President Joko Widodo (Jokowi) has given a period of one to two years for 
state-owned enterprises (SOEs) to make fundamental changes to increase their 
competitiveness.

On October 14, 2021, Jokowi stated that he was pleased to witness the 
clustering of container terminal operator and port development firm Pelindo 
into one holding, which was PT Pelabuhan Indonesia, to cuts logistics costs and 
helps improve connectivity throughout Indonesia.

According to Jokowi, the clustering forms into one great power, as it builds 
networking with partnerships abroad. "Through partnering with overseas 
companies who have networks, the (SOEs') link to all countries can become a 
huge power," the president remarked.

Through clustering, SOE companies have shown above-standard or even excellent 
work performance that has contributed significantly to the state budget.

According to data from the National Development Planning Board (Bappenas) in 
2019, the estimated total budget for infrastructure development in the period 
of 2020-2024 was US$447 million or Rp6,445 trillion, and 21 percent of them 
came from or supported by SOEs.

In the third quarter of 2021, the total assets of SOEs reached some US$610.5 
million or Rp8,767 trillion, equivalent to some 57 percent of Indonesia's GDP.

Moreover, in January - September 2021, the total consolidated revenues were 
closed at Rp1,613 trillion, or grew 14% compared to the same period in 2020.

One of the efforts to enhance state firms' performances is through clustering 
and restructuring.

Clustering efforts have been accomplished by reducing the number of SOEs from 
107 to 41, and sector clustering from 27 to 12, where two deputy ministers each 
oversee six clusters.

Currently, there are 12 sectors that 41 SOEs engage in: energy, oil, and gas; 
mineral and coal; insurance and pension funds services; plantations and 
forestry; and telecommunications and media.

Additional industries include the food and fertilizer industry, tourism and 
supporting services, health industry, manufacturing industry, infrastructure, 
logistics, and financial services.

On February 18, 2022, SOEs Minister Erick Thohir announced that he would again 
downsize the number of state-owned enterprises from 41 to 37 in the next two 
years.

In addition, he expressed his hope that the next SOEs Minister can complete the 
reducing program to only 30 state-owned enterprises. With a roadmap for a 
ten-year period, he has targeted to make the scope of state firms more 
manageable.

So far, the ministry has encouraged and carried out the SOEs transformation 
through reducing companies that are considered too large in number, and 
focusing on inefficient business sectors.

Under his leadership, the transformation is focused on human capital through 
replacing underperforming board of directors with better ones, so many 
state-owned enterprises can generate profits for the state.

Through restructuring, holdings, mergers, and acquisitions, Thohir has made 
SOEs' work performances more efficient.

According to Thohir, the SOEs Ministry distinguishes the strategy of the three 
pharmaceutical SOEs, where Bio Farma focuses on vaccines, Kimia Farma is 
focused on chemicals, and Indofarma on herbs. Indonesia has extraordinary 
potential in the herbal sector, but it has not been explored, so the SOEs 
Ministry had tried to re-map the path in developing it.

"We know that we import 90 percent of the raw material for medicines, and even 
medical devices. The COVID-19 pandemic has woken us up that we need to create a 
roadmap for Kimia Farma to focus on chemicals and Indofarma to be positioned on 
herbs," he explained.

Thohir said that since health and energy are under the same SOEs ecosystem, a 
connection between sectors needs to be built.

On the other hand, oil and gas firm Pertamina has begun to build 
petrochemicals, and one of the derivatives of petrochemicals is to create 
paracetamol. If Pertamina is merged with a health state firm into one 
ecosystem, Indonesia would no longer need to import paracetamol.

The ministry also consolidated and launched the tourism holdings and its sub 
holdings into one cluster, consisting of airport operator Angkasa Pura I and 
Angkasa Pura II, as well as some aviation and hotel companies.

Thohir put together the infrastructure construction SOE and cement SOE into one 
cluster, as he viewed that the two need each other and are expected to 
synergize.

Meanwhile, the tourism, logistics, and support cluster consists of Hotel 
Indonesia, temple tourism managing firm PT TWC, which manages the temples of 
Prambanan and Borobudur and Ratu Boko, and Indonesia Tourism Development 
Corporation (ITDC).

State-owned Bank Negara Indonesia (BNI) also announced that it relied on 
clustering to strengthen the distribution of smallholder business credits 
(KUR), as well as to help boost the productivity of Micro, Small, and Medium 
Enterprises (MSMEs) during the COVID-19 pandemic.

Moreover, on February 23, three state-owned companies have agreed to 
collaborate on building green industry clusters in Indonesia that will 
prioritize the efficient and effective use of sustainable resources. The three 
state firms are electricity company PT Perusahaan Listrik Negara (PLN), oil and 
gas company PT Pertamina, and fertilizer company PT Pupuk Indonesia.

The clustering efforts began in 2020, as many state firms decided to be merged. 
Thohir also significantly increased the performance target of SOEs to double 
their outputs in 2024, especially on profits, which are projected to reach some 
US$20.8 billion or Rp300 trillion.

To be successful

Performance of banks incorporated in the Association of State-Owned Banks 
(Himbara) throughout 2021 showed satisfactory results through well-implemented 
credit restructuring, economist and capital market practitioner Lucky Bayu 
Purnomo said.

According to Purnomo, credit restructuring has resulted in more efficient and 
effective management of operational expenditures. In December 2021, the total 
profit of Himbara banks shot up to US$5 billion or Rp72.05 trillion, 
significantly increasing by 78.06 percent, compared to 2020 at US$2.8 billion 
or Rp40.34 trillion.

Thohir said each Himbara bank has a specific business focus, such as BRI 
prioritizes the MSME and ultra micro-segments, Mandiri is dedicated to 
enhancing the national corporates and entrepreneurs, BNI on international 
business, and BTN focuses to reduce backlog numbers and help people, including 
millennials, to make it easier to purchase a home.

"We hope that Himbara's role can be more prominent and become the main national 
economic driver through enrichment in various segments that provides positive 
impacts for stakeholders and Indonesian society," he said.

Previously, SOE holdings that had been formed were plantation holdings under PT 
Perkebunan Nusantara III, forestry holding under Perum Perhutani, fertilizer 
holding under PT Pupuk Indonesia, and cement holding under PT Semen Indonesia.

Under Thohir's leadership, the holdings of SOEs that have been completed are 
the mining holdings under Mining Industry Indonesia (MIND ID), oil and gas 
holdings under PT Pertamina, pharmaceutical holdings under PT Biofarma, 
state-owned hospital holdings under Pertamedika IHC, insurance and underwriting 
holdings Indonesia Financial Group (IFG), and tourism and aviation holdings 
under Aviasi Pariwisata Indonesia or InJourney.

Fixing SOEs through the establishment of holdings is a task that must be 
carried out sustainably to yield powerful government-owned corporations that 
can compete on the international stage.

SOURCE: Ministry of SoE