State versus Private Companies

Posted by AsiaViews | Oct 16, 2017 | 0 |

The Jakarta Post

Oct 9, 2017

Right from the outset of his administration, President Joko “Jokowi” Widodo has rightly focused his attention on tackling physical and institutional shortfalls of the country by accelerating infrastructure development and pushing for deregulation.

But his physical infrastructure programs have of late been criticized for the alleged dominance of state-owned enterprises (S0Es) in financing and building facilities like toll roads, power plants, airports and seaports. Even the Indonesian Chamber of Commerce and Industry (Kadin) brought the issue of what it calls “SOEs omnipresence” in the economy directly before Jokowi at a national conference last Tuesday.

The impression of SOE dominance especially in infrastructure development is inevitable, because this sector requires huge and long-term investment, and the biggest barriers to investors are the complexity of land clearance and acquisition and overlapping regulations.

Faced with the understandable reluctance of private investors in green-field infrastructure projects due to the myriad regulatory and financial risks, the President has pressured SOEs to take the lead role, apparently in a concerted bid to build up confidence after infrastructure was virtually ignored over the past two decades. Inadequate infrastructure has become the biggest obstacle to economic development, including poverty alleviation.

Given the high risks and huge capital requirement of infrastructure development, SOEs, riding on the back of state budget financing and government guarantees, have the big advantage of circumventing the regulatory and bureaucratic inefficiencies in plunging head-on into this sector.

The problem is that there has been an acute lack of bankable projects. But the bankability of an infrastructure project is determined in its early phase – at the project development stage, which is entirely under the jurisdiction of the government or ministries preparing projects. If the risks are not allocated to the right parties during a project’s conceptualization, investors and lenders will not want in.

Since the assessment and design of the risk-sharing arrangement under the public-private partnership (PPP) scheme are done by line ministries, SOEs have the advantage of implementing the projects either through competitive bidding or by direct appointment. But this has the effect of crowding out the private sector, which is supposed to put up almost 40 percent of the $350 billion of infrastructure investment needed for the 2015-2019 period.

A lack of competition or an oligopoly usually causes inefficiency and does not enhance corporate governance. This is the biggest downside risk now encountered in the SOE-dominated infrastructure development. In addition, there has been increasingly pressure on the balance sheets of SOEs involved in infrastructure development. Moreover, state budget funds derived from the savings generated by slashing fuel subsidies have sharply decreased.

Good to know, though, that after three years of pioneering efforts, the government is aware of these risks and has started improving the PPP scheme for state-private joint ventures and is encouraging SOEs to monetize the stable cash flows from their existing revenue-generating infrastructure assets for investment in green-field projects.

Investors will certainly conduct vigorous due diligence on the SOEs and their projects, especially their corporate governance standards and requirements for efficiency, transparency and accountability.

(http://www.thejakartapost.com/academia/2017/10/09/editorial-state-versus-private-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.”

State versus Private Companies