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Govt eyeing limit on state-owned banks’ loans to construction SOEs
Outstanding loans from state-owned banks to construction SOEs reached Rp 70 trillion (US$4.6 billion) in May, according to government data, but restricting issuance would cause new risks for lenders.
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A construction worker inspects a girder on Aug 8, 2016, at a PT Waskita Beton Precast plant in Palembang, South Sumatra. PT Waskita Beton Precast is a subsidiary of state-owned construction firm PT Waskita Karya. (JP/Donny Fernando)
S
tate-Owned Enterprises (SOEs) Minister Erick Thohir is looking to curb loan disbursement from state-owned banks to state-owned construction firms, which have struggled to meet their debt obligations, but such a move could lead to new risks.
Details on the matter are still being worked out by the ministry and executives from both parties.
"We will continue to support construction SOEs, but not based on corporations anymore. We will [give loans] based on projects, with multiyear repayment periods," the minister said on Monday, as quoted by Bisnis Indonesia.
According to him, the move is needed because some construction SOEs have mishandled borrowed funds for buying land, buildings and other types of assets, instead of funding projects.
The minister, who has held the position since 2019, said those cases had happened before his term in office but he was committed to finding solutions to the financial problems of the firms in question.
Abra Talattov, who heads the Center of Food, Energy and Sustainable Development at the Institute for Development of Economics and Finance (INDEF), said Erick's statement was a sign that construction SOEs should focus primarily on solving their financial problems.
"It puts pressure on those companies, so they don't feel any privilege or assume that SOE banks will help them [solve] their financial issues. They need to think about how to find external funding, as well as rationalize their projects," Abra told The Jakarta Post on Tuesday.
