PR 94962 

JAKARTA, Indonesia, March 14, 2022/ Antara News Agency=KYODO JBN/ --

President Joko Widodo (Jokowi) has given a period of one to two years for

state-owned enterprises (SOEs) to make fundamental changes to increase their

competitiveness.

On October 14, 2021, Jokowi stated that he was pleased to witness the

clustering of container terminal operator and port development firm Pelindo

into one holding, which was PT Pelabuhan Indonesia, to cuts logistics costs and

helps improve connectivity throughout Indonesia.

According to Jokowi, the clustering forms into one great power, as it builds

networking with partnerships abroad. "Through partnering with overseas

companies who have networks, the (SOEs') link to all countries can become a

huge power," the president remarked.

Through clustering, SOE companies have shown above-standard or even excellent

work performance that has contributed significantly to the state budget.

According to data from the National Development Planning Board (Bappenas) in

2019, the estimated total budget for infrastructure development in the period

of 2020-2024 was US$447 million or Rp6,445 trillion, and 21 percent of them

came from or supported by SOEs.

In the third quarter of 2021, the total assets of SOEs reached some US$610.5

million or Rp8,767 trillion, equivalent to some 57 percent of Indonesia's GDP.

Moreover, in January - September 2021, the total consolidated revenues were

closed at Rp1,613 trillion, or grew 14% compared to the same period in 2020.

One of the efforts to enhance state firms' performances is through clustering

and restructuring.

Clustering efforts have been accomplished by reducing the number of SOEs from

107 to 41, and sector clustering from 27 to 12, where two deputy ministers each

oversee six clusters.

Currently, there are 12 sectors that 41 SOEs engage in: energy, oil, and gas;

mineral and coal; insurance and pension funds services; plantations and

forestry; and telecommunications and media.

Additional industries include the food and fertilizer industry, tourism and

supporting services, health industry, manufacturing industry, infrastructure,

logistics, and financial services.

On February 18, 2022, SOEs Minister Erick Thohir announced that he would again

downsize the number of state-owned enterprises from 41 to 37 in the next two

years.

In addition, he expressed his hope that the next SOEs Minister can complete the

reducing program to only 30 state-owned enterprises. With a roadmap for a

ten-year period, he has targeted to make the scope of state firms more

manageable.

So far, the ministry has encouraged and carried out the SOEs transformation

through reducing companies that are considered too large in number, and

focusing on inefficient business sectors.

Under his leadership, the transformation is focused on human capital through

replacing underperforming board of directors with better ones, so many

state-owned enterprises can generate profits for the state.

Through restructuring, holdings, mergers, and acquisitions, Thohir has made

SOEs' work performances more efficient.

According to Thohir, the SOEs Ministry distinguishes the strategy of the three

pharmaceutical SOEs, where Bio Farma focuses on vaccines, Kimia Farma is

focused on chemicals, and Indofarma on herbs. Indonesia has extraordinary

potential in the herbal sector, but it has not been explored, so the SOEs

Ministry had tried to re-map the path in developing it.

"We know that we import 90 percent of the raw material for medicines, and even

medical devices. The COVID-19 pandemic has woken us up that we need to create a

roadmap for Kimia Farma to focus on chemicals and Indofarma to be positioned on

herbs," he explained.

Thohir said that since health and energy are under the same SOEs ecosystem, a

connection between sectors needs to be built.

On the other hand, oil and gas firm Pertamina has begun to build

petrochemicals, and one of the derivatives of petrochemicals is to create

paracetamol. If Pertamina is merged with a health state firm into one

ecosystem, Indonesia would no longer need to import paracetamol.

The ministry also consolidated and launched the tourism holdings and its sub

holdings into one cluster, consisting of airport operator Angkasa Pura I and

Angkasa Pura II, as well as some aviation and hotel companies.

Thohir put together the infrastructure construction SOE and cement SOE into one

cluster, as he viewed that the two need each other and are expected to

synergize.

Meanwhile, the tourism, logistics, and support cluster consists of Hotel

Indonesia, temple tourism managing firm PT TWC, which manages the temples of

Prambanan and Borobudur and Ratu Boko, and Indonesia Tourism Development

Corporation (ITDC).

State-owned Bank Negara Indonesia (BNI) also announced that it relied on

clustering to strengthen the distribution of smallholder business credits

(KUR), as well as to help boost the productivity of Micro, Small, and Medium

Enterprises (MSMEs) during the COVID-19 pandemic.

Moreover, on February 23, three state-owned companies have agreed to

collaborate on building green industry clusters in Indonesia that will

prioritize the efficient and effective use of sustainable resources. The three

state firms are electricity company PT Perusahaan Listrik Negara (PLN), oil and

gas company PT Pertamina, and fertilizer company PT Pupuk Indonesia.

The clustering efforts began in 2020, as many state firms decided to be merged.

Thohir also significantly increased the performance target of SOEs to double

their outputs in 2024, especially on profits, which are projected to reach some

US$20.8 billion or Rp300 trillion.

To be successful

Performance of banks incorporated in the Association of State-Owned Banks

(Himbara) throughout 2021 showed satisfactory results through well-implemented

credit restructuring, economist and capital market practitioner Lucky Bayu

Purnomo said.

According to Purnomo, credit restructuring has resulted in more efficient and

effective management of operational expenditures. In December 2021, the total

profit of Himbara banks shot up to US$5 billion or Rp72.05 trillion,

significantly increasing by 78.06 percent, compared to 2020 at US$2.8 billion

or Rp40.34 trillion.

Thohir said each Himbara bank has a specific business focus, such as BRI

prioritizes the MSME and ultra micro-segments, Mandiri is dedicated to

enhancing the national corporates and entrepreneurs, BNI on international

business, and BTN focuses to reduce backlog numbers and help people, including

millennials, to make it easier to purchase a home.

"We hope that Himbara's role can be more prominent and become the main national

economic driver through enrichment in various segments that provides positive

impacts for stakeholders and Indonesian society," he said.

Previously, SOE holdings that had been formed were plantation holdings under PT

Perkebunan Nusantara III, forestry holding under Perum Perhutani, fertilizer

holding under PT Pupuk Indonesia, and cement holding under PT Semen Indonesia.

Under Thohir's leadership, the holdings of SOEs that have been completed are

the mining holdings under Mining Industry Indonesia (MIND ID), oil and gas

holdings under PT Pertamina, pharmaceutical holdings under PT Biofarma,

state-owned hospital holdings under Pertamedika IHC, insurance and underwriting

holdings Indonesia Financial Group (IFG), and tourism and aviation holdings

under Aviasi Pariwisata Indonesia or InJourney.

Fixing SOEs through the establishment of holdings is a task that must be

carried out sustainably to yield powerful government-owned corporations that

can compete on the international stage.

SOURCE: Ministry of SoE