Toto Pranoto Review Quo Vadis BUMN Corruption
Nino Eka Putra ~ Humas FEB UI
DEPOK – Based on the release of the article published in mediaindonesia.com, Expert Column (9/12/2019), Toto Pranoto as Managing Director of the FEB UI Management Institute, wrote that at the end of 2019, SOEs were given a very bitter gift. Efforts by SOE Minister Erick Thohir to carry out SOE mental transformation with the tagline of SOEs with morality were damaged by the actions of the Managing Director of Garuda through the smuggling of luxury goods. Ironically, it was done in the ferry flight arrival of the new Garuda A330 Neo aircraft from the Airbus manufacturer in Touluse to Jakarta.
This scandal adds to the long list of SOE directors affected by corruption cases in recent years. In 2017, the public was shocked by the case of alleged bribery of the bribes of the former Managing Director of PT GIA (Tbk) which was dismantled by the KPK thanks to British intelligence reports. Then, following the OTT the KPK against the top leadership of PT PAL (Persero).
“In 2019, we were also surprised by a series of arrests of the KPT and the Attorney General’s Office. Among them involved BUMN directors in AP2, Krakatau Steel, INTI, Perindo, and PTPN Holding 3. The series of events seemed contrasted because the efforts of the Ministry of SOEs to apply the principles of good corporate governance or often abbreviated as GCG had been echoed from the beginning 2000s,” said Toto Pranoto.
The obligation of SOEs to implement GCG is regulated through a Decree of the Minister of SOEs KEP-117 / M-MBU / 2002 concerning the Implementation of Good Corporate Governance (GCG) Practices. The obligation to carry out GCG for SOEs, Tbk is further strengthened by capital market regulations that require disclosure and transparency for issuers.
Various educational programs, benchmarking studies, KPK-SOE supervision cooperation, and GCG independent audit obligations for SOEs have often been carried out. However, the revelation of several cases of BUMN corruption that have occurred in a row has destroyed public trust.
“It seems that the GCG credo is only limited to ‘lipstick’ for some SOEs. They explicitly stated compliance with this rule by setting GCG charters in each SOE. However, it seems that the implementation of these rules is only limited to be recorded without the need to be implemented,” he said.
The supervisory function of the Board of Commissioners on the Board of Directors seems barren even though they have been assisted by a variety of expert assistants who are members of the Audit Committee, Risk Management Commission, and there is also a GCG Committee as well. This governance violation seems to be based on the low awareness of the importance of GCG implementation on company performance.
Relationship between GCG implementation and performance
Some studies like Abravanel (2006) show that public companies that implement GCG well will get premium prices from investors up to 20%. However, the implementation of bad governance will be directly punished by investors as happened in the case of Enron (2001).
Meanwhile, research from Megginson, D Souza, and Nash (2005) also shows that BUMN privatization has been able to build better GCG practices, which in turn can trigger performance improvements. The main trend that occurs after privatization is the change in ownership. If more and more government shares are released, SOE management will be more flexible and will focus more on the goal of profit maximization. If privatization is carried out by listing on the capital market, transparency and disclosure will arise so that GCG is strengthened.
According to Simon Wong’s (2005) study of GCG practices, it was revealed that most BUMNs in developing countries have governance weaknesses. These weaknesses include the agency problem, in which government intervention in the management of SOEs is felt to be quite high. In addition, the right of SOE management to independently manage companies is often castrated because most SOE leaders are chosen based on political closeness so they cannot appear independently.
“In addition, there are problems related to the lack of tools to provide incentives and discipline BUMN management. Weakness in terms of governance makes the performance of SOEs uncompetitive. Meanwhile, new organizational culture factors (new share values) that are internalized into the organization are considered capable of improving performance,” he explained.
As a comparison of how the privatization of SOEs is able to foster GCG practices and introduce a new culture that is more progressive, it can be conveyed the experience of neighboring Malaysia. The study of privatization in Malaysia by Jomo K S and Tan Woo Syn (2003) shows that privatization has positive and negative results related to the economic patterns developed by the government.
The New Economy Policy (NEP), which was developed since 1970, has made the natives increasingly have access and economic ownership. However, on the other hand also led to the practice of KKN which then fostered a false economy (Ersatz Capitalism).
UMNO’s dominance over decades has led to Alibaba’s patron and benefited certain groups. However, then the Malaysian government made a strategic decision in preparing BUMN to enter global competition.
One of them is by forming superholding Khazanah Bhd in 2003 as a holding company that oversees all SOEs that are profit oriented. Most of the business groups that joined the Khazanah have gone public.
Regulations on the Kuala Lumpur Exchange (KLSE) are very strict in terms of compliance with GCG principles and it is able to trigger the performance of SOEs that join the Khazanah are performing well. As a result, currently Khazanah has been able to transform itself as a regional / global player by investing in many countries, including Indonesia.
GCG improvements going forward
Structural improvement seems to be carried out by the Ministry of SOEs to re-enforce compliance with GCG by all echelon layers in SOEs. Awareness must be focused not only on formal GCG compliance, but also more on the importance of implementing GCG in increasing company value. Therefore, efforts to implement the internalization of GCG values into SOE corporate culture are urgently needed. This will be more effective as a preventive measure compared to making new regulations.
“Consistent law enforcement efforts, for example, with the dismissal of directors of SOEs involved in GCG violation cases, are also needed as an effective shock therapy method. BUMN monitoring monitoring system also needs to be improved. Various indications of cheating practices in SOEs that have been notified by the appointed BPK or KAP need to be followed up quickly and straightforwardly to prevent recurring events,” he added.
He continued, the structural improvement of BUMN GCG must also start from the initial recruitment of BOD / BOC through a strict fit and proper process. To get the best talent, recruitment sources should be expanded. Not only from internal candidates for BUMN, but also from non-BUMN professionals. Meanwhile, the function of the Board of Commissioners is considered to have weaknesses because supervision is considered ineffective. This is in accordance with the findings of the ASEAN Governance Scorecard 2015. One of the weaknesses of Tbk companies in Indonesia is in the aspects of the responsibility of the board. It was stated the need for efforts to improve the performance of the supervisory board (commissioners) in overseeing the board of directors.
It is also recommended to strengthen the structure of the board of commissioners by increasing the number of independent commissioners. Going forward, it is proposed that the election of the Board of Commissioners passes through the assessment stage as well so that there will really be qualified candidates for the Board of Commissioners.
Firm and fundamental steps towards improving the performance of the BUMN GCG have begun to be implemented by Minister Erick Thohir. “Consistency is needed for such a step so that public confidence remains high. It is hoped that in the future there will grow stronger trust in SOEs so that their performance is also expected to improve. It is never too late. Go BUMN,” he concluded. (Des)
Source: https://m.mediaindonesia.com/read/detail/276495-quo-va-korup-q-bumn