SOE Holding sparked criticisms

JAKARTA. The government is likely to struggle to realize the plan to establish state owned enterprise (SOE) holdings in some sectors, such as oil and gas, mining, and banking.

Even, the issuance of Government Regulation No. 72/2016 on the Procedures of Inclusion and Administration of Government Capital in SOE and Limited Company as the law umbrella to establish SOEs holding has been being criticized.

Economic observer of Indef Mohammad Reza H Akbar said, according to Indef study, the policy has a number of weaknesses. First, the Law on SOE does not include the inclusion of state-owned shares in SOE and limited company as the source of state’s capital participation in SOE. The inclusion is also known as ‘inbreng’ concept.

In fact, the inclusion of state-owned shares in SOE and limited company is stipulated under Government Regulation No. 72/2016. In other words, the government should include the inclusion of ‘inbreng’ mechanism in the revision of Law on SOE to apply the mechanism in the future SOE building. “Law on State Financial should also be revised, as this is related to the State Budget,” he said.

Second, the Government Regulation No. 72/2016 also allows the central government to shift state’s owned shares in a SOE to another SOE without State Budget mechanism. According to Reza, this provision ignores the supervision and auditing functions of BPK (the Audit Board of the Republic of Indonesia) over SOE.

From the perspective of law, this regulation cannot be the legal base of the state’s capital participation without State Budget mechanism. Because, in principle, that regulation may change the provisions in Law on State Financial and contradicts with the Law on SOE and Law of State Financial.

Third, article 2A paragraph 2, 6, and 7 of Government Regulation No. 72/2016 contain some provisions related to SOE’s subsidiary. According to Reza, Law on SOE and Government Regulation No.44/2005 do not include some provisions on SOE’s subsidiary and its business derivative. Therefore, the provisions related to SOE’s subsidiary should be included under a regulation at the level of Law.

However, Minister of SOE Rini Soemarno insisted that the Government Regulation No. 72/2016 has been in accordance with existing legal provisions, including Law on State Financial, Law on SOE, and Law on State Treasury. “We hope everything is learned thoroughly,” Rini said. (Muhammad Farid/Translator)