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Analysis: WIKA to receive Rp 8 trillion cash injection despite fraud allegations
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Minister of State-Owned Enterprises Erick Thohir was greeted by residents when he was about to take a tour at the Bung Karno Exile House, Bengkulu, Tuesday (24/1/2023). Erick Thohir together with the Governor of Bengkulu Rohidin Mersyah, Secretary General of Pena 98 Adian Napitupulu and General Chairperson of Pospera Mustar Bona Ventura will also restore history or return the location of Mrs. Fatmawati's house to its original location, to be precise at the current location of Bank BNI 46. Erick Thohir opened his speech with the success of the nation's struggle for independence, which until now the government continues to build a people's economy. (Courtesy of ET Team)
T
he State-Owned Enterprises (SOEs) Ministry has proposed to the House of Representatives an increase in state-capital injection (PMN) sfor SOEs to be disbursed in 2024 so that it would be able to bankroll cash-strapped PT Wijaya Karya (WIKA) that is currently under investigation for alleged manipulation of its financial reports. If agreed, the total PMN for this year would increase by Rp 24.04 trillion (US$1.61 billion), or 70 percent, from the initial budget of Rp 33.9 trillion to Rp 57.96 trillion.
Construction SOE WIKA was not even included in the initial proposal for the 2024 PMN. In the latest proposal tabled to the House on June 5, the SOEs Ministry included a Rp 8 trillion PMN for WIKA, which is tasked by the government to build a number of key infrastructure projects including the Jakarta-Bandung high-speed railway (HSR).
WIKA was suspected of manipulation after one of its creditors uncovered several irregularities, especially in their 2021 and 2022 financial reports. According to the SOE’s audited financial statement, they reported a net profit of Rp 117.7 billion in 2021, before suffering a net loss of Rp 59.6 billion in 2022. However, when they booked the net profit in 2021, they simultaneously suffered a net decrease in cash and cash equivalents by Rp 7.98 trillion.
Although it is possible for companies to record negative cash flows despite booking a net profit if most of its profits are recorded in receivables instead of cash, construction companies prefer to receive their payments in cash due to long gestation periods so that they can pay off accrued debts. This is especially true in WIKA’s case as the company’s debt reached Rp 12.6 trillion in March and it requested a standstill to 15 different banks in April. Furthermore, WIKA’s financial troubles have delayed construction of the Jakarta-Bandung HSR. The SOE’s late payments to creditors led some banks to freeze a number of HSR accounts, deterring new banks from funding the project.
The SOEs Ministry’s languid response to the allegations has also been adding fuel to the fire. The Development Finance Comptroller (BPKP) did not get assigned to audit WIKA’s finances until recently and only as a prerequisite for receiving the Rp 8 trillion PMN. Meanwhile, the allegations of fraud have been circulating for some time.
In addition to WIKA, the SOEs Ministry increased the PMN allocations for another construction SOE PT Hutama Karya by Rp 12.5 trillion, from an initial budget of Rp 10 trillion to Rp 22.5 trillion, and for newly established state-owned insurance holding company Indonesian Financial Group (IFG) by Rp 3.56 trillion, from an initial budget of Rp 3 trillion to Rp 6.56 trillion.
SOEs Minister Erick Thohir explained that the additional Rp 24.04 trillion increase to the PMN was not a sudden decision and was discussed in an internal meeting with President Joko “Jokowi” Widodo on April 28. The addition of WIKA is to reinforce its capital security, while the other two were necessary for enterprises to complete new high priority projects that were assigned to them. In the case of Hutama Karya, it will be taking over the Bogor-Ciawi-Sukabumi (Bocimi) and Kayu Agung-Palembang-Belitung toll roads from another construction SOE PT Waskita Karya. Meanwhile in IFG’s case, it was assigned to resolve policy migrations from defrauded state-owned insurer PT Asuransi Jiwasraya.
