Despite strong protests from lawmakers at the House over the rule, the government is convinced the process of establishing such an SOE holding will remain under strict governance principals.

“It’s true that PP 72 is being questioned [by the House], but we will go on with the process. We are ready to explain [our stance] to the lawmakers that there is no issue [with the regulation],” The Finance Ministry’s directorate general of state assets, Sonny Loho, said recently.

The rule, Government Regulation (PP) No. 72, was issued last year as a revision to PP No. 44/2005, which regulates the mechanism of state capital participation and administration for SOEs.

The government claims the new regulation is needed as a legal basis for any transaction mechanism, dubbed “inbreng”, in which stakes and assets in one company are transferred to the other and are treated as capital injection.

With the rule, it will be able to carry out the inbreng mechanism without having to change the state budget, thus avoiding the requirement to seek approval from the House as before.

Commission VI — which partners with several ministries, including the SOE Ministry — plans to summon SOE Minister Rini Soemarno to explain the government’s intention in issuing PP 72, as it insists that privatization and transfer of stakes must acquire the House’s approval.

When contacted, Nurhasan Zaidi, a Commission VI member from the Prosperous Justice Party (PKS), insisted that SOE monitoring remained at the lawmakers’ behest.

“We have the authority to check whether SOE mergers have merit. We will study any merger plans, but the government has not been clear as to which SOEs to merge,” he said.

Nurhasan added that the commission’s chairman would schedule a meeting with the government soon.

The government previously stated that oil and gas firm Pertamina would become the future main holding for state companies operating in the oil and gas sector, while its subsidiary, gas firm Pertagas, will merge with state gas company Perusahaan Gas Negara (PGN). The process will be carried out under the new mechanism.

SOE Minister Rini Soemarno, however, begged to differ. She argued that the government did not intend to override the House’s authority and insisted that the newly revised rule was required to enable the state to own 100 percent shares in the holding companies.

The holding issue will take an unresolved feud between Rini and the lawmakers to new heights. The House’s special inquiry committee demanded last year that Rini be removed from her position on account of her alleged mismanagement of state-owned seaport operator Pelindo II.

Since then, Rini has been represented by former finance minister Bambang Brodjonegoro and current Finance Minister Sri Mulyani Indrawati during meetings at Commission VI.

Separately, University of Indonesia (UI) economist Faisal Basri disagreed with the SOE holding concept, which he claimed as the wrong move to improve state-owned companies and instead created unhealthy competition between them and private firms.

He pointed out that most SOEs could not synergize with their private counterparts in various sectors, thus played only a small role in improving the welfare of the people.

The holding concept may create backlash for the SOEs as well.

“If there are five state-owned infrastructure firms being merged, there is a smaller probability that they will win tenders compared to private companies. This is a bad concept by the government to deflate SOEs,” he said.

Prima Wirayani contributed to this story.

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