Consolidating State Companies

Posted by AsiaViews | Dec 4, 2017 | 0 |

The Jakarta Post

Nov 27, 2017

It is encouraging to learn that the government will accelerate the reform of state-owned enterprises (SOEs) by consolidating SOEs in similar business lines. Two holding companies are expected to be established before the end of this year: one for SOEs operating in mining and the other for oil and gas industries. Four more holding companies are to be set up next year in financial services, public housing, construction and toll road development.

While not a great feat in itself, if this small target is achieved, it will still be rather impressive, because over the past 19 years only two holding companies — in the fertilizer and plantation industries — have taken shape. Then-president Soeharto merged two state-owned cement companies into PT Semen Gresik in 1995, but only after 2012 was it able to operate as a holding company under the new name PT Semen Indonesia.

That shows how challenging the consolidation effort is, mainly because of opposition from vested interest groups in the bureaucracy and at the House of Representatives that wish to keep SOEs as their cash cows. President Joko “Jokowi” Widodo has, however, given SOE Minister Rini Soemarno a strong mandate to push ahead with the consolidation process.

Most analysts agree that consolidating SOEs operating in similar business lines into holding companies will improve efficiency, create stronger synergy in production, marketing, procurement and financing and strengthen internal control.

The objective of the whole consolidation is to eventually streamline SOEs, so that their total number could be slashed from more than 150, including subsidiaries, at present. If the program succeeds, the SOE Ministry will no longer be necessary. In its place, we would have at the most a dozen holding companies, like Temasek in Singapore and Khazanah in Malaysia.

Certainly, the consolidation effort requires a set of corporate actions, such as due diligence on the holding companies’ formation and structure, benchmarking holding companies to similar corporations at the global or regional level and new tax audits etc. The government also should see to it that the new structure would not lengthen decision-making processes, thereby rendering SOEs less able to adjust to changing environments. Holding companies should not maintain virtual monopolies or oligopolies at the expense of sound competition.

But the most sensitive and daunting aspect of the process is to convince politicians and trade unions of the gains of the reform, explaining that employees would also benefit, as SOEs managed and supervised under holding companies would be more efficient and competitive than ever before in the domestic and global market.

Such a persuasive campaign is needed, because consolidation, like most reforms, always initially has destabilizing impacts, as redundant employees and complacent managers at inefficient companies are afraid of losing jobs, and many senior officials with political power over SOEs are worried about losing their cash cows.

What we badly need is the consistent leadership of President Jokowi to maintain a strong and broad legal and political framework for the reform process and provide clear-cut guidelines and transparency in structuring the holding companies.

(http://www.thejakartapost.com/academia/2017/11/27/editorial-consolidating-state-companies.html)

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EXTRICATING NDONESIAN CHILDREN FROM ISIS INFLUENCE ABROAD

Indonesia urgently needs to revisit the possibility of repatriating the neediest of its young citizens stranded abroad, whose families had earlier joined ISIS. Most of these children are in camps in northern Syria but there are also small numbers in the Philippines, Afghanistan and Iraq. “Extricating Indonesian Children from ISIS Influence Abroad”, the latest report from the Institute for Policy Analysis of Conflict (IPAC) argues that the government could begin by bringing back small groups of unaccompanied children under ten years of age, who pose minimal security risk and are most vulnerable to deteriorating conditions in the camps.“The problem is that health and security conditions are worsening by the day in the Syrian camps, and the children are growing older,” says Dyah Kartika, IPAC analyst. “They need access to schools, a nurturing environment, and medical attention. If the government waits too long, the children will be further exposed to ISIS ideology.” The new report examines a 2019 list of Indonesians in camps and prisons run by the Kurdish Syrian Democratic Forces (SDF). The Indonesian government has been trying to verify their citizenship, but with pseudonyms, misspellings and bad transliterations, it is a daunting task. At the time the data was collected, between March and June 2019, there were 555 Indonesians in SDF camps and prisons, including 367 children. Among the children, approximately 277 were under the age of ten and 34 were unaccompanied. In June 2021, there are fewer than ten children who are both unaccompanied and under the age of ten that could be prioritized for return. Bringing back children of ISIS families is no easy task. The report analyses the main challenges faced by the Indonesian government. These include definitional issues, bureaucratic competition, the difficulty of verifying nationality, evaluating the toll of exposure to conflict, assessing security risk, and finding relatives or others willing to provide care once the children are returned. In addition, COVID has meant stringent restrictions on travel, placing further obstacles in the way of repatriation. There are several models for rehabilitation of children exposed to violent extremism in Indonesia that could be modified to accommodate the needs of children repatriated from abroad. The report examines these models and argues that the government does not need to have every detail of rehabilitation programs in place before it starts extricating children from ISIS influence. It can start by bringing back the most vulnerable children and then modify programs as needed.

“It’s important that the government see these children as victims” says Dyah. “They deserve a chance to be children again.”

Consolidating State Companies