Indonesia to Consolidate State-Owned Enterprises

Restructuring Plan

The Indonesian government is planning a major restructuring of its state-owned enterprises (SOEs), aiming to reduce their number from over 1,000 to 200. This significant consolidation is driven by the fact that nearly half of the current SOEs are operating at a loss. The restructuring plan is being managed by Danantara, a state-owned investment management company.

Rationale Behind the Consolidation

The decision to consolidate SOEs is based on the need to eliminate inefficiencies and improve overall financial performance. Managing Director of Danantara, Febriany Eddy, highlighted that many SOEs were created under different circumstances and are no longer viable in the current economic context. The losses are often attributed to poor decision-making in business processes.

Sector-Specific Challenges

The telecommunications sector was cited as an example where unnecessary competition among multiple SOEs leads to reduced profit margins. By consolidating these entities, the government aims to eliminate redundant operations and improve efficiency. This move is expected to have a positive impact on the financial health of the remaining SOEs.

Implementation and Expectations

The consolidation process is expected to be complex and challenging, involving the merger or dissolution of numerous entities. While the exact timeline has not been disclosed, the government's commitment to this restructuring signals a significant shift in its approach to managing state-owned assets. The outcome of this consolidation is expected to strengthen the financial position of the remaining SOEs and contribute to the overall economic stability.