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Enhancing Indonesian state-owned enterprises (SOEs) through clustering
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On October 14, 2021, Jokowi stated that he was pleased to witness the clustering of container terminal operator and port development firm Pelindo into one holding, which was PT Pelabuhan Indonesia, to cuts logistics costs and helps improve connectivity throughout Indonesia.
According to Jokowi, the clustering forms into one great power, as it builds networking with partnerships abroad. "Through partnering with overseas companies who have networks, the (SOEs') link to all countries can become a huge power," the president remarked.
Through clustering, SOE companies have shown above-standard or even excellent work performance that has contributed significantly to the state budget.
According to data from the National Development Planning Board (Bappenas) in 2019, the estimated total budget for infrastructure development in the period of 2020-2024 was US$447 million or Rp6,445 trillion, and 21 percent of them came from or supported by SOEs.
In the third quarter of 2021, the total assets of SOEs reached some US$610.5 million or Rp8,767 trillion, equivalent to some 57 percent of Indonesia's GDP.
Moreover, in January - September 2021, the total consolidated revenues were closed at Rp1,613 trillion, or grew 14% compared to the same period in 2020.
One of the efforts to enhance state firms' performances is through clustering and restructuring.
Clustering efforts have been accomplished by reducing the number of SOEs from 107 to 41, and sector clustering from 27 to 12, where two deputy ministers each oversee six clusters.
Currently, there are 12 sectors that 41 SOEs engage in: energy, oil, and gas; mineral and coal; insurance and pension funds services; plantations and forestry; and telecommunications and media.
Additional industries include the food and fertilizer industry, tourism and supporting services, health industry, manufacturing industry, infrastructure, logistics, and financial services.
On February 18, 2022, SOEs Minister Erick Thohir announced that he would again downsize the number of state-owned enterprises from 41 to 37 in the next two years.
In addition, he expressed his hope that the next SOEs Minister can complete the reducing program to only 30 state-owned enterprises. With a roadmap for a ten-year period, he has targeted to make the scope of state firms more manageable.
So far, the ministry has encouraged and carried out the SOEs transformation through reducing companies that are considered too large in number, and focusing on inefficient business sectors.
Under his leadership, the transformation is focused on human capital through replacing underperforming board of directors with better ones, so many state-owned enterprises can generate profits for the state.
Through restructuring, holdings, mergers, and acquisitions, Thohir has made SOEs' work performances more efficient.
According to Thohir, the SOEs Ministry distinguishes the strategy of the three pharmaceutical SOEs, where Bio Farma focuses on vaccines, Kimia Farma is focused on chemicals, and Indofarma on herbs. Indonesia has extraordinary potential in the herbal sector, but it has not been explored, so the SOEs Ministry had tried to re-map the path in developing it.
"We know that we import 90 percent of the raw material for medicines, and even medical devices. The COVID-19 pandemic has woken us up that we need to create a roadmap for Kimia Farma to focus on chemicals and Indofarma to be positioned on herbs," he explained.
Thohir said that since health and energy are under the same SOEs ecosystem, a connection between sectors needs to be built.
On the other hand, oil and gas firm Pertamina has begun to build petrochemicals, and one of the derivatives of petrochemicals is to create paracetamol. If Pertamina is merged with a health state firm into one ecosystem, Indonesia would no longer need to import paracetamol.
The ministry also consolidated and launched the tourism holdings and its sub holdings into one cluster, consisting of airport operator Angkasa Pura I and Angkasa Pura II, as well as some aviation and hotel companies.
Thohir put together the infrastructure construction SOE and cement SOE into one cluster, as he viewed that the two need each other and are expected to synergize.
Meanwhile, the tourism, logistics, and support cluster consists of Hotel Indonesia, temple tourism managing firm PT TWC, which manages the temples of Prambanan and Borobudur and Ratu Boko, and Indonesia Tourism Development Corporation (ITDC).
State-owned Bank Negara Indonesia (BNI) also announced that it relied on clustering to strengthen the distribution of smallholder business credits (KUR), as well as to help boost the productivity of Micro, Small, and Medium Enterprises (MSMEs) during the COVID-19 pandemic.
Moreover, on February 23, three state-owned companies have agreed to collaborate on building green industry clusters in Indonesia that will prioritize the efficient and effective use of sustainable resources. The three state firms are electricity company PT Perusahaan Listrik Negara (PLN), oil and gas company PT Pertamina, and fertilizer company PT Pupuk Indonesia.
The clustering efforts began in 2020, as many state firms decided to be merged. Thohir also significantly increased the performance target of SOEs to double their outputs in 2024, especially on profits, which are projected to reach some US$20.8 billion or Rp300 trillion.
To be successful
Performance of banks incorporated in the Association of State-Owned Banks (Himbara) throughout 2021 showed satisfactory results through well-implemented credit restructuring, economist and capital market practitioner Lucky Bayu Purnomo said.
According to Purnomo, credit restructuring has resulted in more efficient and effective management of operational expenditures. In December 2021, the total profit of Himbara banks shot up to US$5 billion or Rp72.05 trillion, significantly increasing by 78.06 percent, compared to 2020 at US$2.8 billion or Rp40.34 trillion.
Thohir said each Himbara bank has a specific business focus, such as BRI prioritizes the MSME and ultra micro-segments, Mandiri is dedicated to enhancing the national corporates and entrepreneurs, BNI on international business, and BTN focuses to reduce backlog numbers and help people, including millennials, to make it easier to purchase a home.
"We hope that Himbara's role can be more prominent and become the main national economic driver through enrichment in various segments that provides positive impacts for stakeholders and Indonesian society," he said.
Previously, SOE holdings that had been formed were plantation holdings under PT Perkebunan Nusantara III, forestry holding under Perum Perhutani, fertilizer holding under PT Pupuk Indonesia, and cement holding under PT Semen Indonesia.
Under Thohir's leadership, the holdings of SOEs that have been completed are the mining holdings under Mining Industry Indonesia (MIND ID), oil and gas holdings under PT Pertamina, pharmaceutical holdings under PT Biofarma, state-owned hospital holdings under Pertamed ika IHC, insurance and underwriting holdings Indonesia Financial Group (IFG), and tourism and aviation holdings under Aviasi Pariwisata Indonesia or InJourney.
Fixing SOEs through the establishment of holdings is a task that must be carried out sustainably to yield powerful government-owned corporations that can compete on the international stage.
Photo: ANTARA / HO-Kementerian BUMN / pri
Reporter: Kenzu Tandiah; Editor: Rahmad Nasution (c) ANTARA
Copyright 2022 ACN Newswire. All rights reserved. www.acnnewswire.comPresident Joko Widodo (Jokowi) has given a period of one to two years for state-owned enterprises (SOEs) to make fundamental changes to increase their competitiveness.
SMEStreet and Tally Solutions Join Hands for National Productivity Day’s Exclusive Webinar on Industry 4.0
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The National Productivity Day is a part of the National Productivity Week observed from 12th-18th February every year in the country by the National Productivity Council under the Ministry of Commerce and Industry.
In light of the National Productivity Day that aims to highlight the importance of productivity, efficiency and innovation across different sectors of the economy so as to augment the economic growth of the country altogether, the focus of the webinar essentially revolved around understanding of Industry 4.0 and the kind of opportunities it brings to the table for the MSMEs particularly.
The webinar saw the presence of distinguished panelists who articulated their ingenious perspectives on various aspects of Industry 4.0 and the roadmap for MSMEs to navigate the same and equip themselves for the future.
Mr. BB Swain, Secretary, MSME Ministry, shed light on the enormous significance that technology holds as a means to drive the MSME sector and the digitization of manufacturing process therein. He also highlighted various schemes and measures undertaken by the Ministry to promote the integration of the essentials of industry 4.0 amongst MSMEs. The ministry is working on schemes still under discussion that are primarily concerned with providing necessary support and information to MSMEs regarding registration, access to credit and technology and to all related activities which can enhance their performance quality. "The ministry has been running several seminars, workshops and trainings to create awareness and familiarization of M2M, IoT, AI, etc. through its various technology centres."
Mr. Swain also added, "The Ministry of MSME is working with clusters and associations to assess ground level requirements. Among such endeavours is one of getting in place an IoT readiness index; it'll be a diagnostic study to assess the appetite and acceptability. Once available, the necessary and customized intervention will be provided."
Moreover, Mr. Swain elaborated on the endeavours of the Ministry like the Champions portal to curtail the ordeal faced by MSMEs post the onset of the pandemic, especially the micro industries that were impacted the most. The Champions Portal was set up to address the grievances of MSMEs about 15 per cent of which were technology related which in turn affirmed the receptiveness of the sector to technology and Industry 4.0 by and large.
Complete Recording of the Webinar
There exist a multitude of challenges that the MSME sector has to endure so as to sustain in the market and M. S. Ravi, Ex Chairman, BSE India, rightly elaborated on some of the key components that either make or break the MSMEs namely, Efficient business model, Equity and working capital, Operating costs, Ability to bear shocks and lastly an Efficient credit cycle.
Stressing on the relevance of incorporating technology into MSMEs to optimise productivity, M. Ravi said, "The operating costs can be reduced by 5-7 per cent through technology. Technology doesn't come easy; we have to have a shared platform for common industries so that at least the technology costs can come down." In addition, M. Ravi opined that the exorbitant compliance costs like GST, tax, etc. can also be reduced by a sizeable amount through the use of adequate technology.
Apart from technology; the ability to constantly adapt to the changing needs of the customers, to be able to engage with them and analyse the changing nuances of the market are all pivotal in fostering innovation amongst MSMEs. "As we look at the culture in addition to the customer, the second important pillar which I think each one of us as we reflect, will recognise, is the need to innovate," said Mr. Manoj Chugh, Board Member, Mahindra Group. He also added, "As we look at making investments in technology which are very very important, it is also incredibly important to look at reskilling our workforce because if our workforce doesn't understand how the new world is going to work, we are not going to be successful as an entrepreneur or as a small team which is driving the business."
Mr. Arun Kumar Jha, Ex Director General, NPC, also gave his insights regarding how industry 4.0 is likely to revolutionize how businesses work in the country in more ways than one and has out and out provided an exponential boost to the country's economic development through the generation of employment opportunities, foreign exchange by means of export of IT services to other countries so on and so forth.
However, It would be naIve to generalise that all existing entrepreneurs are familiar with ways to navigate the intricacies of technology and the digital ecosystem to operate their businesses. Vedanarayanan Vedantham, Business Head, Razorpay spoke on similar lines that how with the influx of sophisticated digital payment gateway providers such as Razor Pay, the new age start up entrepreneurs belonging to the MSME sector especially, although lack decent levels of financial and digital literacy, yet have been successful at running their businesses seamlessly by virtue of using easy to use digital payment products. He further added, "Digital payments have become democratized and accessible to everybody. It's no longer elitist, it's egalitarian. It has become essentially an aam aadmi platform."
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Copyright 2022 ACN Newswire. All rights reserved. www.acnnewswire.comSMEStreet along with Tally Solutions organized a webinar on the 12th of Februrary,2022 to mark the occasion of National Productivity Day, on the theme Industry 4.0 - Journey Ahead for MSMEs.
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