Indonesia plans to build its own version of Singapores
Temasek a vast holding company for all of its
The number of state-owned companies in Indonesia would be
reduced dramatically from 141 today to 78 by 2014
under the plan, representatives of the Ministry of State Owned
Enterprises told Emerging Markets this weekend.
A first stage, which will establish holding companies for
individual sectors such as plantations or pharmaceuticals, has
been under discussion for some time. But the intention to put
all these companies into a single holding entity marks an
ambitious new strategy.
The ministry has identified Temasek and Malaysias
Khazanah, which also uses a holding company structure for the
oversight of state-owned assets, as role models, although the
two have quite different approaches to their holdings.
Ekoputro Adijayanto, special adviser to state enterprises
minister Mustafa Abdullah Abubakar, said: SOEs in essence
have two missions: corporate value maximization, and
instruments of social welfare.
We are aiming for our SOEs to become more
professional, transparent and well-governed, yet on a level
playing field with their international peers.
Indonesias SOEs law and related laws would have to be
amended, Adijayanto added. Such laws will become the
legal ground finally to establish a super holding company, like
Khazanah or Temasek.
The plans have drawn a muted response from analysts.
Its an interesting concept but Im not sure
what value it adds, said an analyst at a major brokerage.
As a holding company, I see it as just another
unnecessary management structure. It would be a real bun fight
for positions. How do you put Bank Rakyat, Bank Mandiri and
Bank Negara under one roof?
Bundling management of Indonesias SOEs into a single
entity would be a colossal task. They had total revenue of more
than Rp930 trillion (about $100 billion) in 2009; their capital
expenditure and operating expenditures are consistently greater
than the entire capex budget for the Indonesian state.
SOEs taxes and dividends alone accounted for 12% of
national budget revenue in 2009, and they already represent
31.5% of the Indonesian Stock Exchanges market
capitalization, despite the fact that most are not yet
The Ministry claims progress in SOE reform, arguing that the
number of loss-making companies will fall from 36 in 2006 to
just eight this year. But long-awaited privatizations and
restructurings, and IPOs of Garuda Indonesia airline and PT
Krakatu Steel, are not yet complete.
Parikesit Suprapto, deputy minister for state owned
enterprises, insisted both sales would take place this year,
despite recent worries about Garudas debt load.
The next concrete step is likely to be a holding company for
several plantation companies, to be followed by an IPO,
Indonesias two named role models have dramatically
different approaches. Temasek is largely a passive shareholder
in its companies, whereas Khazanah is closely involved, setting
detailed evaluation measures for performance and sometimes
intervening to replace management.