The Indonesian government is planning to set up a super holding company that would act as an umbrella firm for state-owned enterprises.
The notion was initially revealed by President Joko Widodo during the final presidential candidate debate on Saturday.
“We will build state-owned holding companies (for) infrastructure, oil and gas and the one related to plantation. Later, there will be a super holding company,” Widodo said.
The statement was later elaborated by his State-Owned Enterprises (SOEs) Minister Rini Soemarno, who said that the super holding company would essentially take up and potentially even replace the functions of her ministry.
The key is, she explained, to ensure that all state-owned holding companies are run professionally, away from the bureaucracy-driven culture that currently still exists in many holding and its SOE companies.
The move is expected to help the SOE company to thrive and grow in competition with aggressively-run private firms. Setting up of a holding company may strengthen capital structure, improve competitiveness, enable synergy between SOEs and increase their operational efficiency.
Indonesia has established three SOE holding companies – state-owned oil and gas holding company Pertamina, state-owned holding plantation company PT Perkebunan Nusantara (PTPN III) and state-owned mining holding company PT Indonesia Asahan Aluminium (Inalum).
It is currently working on setting up a holding company in the aviation sector, which will oversee the operations of state-owned airport operators Angkas Pura I and II, as well as national flag carrier Garuda Indonesia.
By setting up a super holding company, Indonesia would be following the lead of neighbors Singapore and Malaysia, who have seen the benefits of setting up similar institutions in the form of Temasek and Khazanah, respectively, which are professionally run companies controlled by those countries’ respective prime ministers.
The plan, which would require approval from legislators, has met with criticism from some quarters who believe that merging existing SOEs would be more difficult than in neighboring countries given the complex landscape and that such a move may in fact stifle the progress of companies that have shown commendable performance.