Alfi Dinilhaq, Heru Andriyanto, Jakarta – Indonesia is consolidating 23 state-owned industrial estate operators managing a combined 35,000 hectares of land into a single entity as part of a sweeping restructuring of state-owned enterprises (SOEs) aimed at improving efficiency, strengthening industrial competitiveness and attracting investment.
Dony Oskaria, chief operating officer of sovereign wealth fund Danantara Indonesia, said the merger would create a more integrated industrial estate management business with greater scale and operational efficiency.
"We have 23 industrial estate companies, and we are merging them into one," Dony said during his keynote address at the Investor Daily Summit in Jakarta on Oct. 8.
The consolidation is part of Danantara's broader review of state-owned businesses, which has identified overlapping operations, inefficient corporate structures, and opportunities to combine companies operating in similar sectors.
Danantara has mapped 1,074 SOE companies and subsidiaries as part of the restructuring process, with the goal of eventually reducing the portfolio to approximately 200 stronger core businesses by the end of 2026.
Dony said the review examines each company's business model, revenue and cost structures, profit margins, market conditions, financial strength and organizational capabilities.
The assessments will determine which companies should be retained, merged, divested or liquidated.
"We will also soon consolidate 16 insurance companies. We are consolidating 60 hospitals and more than 100 hotels," Dony said.
The restructuring is intended to eliminate duplication, improve efficiency and allow state-owned companies to focus on their core competencies while benefiting from greater economies of scale.
Industrialization takes center stage
Dony described the SOE overhaul as part of Indonesia's broader economic transformation, with industrial development playing a central role in creating jobs, expanding the tax base and supporting more sustainable economic growth.
He argued that Indonesia could no longer rely primarily on its natural resource advantages and needed to develop a stronger industrial base capable of generating higher-value economic activity.
"We must become an industry-based nation," he said.
The government is also seeking to accelerate industrialization through deregulation and the development of downstream processing industries, including projects involving minerals, mining commodities and agricultural products.
By consolidating industrial estate operators, Danantara aims to strengthen the management of industrial land and create a more competitive environment for investors seeking manufacturing and processing facilities in Indonesia.
The merger would bring a combined 35,000 hectares of industrial estate land under a single corporate structure, although Dony did not specify when the integration would be completed.
The restructuring of industrial estates, insurance companies, hospitals and hotels illustrates the scale of Danantara's effort to rationalize the state-owned corporate portfolio.
Danantara separates SOE management from investment operations
Beyond the corporate restructuring, Dony outlined how Danantara has separated its responsibility for managing state-owned companies from its investment activities to prevent investment-related losses from directly affecting the underlying SOE assets.
He said the distinction had been incorporated into Danantara's institutional design from the outset, partly in recognition of the risks associated with investment structures such as those involved in Malaysia's 1Malaysia Development Berhad (1MDB) scandal.
"Who can guarantee that every investment will be 100% successful? Nobody," Dony said.
Danantara operates through two separate entities: Danantara Asset Management and Danantara Investment Management.
Danantara Asset Management is responsible for managing and consolidating the SOE portfolio, while Danantara Investment Management oversees investments financed through dividends generated by those businesses.
"Danantara Asset Management is the entity that manages our state-owned enterprises. It serves as the consolidator of our SOEs," Dony said.
Under the structure described by Dony, the investment arm receives dividend income rather than direct ownership of the SOE companies or their physical assets.
"What is transferred to Danantara Investment Management is only the dividends, not the companies themselves," he said.
Dony stressed that SOE assets were not being pledged as collateral for investment activities.
The separation is intended to let Danantara pursue investment opportunities while limiting state-owned companies' direct exposure to risks from investment decisions.
Dividend-based funding could support larger investments
Dony said the dividends Danantara Investment Management receives could support a range of financing arrangements, including project financing, co-investment partnerships, and equity investments.
Such arrangements could enable Danantara to participate in projects with a total investment value substantially exceeding the amount of dividend income initially available.
"For example, if we receive Rp 1 trillion in dividends, that does not mean we can invest only Rp 1 trillion. We might be able to invest 10 to 15 times that amount," Dony said.
The approach could allow Danantara to mobilize additional capital alongside investment partners and financing institutions, although the size of individual investments would depend on their financing structures and associated risks.
Dony said the institutional separation was designed to prevent investment risks from becoming directly entangled with the management of state-owned businesses.