Economic Committee Concerned SOE Holding Company Would Lead to Cartel

The National Economic and Industry Committee (KEIN) has highlighted concerns about the government’s plan to establish state-owned holding companies. This plan must be reviewed in depth because it has the potential to create cartels.

KEIN member Aries Muftie said that for political reasons Indonesia is not ready to form state-owned holding companies. Indonesia cannot compare itself to Singapore and Malaysia, which successfully established Temasek and Khazanah, because these two countries have a more centralised government.

(Baca: Government Approves of Formation of Six State-Owned Holding Companies)

These holding companies would also be in breach of Business Competition Supervisory Committee (KPPU) regulations. For instance, Aries explained, a state-owned holding company for the construction sector would be in breach of KPPU regulations because it provides an opportunity to form a cartel in the sector. “A state-owned holding company for the construction sector would not be allowed to participate in tenders,” he said after a media workshop in Bogor on Sunday (14/8).

KEIN Deputy Chair Arif Budimanta added that the government must carry out a thorough review of this plan, particularly as there is no clear goal or mechanism for establishing a holding company for this sector, such as being of benefit to the public.

Also, a state-owned holding company of this kind must not be detrimental to other industries because its subsidiaries have different business activities than the core company. (Read: Pertamina – PGN Holding Company to Lower Gas Prices)

The establishment of these SOE holding companies would give their subsidiaries access to large amounts of capital for participating in tenders. Therefore, these SOEs would dominate all business areas and harm Indonesia’s private sector.

The role of these state-owned holding companies must be clear and limited. “To prevent them from killing off other national industries,” Arif told Katadata.

KEIN Chair Soetrisno Bachir said that if a holding company is established without conducting an in-depth study first, it would seem rushed and the country would be at risk of making the same mistakes it made in the past. “Like Pupuk Indonesia, which failed to grow. That’s an example of failure,” said Soetrisno.

During a private meeting on these state-owned holding companies, Soetrisno, who attended the meeting, said President Joko “Jokowi” Widodo was very receptive to suggestions made by several parties. During the meeting, Jokowi even asked the relevant ministries to provide more details about the objectives and direction of these holding companies. (Read: SOE Holding Companies to Wait for Revision of State Capital Investment Regulation)

As previously reported, during a private cabinet meeting on state-owned holding companies held at the President’s office in Jakarta on Friday (12/8), SOE Minister Rini Soemarno proposed the formation of six sector-based state-owned holding companies for the mining, oil and gas, housing, toll road, finance and food sectors.