Jakarta, IO – In recent years, Indonesian StateOwned Companies (SOEs) have been in the spotlight, and not in a good way. A torrent of corruption scandals, bankruptcies, financial statement manipulation, outstanding debts and delayed vendor payments have plagued the firms, in spite of years of Government of Indonesia support and boosting.
Many SOEs clearly find themselves in a difficult situation, while at the same time, they have been loaded up with heavy assignments to accelerate the development of infrastructure projects before President Jokowi’s term ends. The various problems being faced by SOEs in construction, financial, aviation and other sectors have been warned that the worst is yet to come.
External conditions reflected in the macro economy have also made it difficult for the SOEs. During the pandemic, SOEs were hit so acutely that the government came to their rescue, issuing various policies to keep them afloat. Eternally-suffering Garuda Indonesia, an airline that lost a significant number of passengers because of social restrictions, faced both corruption scandals and potential bankruptcy, threats which ended with a term proposal that kept creditors and lessors at bay.
Post-pandemic, the threat of inflation imposed pressure on SOEs from a different angle, except for the energy sector, which suddenly enjoyed short-term oil profits. An increase in the inflation rate in Indonesia to 5% decayed purchasing power, meaning that state-owned companies had to clamp down on production costs and interest payments. Inflation in export destination countries such as the US and the European region also dampened SOEs’ export performance.
Blessings in disguise actually benefited SOEs in the energy and commodity sectors in 2022, when the turmoil of the Ukrainian war escalated, spiking commodity prices. Several SOEs that performed quite well during the transition from pandemic to endemic had more to do with the commodity bonanza. However, this windfall is unlikely to continue, looking at a gloomier economic projection for 2024, which has depressed commodity trading volumes. The party is about to end soon.
What about SOEs in the financial sector? As of this writing, stateowned banks enjoy excess liquidity, the result of panic among businesses and upper income households in, hanging onto their assets through savings, amid a wave of economic uncertainty. Non-performing loans are still kept in line, covered with adequate state bank capital. Naturally, state-owned banks, as the biggest contributors to the state dividend, seem to be performing satisfactorily. In fact, state-owned banks are no different from other state-owned companies, under intense scrutiny related to governance issues.
Corruption and fraud
KPK data revealed that in 2016- 2021 119 cases of corruption were uncovered, dragging down SOEs and resulting in state losses of up to IDR 47.9 trillion. In addition to simple corruption, bribes of up to IDR 106.9 billion were also uncovered, as money laundering crimes amounted to IDR 57.86 billion. Of monumental concern was the banking sector, with at least 38 corruption cases being prosecuted. State-owned banks still have various loopholes, with executives taking customer funds and employing credit facilities for malfeasance.
In addition to cases in the financial sector, SOEs have encountered problems ranging from debt defaults, corruption and manipulation of financial reports, involving construction SOEs that are already listed on the Indonesian Stock Exchange. Awkward for the Government.
Problems at the governance level have become a vicious cycle, one that continues to plague both SOE subsidiaries, as in the case of Waskita Beton, and large-scale SOEs. Weak oversight, both internally and externally, and corrupt behavior on the part of Boards of Directors has fueled recurring corruption and bribery scandals. This of course incurs a predicament, because the state-owned companies involved in corruption cases are state-owned enterprises already listed on the Stock Exchange. Augmenting conventional supervision, the OJK (Financial Services Authority) is also more closely involved in supervision.
The theory that SOEs should be encouraged to privatize or sell shares to the public in the hope of improving governance seems to be unproven. In fact, SOEs with layers of supervision, monitored by the public, continually fail to improve governance.