Corporations are involved in projects such as infrastructure so that they can multiply the funding government initially provided and enrich public welfare. When government corporations lose money and call for more capital from the state budget, particularly tax revenue – the people’s money, they deplete reserves and thus place restraints on the ability of society to meet its needs. This defeats the objective of a government’s involvement in commerce.
In just two years, the Ministry of SOEs (Kementerian Badan Usaha Milik Negara) has implemented various reforms, such as initiating joint ventures with foreign enterprises, establishing holding companies by sectors, launching initial public offerings, and restructuring 19 companies and liquidating 14. These are remarkable developments achieved in the 50 years since the country’s first SOE corporation was created. Other initiatives include the Ministry of Finance’s use of dormant state assets and its guarantee of infrastructure projects. Government-owned land, buildings and facilities that were previously abandoned are used by or leased to SOE corporations to facilitate their project development work. The Ministry of Finance, through the involvement of its special-purpose vehicle or SOE corporation, PT Penjaminan Infrastruktur Indonesia (Persero), mitigates the political and financial risks of projects and thus gives comfort to private businesses that join as investors.
These reforms benefit the people both directly and indirectly. In terms of direct returns, such reforms speed up the development of infrastructure projects that are needed to connect businesses, particularly small and medium-sized enterprises, strengthen the supply chain, and increase the quality of life. Some examples include Bio Farma, which manufactures a Covid-19 vaccine; the Temef Dam in East Nusa Tenggara, a region under water stress; and the Jakarta-Bandung high-speed rail, which is expected to be completed by the end of this year and would become the first such line in Southeast Asia. These are all strategically important projects carried out under the auspices of SOE corporations.
As for indirect benefits, the government aims to expose SOE corporations and their subsidiaries to market competition, improve their financial performance, and remake them as global players. If they earn good income, they would be able to pay back the state in the form of dividends and in turn benefit the people through various government programs and subsidies such as for electricity, which would be worth some US$30.5 billion to low income families and small enterprises. The ultimate goals: to create value for millions of Indonesians and drive unprecedented economic growth across the country.
Within the central government, it is the Ministry of SOEs and the Finance Ministry that are driving the reforms of the state-owned companies, which are supporting the country’s infrastructure development efforts. Local governments are also playing crucial roles as they are on the ground and know what type of projects communities need.