission XI Drajad Wibowo said that SOEs' return-on-assets (ROA) in 2003 was only 1.68 percent, a decline from the 2002 figure of 1.72 percent. He said rough calculations showed that if ROA in 2003 had increased to 4 percent, SOEs would have contributed some Rp 13.5 trillion to the state budget.

Panelists at the seminar outlined several ways that SOE productivity could be boosted, including the appointment of independent and professional managers, implementation of good corporate governance principles, increasing transparency, as well as building more effective public supervision mechanisms. (003)

State-Owned Enterprises Financial Performance

(rupiah billions)

2001 2002 2003 2004*

No. of SOEs 150 158 157 158

No. unprofitable SOEs 48 58 54 31**

Total losses 2,222 9,589 6,081 4,492

No. profitable SOEs 102 100 103 127

Total profits 18.448 25.665 25.611 29.428

Total assets 810.419 935.587 1,163.644 1,177.755

Total debts 678.783 662.539 761.507 695.831

Source : Office of the State Minister of State Enterprises

* unaudited

** six companies have not reported and are assumed unprofitable