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Indonesia Plans to Reduce Number of SOEs From 139 to 120 to Boost Efficiency

Indonesia Plans to Reduce Number of SOEs From 139 to 120 to Boost Efficiency

By Tito Summa Siahaan on 09:10 pm Jun 12, 2014

  1.  The government has called on the country’s state enterprises to consolidate for the sake of greater efficiency and governance.

Indonesia had a total of 139 state-owned enterprises as of Jan. 1 this year, with combined assets of Rp 4,082 trillion ($345 billion).

State Enterprises Minister Dahlan Iskan said on Thursday that the government planned to reduce the number of state-owned enterprises to 120.

Dahlan said although the ideal number was closer to 80, the planned consolidation of companies involved in the plantation and forestry sectors would only reduce the number to about 120.

Even so, “it’s not as much a matter of the quantity of state-owned enterprises, but their quality,” he said after a meeting with Chairul Tanjung, the coordinating minister for the economy.

Chairul was appointed chief economics minister last month, replacing Hatta Rajasa, who left his post to become the running mate of presidential candidate Prabowo Subianto.

Dahlan said a plan to establish two new holding companies in the forestry and plantation sectors has been set in motion.

“We want to repeat the success we had in establishing a holding company in the cement and fertilizer industries,” he said.

The government rebranded Semen Gresik as Semen Indonesia in 2012 and made it the holding company for cement producers Semen Gresik, Semen Padang and Semen Tonasa.

In 2011, the government formed Pupuk Indonesia, a fertilizer holding company, with the merger of seven state-owned companies.

It is now the largest fertilizer producer in the Southeast Asia region, with total assets of Rp 39 trillion.

Indonesia has close to a dozen state-owned enterprises in the plantation sector and at least six in the forestry sector.

The government will continue its plans to merge several state-owned enterprises into existing holding companies, Dahlan said. “In the next two months, Sang Hyang Seri will be merged into Pupuk Indonesia.”

But as Pupuk lacks the financial capacity to procure seeds from local farmers, it too will be merged with other companies.

Chairul said the consolidation of state-owned companies would make them more efficient.

“Merging state enterprises would also enhance their economic scale,” he added.

He said any merger proposal should be carefully planned, pointing to the recent plan for merging state-controlled lenders Bank Mandiri and Bank Tabungan Negara, which later had to be scrapped.

 

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