Wahyudi Soeriaatmadja, Jakarta – Indonesia's State-Owned Enterprises Ministry is looking to streamline operations, with the objective of slashing bureaucratic red tape and restructuring strategic state-owned companies.

High on newly appointed State-Owned Enterprises Minister Erick Thohir's to-do list are plans to restructure the debts of Krakatau Steel, which has become bogged down by an inefficient newly built steel processing plant; insurance firm Jiwasraya, which is accused of mis-investing clients' premiums; and airline Garuda Indonesia, which is struggling to resolve problems in collecting payments.

In addition, several construction companies that have been financially stretched by government diktat to build physical infrastructure – from toll roads to railways – are on the ministry's radar.

Mr Erick is also faced with the enormous task of eradicating the lobbying, horse-trading and under-the-table deal-making that have gone on inside the ministry over appointments to the highly paid boards of directors of 115 state-owned firms.

A slimmer organisation and less bureaucracy are needed for the ministry to function more optimally and lead national development, said the 49-year-old businessman, who led President Joko Widodo's election campaign.

Analysts like Mr Harry Su, head of equity capital markets at investment firm Samuel International, hailed the moves. He said: "Efficiency creation is positive."

In his first month after taking on the role in late October, Mr Erick scrapped six powerful senior assistant-to-minister positions, whose responsibilities were to supervise state-owned enterprises (SOEs) operating in sectors like mining, service and manufacturing. This paved the way for the supervision of the SOEs to be taken over by the Board of Commissioners (BOC), made up of prominent figures and seasoned professionals with long track records.

It would have greater authority and veto powers over key strategic decisions taken by the board of directors in each of the SOEs.

In a signal that Indonesia is taking problems in the SOE sector seriously, the ministry on Nov 25 appointed strong figures, reform-minded former provincial governor Basuki Tjahaja Purnama and anti-corruption czar Chandra Hamzah, as the chiefs of the BOC for state oil and gas firm Pertamina and the state-owned lender focused on housing development Bank Tabungan Negara, respectively.

State-owned and state-controlled firms play an instrumental role in driving South-east Asia's largest economy, but ineffective supervision and the deal-making that occurs when appointing the managements of these companies have in some cases caused them to swing from profitability to loss-making.

State-owned and state-controlled firms play an instrumental role in driving South-east Asia's largest economy, but ineffective supervision and the deal-making that occurs when appointing the managements of these companies have in some cases caused them to swing from profitability to loss-making.

Frequent reshuffles of management have led to weak leadership and prevented the boards of directors from focusing on their work, according to observers, including public policy expert Trubus Rahardiansyah of Trisakti University, who hailed Mr Erick's moves to reform the ministry.

There has also been a trend of filling these posts with people affiliated with political parties, rather than true professionals, the observers noted. Mr Trubus told ST that rogue senior ministry officials would act as brokers for a range of management positions, accommodating politicians vying for the high-paying jobs. "Appointments and reshuffling of state companies' managements should be based on competency and merit," he said.

But a senior ministry official, Mr Fajar Harry Sampurno, dismissed Mr Trubus' observation and said his previous boss, former minister Rini Soemarno, had eradicated practices such as lobbying for posts when she took office in 2014.

Nevertheless, a senior official at a state-owned firm said the constant reshuffling of state-owned firms' managements distracted board members' focus. Describing a typical board director's work pattern, he said: "The first two months, a newly installed director would learn the ropes before he could focus on work, but only for eight months, because the following two months ahead of the annual shareholders' meeting, he would have to lobby the ministry to make sure he would keep his post."

The official, who requested anonymity, cited Pertamina, which has had four different president directors in just five years.

Ministry spokesman Arya Sinunlingga did not reply to ST's queries.

Queried about some of the state construction firms that are saddled with rising debt payments that are projected to exceed their net cash flow from operating activities next year, Mr Fadjroel Rachman, a commissioner at state construction company Adhi Karya, told ST that the financial condition of construction companies is relatively sound.

Source: https://www.straitstimes.com/asia/se-asia/indonesias-ministry-for-state-owned-firms-set-for-overhaul