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Govt ‘must not overlook’ public service tasks amid SOE shakeup
Analysts question how a new sovereign wealth fund will address the public service obligations (PSOs) of certain SOEs included in its portfolio, given that these firms are often instructed by the government to sell products below market prices or take on unprofitable projects.
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State-Owned Enterprises Minister Erick Thohir attends a working committee meeting with House of Representatives Commission VI in Senayan, Jakarta, in January 2020. (JP/Dhoni Setiawan)
T
he newly established Investment Authority of Indonesia (IAI) Danantara is set to become one of the world’s largest sovereign wealth funds (SWF) with an estimated initial US$600 billion in assets under management by consolidating seven state-owned enterprises (SOEs) and a state-owned fund with a mandate to maximize their returns.
However, analysts question how the new agency will address the public service obligations (PSOs) of certain SOEs that are instructed by the government to offer products below market prices or take on unprofitable projects.
Experts suggest a separation of SOEs into two categories based on their key purpose: SOEs meant to generate profit and those meant to fulfil public functions.
According to a document seen by The Jakarta Post, Danantara plans to consolidate seven major SOEs, namely lenders Bank Mandiri, BRI and BNI, telecommunications giant Telkom Indonesia, oil and gas company Pertamina, electricity provider PLN and mining holding firm MIND ID.
Together, those companies hold approximately Rp 8.9 quadrillion (around US$570 billion) in assets, representing over 85 percent of all Indonesian SOE assets. They also contributed around Rp 72.8 trillion in dividends to the state budget last year, accounting for nearly 90 percent of SOE dividend payouts.
In the future, Danantara is to absorb other state assets to bring its assets under management to $982 billion, potentially positioning it as the world’s fourth-largest SWF.
It would be tasked with improving the efficiency of those assets to optimize their returns. However, some of the SOEs it will hold also have a mandate to support government programs.
