Plans to Exclude SOEs as State Assets Raising Fears in Indonesia; fears that stripping the state audit body of its authority to conduct audits of the companies will destroy the firms and worsen corruption within the companies

Plans to Exclude SOEs as State Assets Raising Fears

By Rizky Amelia on 8:20 am November 18, 2013.
Excluding state-owned enterprises from state assets and stripping the state audit body of its authority to conduct audits of the companies will destroy the firms and worsen corruption within the companies, experts and activists say.A group calling itself the State-Owned Enterprise Forum (BUMN) filed a judicial review with the Constitutional Court in June to revise a 2003 state financial law authorizing the Supreme Audit Agency (BPK) to carry out an audit into the state enterprises, thus treating the companies as separate entities from the state.

The forum argued that the law had not been in line with other laws, including the SOE law. The court is now in the final stage to issue a ruling on whether or not the assets of 141 state companies worth Rp 3,500 trillion ($300 billion) is part of state assets, and thus should be audited by the BPK.

If the firms are not regarded as part of state assets then any embezzlement within the companies will not be treated as corruption, preventing the Corruption Eradication Commission (KPK) to handle the cases. Instead, the graft-laden police or Attorney General’s Office will investigate the crimes, according to Indonesia Corruption Watch.

“Our major fears are if the judicial review at the court is accepted, we fear that it will open the doors to fraud, hijacking and robbery,” Donal Fariz of the ICW said during a discussion held by the Coalition for the Accountability of the State’s Finances (KUAK) on Sunday. “Such condition would provide more room for politicians and public officials to engage in corruption,” he added.

“In the Hambalang case, for instance, it would not be called corruption if it was no longer considered the state’s money,” he said, referring to a multi-billion rupiah case involving several state construction firms that is now being investigated by the KPK.

Donal said SOEs’ function was to create prosperity for the public and by no longer considering SOEs as the state’s assets, such goal will not be achieved.

“What we fear is that SOEs will be made cash cows for political parties, political elites and presidential candidates to provide financing for the 2014 elections,” Donal said.

Despite SOE Minister Dahlan Iskan’s rhetoric to clean the companies, Donal questioned why he and Finance Minister Chatib Basri have not resisted the move.

“I’m suspicious that the SOE Minister supported the judicial review because he gave no firm response to it. We are questioning the government’s position now,” he added.

Dahlan has been campaigning to clean the SOEs since becoming minister, ordering all firms to register as clean entities. He recently claimed that almost 80 percent of the companies had been registered in that way. “We must move fast to clean the state companies and regain public trust,” he said.

The Indonesian Budget Center (IBC) also strongly opposed the BUMN Forum’s judicial review, saying that it was important that the BPK audited the SOEs.

“The scenario was to make SOEs the same as private companies when in fact SOEs are the state’s companies that have the responsibilities to develop the country” IBC’s researcher Roy Salam said.

Roy questioned the basis for the judicial review, saying it would not have been filed unless SOEs were involved in dirty practices. “It’s strange to not allow BPK to audit the SOEs,” Roy said.

Bahrullah Akbar, a BPK member, said the government rolled out almost Rp 300 trillion in subsidies to SOEs each year out of the total of Rp 1,600 trillion state budget. In addition, the government has also injected Rp 10 trillion in capital into SOEs in the past three years, he added.

A number of SOEs have been involved in the country’s biggest corruption scandals such as Adhi Karya in the Hambalang sports center case that caused Rp 6 trillion in state losses. Other state firms, including telecommunication companies Telkom, gas firm PGN, power company PLN and rice company Sang Hyang Seri have also been investigated by the KPK for alleged multi-billion rupiah state losses.

Sri Adiningsih, an economist from the Gadjah Mada University in Yogyakarta also opposed the judicial review, saying the SOEs were state assets and subject to the BPK’s audit.

Sri Edi Swasono, an economics professor at the University of Indonesia, supported Adiningsih, saying the BPK’s audit was actually good for the advancement of the SOEs.

 

Editorial: Like All Companies, SOEs Need Audits

By Jakarta Globe on 2:00 pm November 18, 2013.
State-owned enterprises have played a critical role in the economy over the past three decades.

They are present in just about every sector of the economy and have at times spearheaded important national products and as such their involvement in the economy remains critical.

But many of the over 140 SOEs are also badly managed and loss-making. No doubt they employ thousands of people but they are non-transparent and have in the past been ridden with graft scandals and accused of being cash cows for political parties and politicians.

As the Constitutional Court prepares to pass a judgement on whether these companies should be treated as state assets and thus be subject to investigations by the Supreme Audit Agency (BPK), it is important to keep in mind that they are at their core, businesses. They may be owned and operated by the state, but they are companies nonetheless. As such, they should be audited and made accountable.

So whether or not they are treated as state assets is not as critical as how they are run and perceived by the business community and the public at large.

State-owned enterprises should be treated as any corporation, which means they should have their books audited and their management held accountable for any losses or misappropriation of funds.

Only then will Indonesian SOEs be able to play a bigger role in the economy.

We have seen how some SOEs, such as Bank Mandiri and Garuda Indonesia have become leaders in their industries because they have been subject to public scrutiny after being listed on the Jakarta Stock Exchange. Not all SOEs, however, will qualify for a public listing but all of them, without exception, should be audited to ensure that they are managed professionally.