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ADB provides $500m loan to help RI downsize SOEs
The Asian Development Bank has approved a US$500 million loan to support Indonesian government efforts aimed at improving the efficiency, resilience and corporate governance of state-owned enterprises (SOEs).
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T
he Asian Development Bank has approved a US$500 million loan for the Indonesian government to reform state-owned enterprises (SOEs) in the country with the aim of improving their efficiency, resilience and corporate governance.
The program will support efforts to reduce the number of SOEs and require them to focus on core operations, so that they can be financially viable and efficiently provide essential public services.
Other areas include measures to improve the quality of SOE boards, strengthen financial monitoring and disclosure, and help SOEs transition to a climate-compatible business model.
The German development-bank KfW will provide co-financing with a loan equivalent of €300 million (US$310 million).
“SOEs can play a vital role in fostering inclusive and sustainable recovery from the COVID-19 pandemic in Indonesia,” ADB senior public-management specialist for Southeast Asia Yurendra Basnett said in a statement on Friday.
“But to deliver greater value to the public, their structural weaknesses must be addressed,” he added.
Read also: Forget protection: Jokowi tells SOEs to get out of their comfort zone
Prior to obtaining the loan from ADB, the Indonesian government has made efforts to downsize SOEs in the country. In 2019 alone, there were around 143 state-run firms, or more if one includes all subsidiaries.
SOEs Minister Erick Thohir has asked two deputy ministers to help with dividing these SOEs into two main groups of 48 and 73 companies respectively.
The effort included forming holding companies, especially for firms with good prospects and in a healthy financial state, while some firms that are underperforming or that depend on regular state-capital injections were to be liquidated, merged or divested.
Read also: Profit at any cost?: Govt sends mixed signals on SOEs’ fates
The number of SOEs has been brought down to 41 firms as of March. Erick said he aimed to push their number down further to 37 and hope a future SOEs minister could slash it again to below 30.
“So, the important note is that the corporations are shrinking but the net profit is increasing,” Erick Thohir said as quoted by Kompas on March 17.
Erick said that the government efforts to downsize SOEs had made them much more efficient, enabling them to book profits. In 2021, total combined-net profits of SOEs were Rp 90 trillion, up from Rp 13 trillion a year earlier, Erick added.
Regarding the ADB loan, Erick said it would be directly transferred to the state to help finance the deficit next year, making it part of the ministry’s contribution to the state budget, on top of planned dividends next year estimated at Rp 48 trillion. “So, nothing goes to the SOEs Ministry,” Erick said in a statement.
