T

he government is preparing a long-term transformation program to move its state-owned enterprises into a giant holding company in a bid to improve their performance and increase their role in the economy.

Through the program, which was first envisioned several years ago, state-run firms would be transferred into a “super-holding” company that would resemble Malaysian sovereign investment fund Khazanah Nasional, State-Owned Enterprise (SOE) Minister Rini Soemarno said.

She said the super-holding company would resemble Malaysia’s Khazanah more than Singapore’s sovereign wealth fund Temasek, which is designed for purely commercial purposes.

“Khazanah, on the other hand, has people-oriented programs to the forefront,” she said on Wednesday evening, indicating that Indonesia’s state-owned firms would act as the country’s “agents of development”.

Through such a program, she pointed out, she might be the country’s only minister to eliminate the functions of her ministry as the transformation program was expected to be completed before the end of 2019.

The SOE Ministry has started the process of creating the super-holding company by establishing a number of holding companies based on sectors. For this year, she said the ministry was preparing to establish five holding companies covering five sectors, namely finance, infrastructure, mining, energy and housing.

The finance holding company will include four state-owned banks, namely Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI) and Bank Tabungan Negara (BTN), as well as state-owned micro lender Permodalan Nasional Madani (PNM) and state-run pawn shop Pegadaian.

In order to accelerate the program, Rini said the ministry and the House of Representatives were currently discussing a bill that was expected to revise the SOE Law next year in order to pave the way for the establishment of the super-holding company.

“We will see whether the super-holding company becomes an institution that is responsible directly to the President or is part of the Finance Ministry. In Khazanah, the management reports directly to the Malaysian prime minister,” she said.

The roadmap for the long-delayed establishment of SOE holding companies was presented to President Joko “Jokowi” Widodo in December last year shortly after Rini gathered all executives from the country’s SOEs in a focus group discussion to enhance synergy among them.

The government is convinced that the super-holding company will help state-run firms improve their efficiency, while having a better capacity to seek funding and capital, particularly in the banking sector, in order to compete globally.

“Our banks are not strong enough in terms of capital if we want to compete internationally,” Rini said.

Gatot Trihargo, the ministry’s deputy for financial services, said sector-based holding companies that were also in the pipeline were essential to boost capacity and increase the efficiency of Indonesia’s 199 SOEs, which have total assets of Rp 4.2 quadrillion (US$317.7 billion), as the country’s state budget would be limited in supporting their growing businesses in the future.

Being under a super-holding company, state-owned companies would be managed professionally, rather than supervised by the SOE Ministry’s deputies, who were basically civil servants, Rini said.

As the management would be more professional, accountable and transparent, state-owned companies could have greater bargaining power when they needed to become publicly listed firms or seek funds by issuing debt paper in local and global capital markets, she said.

Asmawi Syam, chairman of the Association of State-Owned Banks (Himbara), said the super-holding company could help state-run banks in improving their efficiency such as with the new joint-ATM service “ATM Himbara Link”, which was launched last year in order to reduce operating costs.