Govt to dramatically reduce number of state firms, VP says

Andi Haswidi, The Jakarta Post, Jakarta

To help make state companies more efficient and competitive, the government plans to reduce the number of nationalized firms to 69 over three years from the current figure of 139.

The plan will be implemented through various mechanisms, including merger and privatization.

"The target is to reduce the number of state firms to 69 through mergers, privatizations, liquidations and other mechanisms," Vice President Jusuf Kalla told reporters Monday after a limited ministerial coordinating meeting.

The plan, Kalla said, was expected to bolster the performance of state firms amid increasing competition, both domestic and global.

He insisted that signs of progress in the state sector were already becoming apparent, pointing out that this year the government was targeting 22.5 percent growth in state-firm profits from the Rp 72.44 trillion booked last year.

"We are targeting a minimum of 20 percent growth, but we have agreed on 22.5 percent on average. So, it's good. State-owned companies will now be required to fast-track all the programs in their pipelines," Kalla said.

"These companies have to increase their investment levels for the sake of the nation's development. There are high-performing companies and there are also weak ones," he said.

State Minister for State Enterprises Sugiharto gave the following details of the resizing plan: reducing 139 companies to 102 in 2007, to 87 in 2008, to 69 in 2009, to 50 in the period between 2012 and 2015, and a further reduction to 25 after 2015.

However, the plan would still have to await an agreement between the coordinating ministries, the Finance Ministry and other relevant ministries, as well as the approval of the House of Representatives.

"All the processes, such as mergers, ownership dilution, divestment, etc., will need the support of all the stakeholders, including the legislators," Sugiharto explained.

For the short term, he said, it was expected that at least 4 state firms -- oil and gas firm Pertamina, a proposed holding company for state mining firms, state gas company PT PGN, and a proposed holding company for state plantation firms -- would come close to completing fast-track restructuring in 2007 and 2008, and that these would serve as pioneers capable of competing globally.

As for the state-bank sector, Sugiharto said that the issues involved were still being discussed internally and that consultations would soon be carried out with Bank Indonesia soon.

"I cannot say whether there will definitely be bank mergers. But the Vice President suggested the need to study the concept of a development bank, like those that exist in some overseas countries," he said.

A development bank would be beneficial as it would provide long-term loans, unlike Indonesia's private banks, which tend to cater to short-term financing needs, Sugiharto explained.

Under the 2007 national budget, the government is targeting a total of Rp 3.3 trillion in privatization proceeds, with Rp 1.300 trillion of this being injected as fresh capital for 8 state firms: PT KAI, Garuda, Kertas Leces, PIM, INKA, Perum SPU, BBI and PTPN XIV.

Sugiharto said that he also expected total capital expenditure by state companies to increase this year by 62.78 percent to Rp 114.1 trillion from Rp 70.1 trillion in 2006.