Indonesia is looking to boost the profitability of state companies by merging or closing underperforming firms and their units.
Indonesia is looking to boost the profitability of state companies by merging or closing underperforming firms and their units, the ministry of state-owned enterprises said on Friday, with flag carrier Garuda having identified five subsidiaries to cut.
The ministry wants to cut back the number of state companies from about 140 to ensure the rest can provide public services while being financially viable, minister Erick Thohir told reporters.
“The boards of directors and commissioners will propose (units to be merged or liquidated),” Thohir said, adding that the ministry was weighing up firms by sector, function and profits, to identify “deadweight” to be merged or liquidated.
The ministry expects restructuring to start this year, but it is waiting for a presidential regulation, he added.
The restructuring will involve hundreds more of the state companies’ subsidiaries, but Thohir did not say how many companies were expected to be left after the exercise.
Flag carrier PT Garuda Indonesia had identified five units considered to be “unfit or no longer needed”, Thohir said.
Some state firms face financial difficulties because of alleged mismanagement. Among these are state life insurer PT Asuransi Jiwasraya, which needs a capital injection of more than $2 billion to return to a healthy balance sheet.
The ministry will also step up supervision of companies’ management, said Thohir, who is considering reorganising state firms’ holdings around the value chain, rather than business sectors.
Indonesia has created holding companies for its plantation, mining and oil and gas industries in recent years. (Reporting by Bernadette Christina Munthe; Writing by Fransiska Nangoy; Editing by Clarence Fernandez)