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fter years of delay, the government has decided to group 15 state-owned plantation firms into four new companies based on their commodities: rubber, palm oil, sugarcane and various plants.

“These new companies will be subsidiaries of a new plantation holding company,” deputy to state-owned enterprises minister for primary industry, Megananda Daryono, said Monday.

Indonesia presently has 15 state plantation companies, PT Perkebunan Nusantara I through XIV and PT Rajawali Nusantara Indonesia, which cultivate commodities such as cacao, coffee, palm oil, rubber, sugarcane and tea.

Megananda said the government had yet to decide the names of the new companies. He did say that the holding company and its subsidiaries would be set up by the end of this year.

State-Owned Enterprises Minister Mustafa Abubakar said the new structure will change the existing management.

“The holding company will have six directors, including a president, and finance, investment, and marketing directors. The subsidiaries will only have three: president, and operations and general affairs directors,” Mustafa said.

Megananda said the holding company would concentrate on investment and selling the products from its subsidiaries.

“The subsidiaries will concentrate on producing more product and will not be concerned with budget expansion, as the holding company will do that,” he said.

He added the holding company would improve subsidiaries’ financial performance and production.

“Once the plantation holding company is established, it will be the biggest plantation company on the planet,” he said.

State-owned plantation companies aim to net Rp 2.2 trillion (US$246.64 million) in profit this year, an increase of 22.2 percent from Rp 1.8 trillion in 2009.

Plantation firm profits jumped by 1,600 percent to Rp 397.4 billion in the first half of this year, after
Rp 21 billion loss in the same period last year.

This growth was attributed to a rise in commodities prices and increased production.

The government also plans to set up holding companies for state-owned cement and construction firms.

Holding companies are intended to alleviate difficulties for state-owned firms in raising funds for expansion and to boost coordination between state-owned firms in the same sector.

With a large collateral base, holding companies will have greater leverage when seeking loans and financing from banks and on the stock and bond markets.

Holding companies are also part of the government’s plan to reduce the number of state-owned firms from 141 to 25 by 2015.

In addition to creating holding companies, other options are mergers, acquisitions, re-grouping and liquidation.