Toto Pranoto: BUMN Prospect 2020
2019 will pass soon. What is the performance of BUMNs in 2019 and what challenges will it face in 2020? That may be some of the questions of the public who miss the glory of future state companies.
Referring to the report of SOE Minister Erick Thohir before the DPR in early December 2019, it was mentioned that the total profit of 142 SOEs reached Rp210 trillion in 2018. However, only 15 BUMN companies had the most contribution from the total revenue. Profit that can be generated is approximately Rp.210 trillion, but 76% is more than 15 state-owned companies. It means that BUMN is still in a pareto condition (not optimum).
Not to mention that during semester 2 of 2019 the public was shocked by some bitter gifts from SOEs. Starting with the arrest of several directors and directors of SOEs by the KPK, the smuggling scandal on Garuda’s new aircraft, until the explosion of the Jiwasraya mega scandal. Certainly not an encouraging thing. However, the spirit of change for the better must still be encouraged. Where to start?
BUMN Mapping
When viewed from the total 142 SOEs currently in existence, it might be grouped into 4 different quadrants. If the vertical axis is the benefit of SOEs for the public and the horizontal axis is the health level of SOEs, what will be obtained in quadrant 1 is that public benefits are still large and positive health levels, we call the contributor quadrant.
Second quadrant, public benefits are still high, but health levels are negative. Therefore, restructuring is needed to be healthy again and can move to the contributor quadrant.
Third quadrant, public benefits have declined (because they have been taken over by other business entities, especially the private sector) and health levels are also bad. Therefore, the solution is liquidated (spin off).
Fourth quadrant, public benefits have declined, but the level of health is still excellent, so it should immediately diversify business into new fields that are still growing. Based on the mapping, it can be seen that the number of contributors is relatively small (for example, banking, telecommunications, and oil and gas mining).
The number in quadrant 2 is relatively quite a lot. There gathered several giants, such as KS, PTDI, PAL, and GIA. Unfortunately, most of the other SOEs gather in quadrant 3. This is the trigger for the pareto condition in SOEs.
This quadrant is the term “live reluctantly, die do not want to,” so it’s a hassle. Some have been patients of PT PPA (Asset Management Company) since the last few years. For example, PT Industri Sandang, PT Kertas Kraft Aceh, PT Iglas, PT Survey Air Penas, PT Primissima, and others. The list is very long. The question is what should I do in quadrant 3?
In accordance with SOE Law No. 19/2003 in Articles 72 and 73 concerning Restructuring and Privatization, several options for restructuring are known. However, the liquidation option is not sounded clearly enough or not even discussed at all.
The SOE Ministry in the Rini Soemarno era had also mapped the problems in quadrant 3. However, there has also been no complete settlement because it needs to be discussed with the DPR and the fact is that almost 3 years in his leadership period he was never able to come to the DPR.
In my opinion, if the revision of Law 19/2003 is still to be carried out, the restructuring option must be expanded, including the possibility of SOE liquidation. This can have a positive impact because it will reduce the span of control of the Ministry of SOEs in monitoring while also bringing SOEs to focus on areas of business that are really still needed by the public and they can perform optimally.
Regarding this restructuring, arrangements regarding the establishment of BUMN subsidiaries also need to be explicitly regulated. In Law 19/2003, there is no regulation about the establishment of SOE subsidiaries. As a result, there is a ‘time bomb’ at this time, of which there are already nearly 800 children / grandchildren of SOEs and most of them are losers. Plans to revise Law 19/2003 on SOEs must regulate this matter more closely.
Another problem that is also critical is how will the deeselonization process at the Ministry of SOEs improve service and efficiency? The policy to cut layers of bureaucracy up to echelon 2 alone would certainly cut offices quite a lot at echelon 3 and 4. They meant that they had to switch functions to functional officials.
How should bureaucratic transformation be carried out so that the transition period runs smoothly? Strategic steps are needed, especially the enrichment and upskilling process, within the scope of the executive echelon so that they can remain productive.
Will President Jokowi’s desire to bring Indonesian SOEs as a global player be realized? In the organizational context, SOE management in Indonesia is different from the SOE management model in Malaysia and Singapore. The two countries manage SOEs under the control of the super holding company (SHC), namely Khazanah in Malaysia and Temasek in Singapore. There are no SOE Ministry offices in the two countries.
In terms of performance, Temasek’s abilities are extraordinary. In 2018 their total assets have reached US $ 342 billion and profit before tax (EBT) of US $ 10.4 billion.
Why do Indonesian SOEs relatively lose out in their competition? There are several possible causes. First, there may be difficulties in translating SOE dual fuction as a development agent plus commercial functions.
This complexity often creates uncertainty for state-owned enterprises that have to sacrifice commercial interests for the benefit of the country’s tasks (PSO). As a comparison, in Malaysia, the function of BUMN which is heavy with PSO affairs is managed by its technical ministry, not joining Khazanah.
The second weakness is the poor quality of corporate governance (GCG). The rise of BUMN corruption cases lately proves this. The integrity quality of some SOE leaders and supervision from the board of commissioners appear to be weak. At Temasek, they recruited many of the world’s top-level executives as non-executive directors who served as a counterweight to those who ran the company’s operations.
Hope in the future
The results of this SOE mapping will, in passing, make the SOE Ministry’s decision to make SOE’s grand design easier in the future, both in terms of better SOE performance targets and the desire to make SOEs a world-class player.
More agile coordination steps are needed between the Ministry of SOEs, the Parliament, and other stakeholders so that decision making can be faster and have a positive impact on the empowerment of SOEs going forward.
BUMN Minister Erick Thohir’s breakthrough in the early days of his leadership has received considerable appreciation. Mainly related to efforts to improve governance and empowerment of the board of commissioners. My notes are that this effort can be done more massively and is done consistently without selective logging. Therefore, public trust in SOEs has become increasingly thicker. This will facilitate the next step in carrying out internal transformation in each SOE.
By looking at the current business competition landscape, efforts to make SOEs a agile, adaptive and globally oriented business organization need to be implemented immediately.
With clear direction and strong leadership in the Ministry of SOEs, it is hoped that these goals can be realized. However, of course it is also necessary to support all stakeholders because with a healthy business ecosystem, it will encourage SOEs to become stronger and more competitive.