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Govt looks to cut down infrastructure SOEs to just four firms
Smaller firms are to be controlled by the National Asset Management Company (PPA) and state-owned holding company Danareksa, while the process for bigger companies is still being studied.
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he State-Owned Enterprises (SOEs) Ministry is in the process of consolidating the infrastructure sector to reduce their number from nine to four.
The plan was in line with a recommendation made by the Boston Consulting Group two years ago to keep a small number of firms with specialized segmentation, SOEs Minister Erick Thohir said on Wednesday, as quoted by Kontan.
Smaller infrastructure firms would be merged into the National Asset Management Company (PPA) and state-owned holding company Danareksa. Meanwhile, the process for bigger SOEs, such as Waskita Karya, PP, Wijaya Karya, Adhi Karya and Hutama Karya, is still being studied.
"We will try to consolidate Hutama Karya and Waskita, as well as PP and Wijaya Karya. It would be similar to Bank Mandiri, which has Bank Syariah Indonesia (BSI) [as its subsidiary], while the merger [between state-owned sharia banks] happened in the subsidiary. But no decision has been made," Erick said.
Furthermore, Erick explained that the ministry still needed to analyze the cash flow of those big companies to ensure the process would not disrupt ongoing projects and hence their business performance.
Last month, the SOEs Ministry announced its plan to request an additional Rp 25 trillion from state coffers this year to aid state-run construction firms, many of which are burdened by debt.
Deputy SOEs Minister Kartika Wirjoatmodjo said the ministry was in the process of requesting the allocation in the 2023 state budget. He said the ministry was expecting a total of Rp 80 trillion in SOE dividends for the state from 2022, exceeding the Rp 50 trillion target, and that the capital injections could come from the difference.
As of the third quarter of 2022, Wijaya Karya had a debt ratio of 99.26 percent, while Adhi Karya was with 78.79 percent, followed by PP with 46.27 percent. The worst-performing of the four major construction companies was Waskita Karya with a debt ratio of 142.73 percent.
Read also: Ministry seeks additional $1.68b for struggling construction SOEs
University of Indonesia SOE researcher Toto Pranoto stated that mergers of infrastructure firms could increase their competitiveness, as many of them had similar lines of business. The move would also improve their efficiency and prevent unhealthy competition pitting the SOEs against one another in tenders.
The number of SOEs has continually declined in recent years due to restructuring and the establishment of SOE conglomerates overseeing several subsidiaries. There were 108 state-owned businesses in 2020, until their number was cut to 92 in 2021 and to 41 last year.
Total revenue of companies under the SOE Ministry increased by 14 percent to Rp 2.61 quadrillion in 2022. Meanwhile, their net profit surged 143.6 percent to Rp 304 trillion, while their total assets grew 9.9 percent to Rp 9.87 quadrillion, according to ministry data.
