The next government should give no room to political interference in state enterprises.

As valuable assets, state-run firms have been playing an important role in helping shape and develop the national economy. However, political interference remains one of the biggest barriers that could hamper the growth of these companies.

The next government can help state-owned enterprises (SOEs) develop professionalism, while at the same time minimizing political interference with the companies.

During the term of Tanri Abeng (March 1998-Oct. 1999), the State-Owned Enterprises Ministry was managed professionally, separating state firms from technical ministries, such as mining companies that used to be under the Energy and Mineral Resources Ministry, manufacturing companies under the Industry Ministry, and so on.

But as time went by, particularly when direct presidential elections were introduced in the country, political interference toward the SOE Ministry and state firms began to mount. In some cases, the political interference was intense and extraordinary. For instance, an SOE minister and secretary could not agree on many issues simply because they were from different political parties.

During my tenure, however, political interference has been relatively minimal, perhaps because I am not affiliated with any party. I have a free hand to uphold professionalism in the state companies, although I have to admit that in some cases I was not that free and political interference could win.

Now we are welcoming the new government and we do not know whether it will promote professionalism or appoint a politician for the SOE ministerial post. It will really depend on the new president, but I am hoping that the new government will uphold professionalism. Successful corporations require professional management, and the SOEs are on the right track.

The next government should give no room to political interference in state enterprises, in line with good corporate governance, or else we will only have a setback. As a consequence, the SOE Ministry will also need a very professional leader.

The culture of professionalism, however, will require qualified human resources in order to win competition both at home and in the global market.

The human capital of SOEs is improving year by year. Big state-owned firms have started to prepare their human resources by setting up training centers, some of them developing their own centers of excellence in the form of universities or academies to create talented individuals who will come up with innovations and later lead the companies.

To name a few, airport operator PT Angkasa Pura I (AP I) has built its center of excellence in Kemayoran, Central Jakarta; port operator PT Pelabuhan Indonesia II (Pelindo II), or Indonesia Port Corporation (IPC), runs IPC Academy in collaboration with the Netherlands Maritime University in Bogor, West Java; and cement producer PT Semen Indonesia recently launched Semen Indonesia Management Institute.

In the future, we hope to see more state companies form their own human resources development centers that focus on their respective fields and business specialization. Honestly, I am afraid that if they do not accelerate their human resources development programs, they will be unable to cope with the world'€™s changing business environment.

But human capital development is not enough to strengthen Indonesia'€™s presence in ASEAN, because the SOEs badly need huge assets and networks to compete and win in the regional market, particularly when the ASEAN Economic Community comes into effect at the end of 2015.

For that reason, the SOE Ministry introduced holding companies in 2012 to leverage Indonesia in ASEAN.

Currently, Indonesia only has two holding company giants, namely cement producer PT Semen Indonesia and fertilizer producer PT Pupuk Indonesia.

Semen Indonesia serves as a holding company for PT Semen Gresik, PT Semen Padang and PT Semen Tonasa, while Pupuk Indonesia is the holding company for PT Pupuk Iskandar Muda (PIK), PT Pupuk Kalimantan Timur (Pupuk Kaltim), PT Pupuk Sriwidjaya (Pusri) and logistics firm Pupuk Indonesia Logistik.

Under the holding formation, both firms have expanded their businesses in Asia. Semen Indonesia acquired a 70 percent stake in Vietnam'€™s Thang Long Cement Joint Stock Company from the Hanoi General Export-Import Joint Stock Company (Geleximco), while Pupuk Indonesia took over Japan'€™s Mitsui & Co. Ltd. ammonia fertilizer plant in East Kalimantan for Rp 1.5 trillion (US$129 million) recently.

Still, it is not enough, because other ASEAN countries have a stronger presence than Indonesia in the 600 million population region. Malaysia, for example, can boast financial institutions such as Maybank and CIMB, or its low-cost carrier AirAsia, which have all penetrated markets in the region, including in Indonesia.

We are fully aware that Indonesia has to build more holding companies to enjoy a share of the pie, which means we will need bank institutions that can support the expansion plans. I am afraid that if we do not have a bank holding company in the next few years, we will be blamed for the future flourishing of foreign lenders. For a country of its size, Indonesia would normally need at least two bank holding companies.

Mandiri, BNI and BTN could create a holding firm together, and the rest, like BRI and other state-run financial and insurance institutions, could set up another holding company.

The problem is that forming a holding company can take quite a long time because the government has to secure approval from the House of Representatives, in addition to getting the president'€™s endorsement. But we have found a breakthrough to help accelerate the process by transferring the assets of a smaller company to the bigger one, such as PT Barata, which is now in the process of asset transfer to PT Wijaya Karya. The same process is currently being carried out in PT Sang Hyang Seri (SHS), which will be managed under PT Pupuk Indonesia Holding.

Ideally, a big country like Indonesia needs to have holding firms in plantations, forestry, cement, fertilizers, food, infrastructure, pharmacies, finance, fisheries and transportation.

Plantation and forestry holding firms are going to be established by the end of September. Having four holding companies at the moment is not that bad, even though I wish I could set up a pharmaceutical holding firm now. But the case is quite different for the pharmaceutical holding company because the existing pharmaceutical firms are all listed on the Indonesia Stock Exchange.

Another imminent challenge facing Indonesia is how state companies can help the government realize its food security programs. Frankly, food state firms at present are weak as they lack skilled human resources and infrastructure to develop the sector. But we are developing them and their condition is getting better each year. Hopefully our food state firms, such as fish producer PT Perikanan Nusantara, can contribute a lot to the national food security programs.

Besides the food industry, Indonesia is in need of engineering state firms that produce manufacturing machinery, equipment and any engineering-related tools that will free the country from dependence on other countries.

Whether all these dreams will come true will depend on the government'€™s commitment to developing and empowering our state-owned enterprises.

The article was written based on The Jakarta Post'€™s Nurfika Osman'€™s interview with Dahlan Iskan.

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