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Govt to cap growth of SOEs' capex at 7 percent as focus shifts to profitability
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Dozens of garlands of thanks to the support of the Minister of SOEs in the pages of the Ministry of SOEs Jakarta, Friday (12/06/2019). (JP/Dhoni Setiawan)
T
he government will limit the increase of capital expenditure (capex) at state-owned enterprises (SOEs) to about 7 percent this year as part of an SOEs restructuring program, an advisor to the SOEs minister has said.
Mohammad Ikhsan, an advisor to State-Owned Enterprises Minister Erick Thohir, said the growth of SOEs’ capex this year would be far lower than the average growth of 15 percent between 2012 and 2018.
“In our new RPJMN [National Medium-Term Development Plan], the increase in capex for SOEs is limited to between 5 and 7 percent,” Muhammad said at the Mandiri Investasi Market Outlook presentation in Jakarta on March 5.
SOEs nationwide are currently part of a restructuring program on improving profitability, as the increase in asset growth at SOEs is not proportional to their profit growth.
Muhammad said the total assets of more than 140 SOEs almost doubled to Rp 800 quadrillion (US$560 billion) in 2018 from Rp 450 quadrillion in 2012. “The asset growth should have corresponded with the growth in earnings but, in reality, it contrasted,” he added.
The ministry, Muhammad said, would focus on improving profitability rather than on asset growth.
According to a government-commissioned joint study between McKinsey & Co. and Boston Consulting Group, from the 114 SOEs plotted by the study, only five bring value-added to the country. Among the five are banks and a telecommunications company.
