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Analysis: Two institutions with one task Establishing an SOEs super-holding
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High-rise buildings are seen in Sudirman Central Business District in South Jakarta on March 14, 2021. (AFP/Adek Berry)
P
resident Prabowo Subianto’s appointment of Muliaman Hadad as the head of the newly established Daya Anagata Nusantara (Danantara) investment management agency has confused the public following the reappointment of Erick Thohir as state-owned enterprises (SOEs) minister. Both Muliaman and Erick are to manage 41 SOEs, with a single aim of establishing an SOEs super-holding company similar to Singapore’s Temasek Holdings.
Muliaman, former chairman of the Financial Services Authority (OJK) from 2012-2017, noted that the role and authority of Danantara would differ from that of the SOEs Ministry led by Erick Thohir. Danantara would be more similar to Indonesia's existing sovereign wealth fund, the Indonesia Investment Authority (INA), but with a larger fund. Danantara would manage government investments outside of the state budget.
The creation of Danantara is intended to enhance SOEs’ leverage once their scattered assets are consolidated. Muliaman reiterated that the SOEs Ministry would continue to operate alongside Danantara but could not offer certainty about the future relationship between the two institutions. With the establishment of Danantara, the future of the INA is unclear. Muliaman only noted that Singapore also operated two separate sovereign wealth funds, Temasek and GIC, which worked in different sectors.
Restructuring the SOEs Ministry is a key part of Prabowo’s plan to achieve an 8 percent growth rate in the next five years. Prabowo sees that SOEs have the potential to contribute more to the government’s revenue if they are managed professionally, like Singaporean SOEs under Temasek.
However, questions remain regarding how SOEs will deliver their public service obligations (PSO). The Prabowo government aims to streamline the operations of SOEs by differentiating between those with PSO and those that focus on maximizing profits. Profit-oriented SOEs will be placed directly under the super holding company to improve their competitiveness, market value and performance, as well as enhance their dividend contributions to the government.
It is unclear at present whether the super holding company will also comprise PSO SOEs such as PT PLN, which distributes subsidized electricity to low-income households; PT Pertamina, which distributes subsidized fuels; and PT Pupuk Indonesia, which produces subsidized fertilizers. There is talk that the internal units at PLN and Pertamina that handle subsidized products will be separated from their profit-oriented business line, while the fertilizer subsidy will be distributed directly to farmers instead of via Pupuk Indonesia.
To encourage better professional management of SOEs, Prabowo’s economic team aims to adopt a governance structure inspired by Temasek. In addition to referring to Temasek’s model, Prabowo’s team plans to learn from China’s State-owned Assets Supervision and Administration Commission of the State Council (SASAC) and its successful strategies for managing and reforming SOEs.
