During the last presidential debate on April 13, incumbent President Joko “Jokowi” Widodo said he planned to establish a super holding company that would act as the ultimate parent company for all existing and upcoming holding companies in various sectors.

The government has established several holding companies, each of which consist of SOEs from the same industries.

Those holding companies are PT Pupuk Indonesia, which comprises state fertilizer companies; PT Indonesia Asahan Aluminium (Inalum), which manages state mining companies; PT Pertamina, the holding company in charge of oil and gas, and a plantation holding company led by PT Perkebunan Nusantara (PTPN III).

The government is working to establish other holding companies for infrastructure and construction industries, housing and industrial development industries as well as for aviation industries.

State-Owned Enterprises Minister Rini Soemarno said the creation of the super holding company would hopefully make the management of all state-owned companies become less bureaucratic as all companies would be managed professionally by the super holding.

Later, she continued, the super holding company would resemble that of Singapore’s Temasek or Malaysia’s Khazanah.

“This means that the super holding would report directly to the president just like Temasek or Khazanah directly reports to their [respective] prime ministers,” she told the press in Jakarta, adding that the role of her ministry would later be replaced by the super holding company.

University of Indonesia SOE expert Toto Pranoto said he agreed with the idea of establishing a super holding company, adding that when the super holding company was established, Indonesia would no longer need an SOE Ministry.

“Like Malaysia and Singapore, the government’s involvement with SOEs will be very limited, as it will delegate the authority to the super holding company,” he explained

The super holding company would also manage the many sectoral sub-holdings, similar to that of Temasek, which managed nine sectoral holding companies and Khazanah, which managed 11. Such management would make Indonesia’s SOEs be more efficient, he said.

Toto also said the creation of the company would speed up decision-making in the business sector.

Currently, state firms need to ask permission from the SOE Ministry before they can conduct any corporate action, particularly those related to the firms’ equities. The ministry then seeks permission from the House of Representatives before it can give a green light on the firms’ plan.

The House will also evaluate the firms’ performances regularly as part of its role of overseeing the country’s assets.

Yet, before the government could establish the super holding company, Rini said, it still had to seek permission from the House.

This, Toto said, could become a hurdle in the establishment of the super holding company because the government and the House would have to reach a deal on new SOE management.

Furthermore, the SOE law would have to be amended to legally allow the super holding company to manage all 114 state firms, he said.

Another hurdle that the super holding company might face was integrating all SOEs under it during its implementation, he said.

“Research shows that the post-merger integration process is critical in determining the success of forming a holding company,” he said. “If that doesn’t go smoothly, the holding would not be able to increase its value and competitiveness.”

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