The government is altering the focus of capital injections for state-owned enterprises as the COVID-19 pandemic disrupts business activities and batters the country’s economy.
A newly enacted government regulation in lieu of law (Perppu) allows the government to use funds initially intended for capital injections to finance its efforts to fight the impacts of the pandemic as well as to face threats to the national economy and financial system stability.
The regulation, Perppu No.1/2020, also grants the government the authority to inject state capital as part of a national economy recovery program. The program aims to protect, maintain and improve the economic ability of businesspeople in the real sector and financial industry.
State-Owned Enterprises (SOEs) Minister Erick Thohir explained on Wednesday that the new regulation opened ways for the government to refocus its budget on state-owned firms that are working on strategic projects.
“We’re currently mapping which strategic projects must keep going and which ones can be delayed,” he said during an online press conference.
Previously, Erick had explained that the ministry would discuss the issue with the Finance Ministry, as several projects were deemed important to stimulate the economy, one of which was state-owned electricity firm PLN’s 35,000-megawatt electricity generation project.
“One thing is for sure, the 35,000-MW project is still going on despite the slowdown caused by the pandemic, as we want to anticipate a spike when the economy rises again,” he said on Wednesday.
The government has allocated Rp 17.73 trillion (US$1.06 billion) for state capital injections this year, as it expected state-owned companies to help drive the country’s economic growth. The funds were initially to be disbursed to several state enterprises, such as utility company PLN, construction company PT Hutama Karya, secondary mortgage company PT Sarana Multigriya Finansial (SMF) and microfinancing company PT Permodalan Nasional Madani (PNM).
University of Indonesia (UI) SOE expert Toto Pranoto further explained that the government’s refocusing strategy meant that state-owned companies would still receive capital injections, as long as they were working on strategic projects.
“This allows the government to refocus its capital injection budget and use it to fight the COVID-19 pandemic impacts in Indonesia,” he told The Jakarta Post, adding that the government had also signaled a reduction in capital injections this year.
“This way, the capital injections can create a multiplier effect and stimulate higher economic growth once this ordeal is over," said Toto.