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Government wants to end duplication of SOE operations

Source
Jakarta Post - February 27, 2019

Stefanno Reinard Sulaiman, Jakarta – State-Owned Enterprises (SOEs) Minister Rini Soemarno has ordered all state-owned companies to eliminate duplication of business lines to increase public-sector efficiency and improve the quality of products and services.

State-owned energy holding company Pertamina and four state-owned port operators, Pelindo I, II, III and IV, have already heeded the call by inking a cooperation deal in Jakarta.

Rini said Pertamina currently operated 167 ports to support its business, but it should focus only on the oil and gas industry and leave port management to Pelindo and other noncore business lines to other SOEs.

"Pertamina has expertise in energy from the upstream side to the downstream one, while Pelindo has expertise in port management [...]. If there are operations that aren't their core businesses, they should work this out with other SOEs," she said after the recent signing of the agreement.

Pertamina would gradually hand over the management of its 167 ports across Indonesia to Pelindo, Rini said.

The agreement, titled "business synergy collaboration", will save Pertamina and Pelindo up to Rp 2.4 trillion (US$171.5 million) in costs per year, according to ministry estimates.

That value would emerge from requirements covered in the agreement, namely the use of Pertamina's fuel and lubricants at all of Pelindo's ports and working areas as well as measures to strengthen pilot boat and tugboat services.

Aside from those requirements, the agreement encompasses 18 strategic collaboration projects, ranging from the development of fuel terminals (TBBM) to the management of guesthouses, all of which were expected to be completed within five years.

The ministry expects the 18 projects to create value of Rp 30 trillion, while total investment is estimated at Rp 5 trillion, said Edwin Hidayat Abdullah, the ministry's undersecretary for energy, logistics and tourism. "We hope that the projects can bring down Pertamina's logistics costs," he said.

Gandhi Sriwidodo, Pertamina director of logistics, supply chain and infrastructure, said one of the 18 projects was the development of a floating storage and regasification unit (FSRU) in Gorontalo, Sulawesi.

He said the agreement stipulated that Pelindo Energy Logistik (PEL), the logistics subsidiary of Pelindo III, should provide the FSRU and Pertamina would be the supplier of liquefied natural gas (LNG).

"We supply the LNG to the facility owned by PEL and then the LNG will be used for power plants [in the area]," he said. "The scale of the project is medium, and the investment will be done by a joint venture between us [Pertamina and PEL]."

To improve efficiency, Pertamina last year signed deals with state-owned toll road operator Jasa Marga, state postal service provider Pos Indonesia and state-owned railway operator Kereta Api Indonesia (KAI).

The first agreement was a partnership for Pertamina to build at least 10 gas stations by July 2019 along toll roads in Java that are managed by Jasa Marga.

As for the deals with KAI and Pos Indonesia, Pertamina signed initial agreements to utilize the two companies' assets by turning them into fuel stations and marketing outlets, which will display its products, like liquefied petroleum gas (LPG) and lubricants.

Prior to the deal, Pelindo II president director Elvyn G. Masassya said all ports under his company's management purchased fuel separately, leading to price differences.

"We have a lot of branches, each buying [fuel] on their own, whether from Pertamina or not," he said. "With this agreement, we can have a guarantee for the price and fuel stocks."

Source: https://www.thejakartapost.com/news/2019/02/27/government-wants-to-end-duplication-of-soe-operations.html

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