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Most SOE profits from listed firms
State-owned enterprises (SOEs) that have recorded weak performances may have to improve their finances by going public, as the few that have listed their shares on the stock market have performed better, according to research
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State-owned enterprises (SOEs) that have recorded weak performances may have to improve their finances by going public, as the few that have listed their shares on the stock market have performed better, according to research.
Eighty percent of the profits of 114 SOEs last year came from 20 publicly listed state enterprises, a study conducted by the University of Indonesia’s Economic and Business School Management Institute (LM-FEB UI) showed.
“Becoming publicly listed companies will [make them accountable] to investors; it will make them focus on managing their stock prices at a good level,” said the institute’s managing director Toto Pranoto in Jakarta recently.
The combined profits of the 20 publicly listed SOEs in 2018 was estimated at Rp 150 trillion (US$10.61 billion), or 79.7 percent of all the SOEs profits of Rp 188 trillion.
In terms of revenue, the 20 SOEs contributed Rp 796 trillion last year, or 34 percent of all SOE revenue of Rp 2.3 quadrillion.
Data from state-owned investment firm Bahana Pembinaan Usaha Indonesia (BPUI) echoed the study, showing that the market had responded positively to the performance of listed SOEs.
BPUI president director Marciano Herman took the example of the case of three state-owned banks — Bank Negara Indonesia (BNI), Bank Mandiri and Bank Rakyat Indonesia (BRI). BNI became publicly listed in 1996, while Mandiri and BRI went public in 2003.
“Fifteen years [after the initial public offering], Mandiri achieved average compound annual growth [CAG] of around 20 percent and BRI at 22 to 24 percent, while BNI achieved 12 percent,” he said.
Aside from banks, Marciano pointed to positive growth in stock prices of SOEs in the infrastructure sector, namely state-owned toll road operator Jasa Marga and state-owned construction company Waskita Karya.
“Both of them also performed pretty well [in the stock market] with CAG at around 12 percent since becoming publicly listed companies,” he said.
Toto of the institute said the government should immediately take firm action to help underperforming and old-fashioned SOEs, such as by offering them to the public.
“The government has to decide what to do with the SOEs that aren’t socially valuable anymore and keep making losses,” he said, citing that the number of SOEs in that category was probably less than a dozen.
“The options could be divestment of shares or a spin-off.”
Previously, SOEs Ministry secretary Imam Apriyanto said the government had yet to devise a plan for SOE privatization, which may help increase their capital this year. The ministry instead was focusing on completing a program to establish holding companies for SOEs.
State-owned energy holding company Pertamina and state-owned mining holding company Indonesia Asahan Aluminium are two success stories of establishing SOE holding companies.
“[Holding companies] in the pipeline are in infrastructure, housing, pharmaceuticals and asset management. By doing this, we can speed up the process of getting additional funds [from external sources] and avoid using state funds,” he said.
On regulatory considerations, the study by LM FEB UI highlights the possible disincentive in the SOE bill initiated by the House of Representatives.
According to the study, several articles in the bill have the potential to create more bureaucratic hassles, such as the appointment of an SOE president director that will need the House’s approval.
