8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
1/29
EmpoweringSOEs
o yan
a ,
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
2/29
KeepingtheBalanceamongotherBigPlayersinIndonesia
SMEsinIndonesaEconomy
Illustrations (Plantation,OilGasMining,Banking,TelecommunicationsSectors)
FurtherGrowth
and
Better
Balance
are
Necessary
EvolutionofCompetitivenessRankofIndonesia
TheMostProblematicFactorsandWhatSOEsCanDo...WhattheGovernment
(MinistryofSOEs)CanDo
GeneralChallenges
of
SOEs
ac as sown a enge
TransformationalChallengeforSOELeaders
ppen ces
2
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
3/29
K in th Balanc am n th r Bi Pla r
Besidethehistory,StateownedEnterprises inIndonesia playaverycriticalroleinkeeping
onbalancingtheinterestsofforeign,private,and largescale privateandpublicsectors
Source:The
Economist,
March
2014
chunkofeconomicpietogrowaswell
3
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
4/29
SMEs in Indonesia EconomySMEs in Indonesia Economy
Netassets:morethanIDR10billion(USD1million),or
Annualsales: morethanIDR50billion(USD
Numberofentity:4,372unitor 0,01% Shareto:
totalemployment:2,96%m on
Netassets:morethanIDR500millionUSD50.000 u toIDR10billion USD1
,nonoilexport:79.83%
total
Investment :
47,11%
Numberofentity: 39,657unitor 0,08% Shareto:
million),or Annualsales:morethanIDR2,5billion
(USD250.000)uptoIDR50billion(USD5million)
Netassets:morethanIDR50million(USD5.000)
totalemployment:3,48%GDP:13,43%nonoilexport:13,10%totalInvestment :23,81%
Numberofentity:520.221unitor 1,01%uptoIDR500m on USD50.000 ,or
Annualsales:morethanIDR300million(USD30.000)uptoIDR2,5billion(USD250.000)
Shareto:totalemployment:4,26%GDP:10,08%nonoilexport:4,85%totalInvestment :20,69%
Max net worth (excl. land & building) : IDR
50 million (USD 5,000)
Max. annual sales : IDR 300 million (USD
30,000)
Numberof
entity
:50,697,659
unit
or98,90%
Shareto :totalemployment:89,30%GDP :32,05%nonoilexport:2,22%
Datasource:StatisticsIndonesia,2009(dataasof2008)
MSMEdefinitionreferstoMSMEActNo.20/2008
totalInvestment :8,39%
4Source:MinistryofSME(2013)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
5/29
Illustration1: Agroindustry/Plantantion Sector
Source:MinistryofSOEs(2013)
PTPN(I
XIVs),
RNI,
and
large
private
companies
such
as
Astra
Agro
Lestari,
PP
London
Sumatera,SampoernaAgro,etcsarethemajorplayersinagroindustry/plantationsector
SOEsrolesarebasically derivedbyhistorywithdiscouragingperformancesforsome
companiessuchasPTPNII,butthentheyhaveto rewriteitas thecompetitionhas
changed andinfact thatprivatepublic companies aretakingupwithlargerscaleand
capacitiesand
hence
performance 5
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
6/29
Illustration2:BankingSector
Source:MinistryofSOEs(2013)
largestplayers
and
further
foreign
shareholdings
dominance
in
Indonesias
banking
sectors
Whilethecurrentperformancemaybeonpar,buttheirchallengesmaynotbelimited
an w go eyon omest cregu at ona ter ommun ty n w c may
increasefurtherforeignshareholdingsinIndonesiabankingsectors
Abigger
and
stronger
SOE
bank
is
required
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
7/29
Illustration3:TelecommunicationsSector
Source:MinistryofSOEs(2013)
,
shareholdings andignitedveryfiercecompetitionnotonlyonservicesbutprices.
Whileothercompaniesarefocusingmostlyonurbanareasandavoidingruralareas,
SOEanditssubsidiariesareservingmoreremoteandfrontiersaswell.
7
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
8/29
IndonesiaseconomywillbecomemoredominantinASEANand
largerthan
several
countries
in
Europe
IndonesiaEconomicGrowth(nominal)
(USDBillion)CAGR14.5%
Indonesias
economy
as
%
of
ASEAN6
ASEAN(Total11
40% 48% 53%
38% 46% 52%
Countries)
Spain 50% 91%60%
EuropeanCountries:
page8Source:InternationalMonetaryFund,WorldEconomicOutlookDatabase,April2011;Proyeksi Ekonomi Indonesia2011 2045;Analisa Tim KEN
Netherlands 91% 165%105% Source:KEN(2014)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
9/29
FurtherGrowthandBetterBalanceareNecessary
Source:WorldEconomicForum(2014)
9
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
10/29
CompetivenessRankofIndonesia20062014
Thetrendisincreasingalbeitfluctuatingalongthewaysince20067
ow o y
Moresystematicandconsistent approachisneededtoimprovethecompetitivenessof
Indonesianeconomy 10
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
11/29
CompetitivenessRank(20132014)
11
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
12/29
TheMostProblematicFactorsandWhatSOEsCanDo
Supplyingmorebasic
infrastructures(ports,toll
roads,airports,etc)
Betterandbroaderaccessto
financingparticularly
for
middle
andsmallenterprises
Lea ers ip in etter
corporategovernance to
reducecorruption
and
bribery
Leadershipinbetter
competition practices in
,
procurements,and
quality
of
services
Leadershipinindustrial
relations
12
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
13/29
WhattheGovernment(MinistryofSOEs)CanDo...
RapidAssessmentoncurrentMasterplananditsimplementations
Reviewinganymisfitsandbottlenecks,andupdatingwiththelatestconditionsandmaintaininganyprogressofpreviousrestructuring(i.eholdingcompanies establishment)
Identifyingquickwinsundernewgovernment
Alignment withthenewgovernmentpoliciesasrequired
Rapidimplementationafterrapidassessmentwithquickwinsachievements
FocusingtheMostStrategicIssue: Findingtheright transformationalleadersandrecruitthebesttalentforSOEdirectorship
Im ortantRolesofMinistr ofSOEs:
ShieldingSOEsfromanyunnecessaryinterventions(anyintentionand instructionmustbechanneled throughtheshareholdingactivitiesorbasedonacrossindustry regulation
.
Ensuringthe
supervisory
duties
of
BoCproportionally buteffectivelyperformed
EnsuringinternalaffairsofaSOEcompletelybesettled onitsowninternalgovernancestructureandprocess(notbouncingtotheMinistryof SOEs)
AdvocatingfairerpolicyandregulatoryissuesonbehalfofSOEs and otherinterestsofSOEsat thehighestlevel
13
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
14/29
General Challenges of SOEs
Too many of companies, too few have economies of scale individually.
It needs ability to create orchestrated corporate efforts virtually (by business-to-business
mutual cooperation) and physically (by creating meta-company structure).
,
especially when compared to the regional and global private sectors. It needs leaders who acceptthe highest benchmarks challenge and lead their companies to go beyond.
The chances to row and develo are still wide
but there are some previous corporate culture hurdles such as: (a) unwillingness to take risks; (b)
complacency with the current achievements; c) rigid silos of corporate bureaucracy. It needs
leaders who are able to move from the comfort zone towards value-creating corporate.
Legacy of previous practices using intermediaries on commercial activities among SOEs
which creates unnecessary high cost. It needs leaders who dare to break all non-value-creating
(negative) value-creating practices and set the new rules of doing business.
Technical competency can not be understated due to long experience in the area, but lack ofleadership and managerial resources are eminent.
Lack of good talent based on international standards
14
It need to recruit, train and retains the best talent available in the local market and if
necessary to recruit expatriates as well especially to fulfill critical positions such as CEOs,
CFOs, COOs, or CIOs.
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
15/29
Each SOE has its own Challenges
Peak
Secon
Li e
InflectionPoint
PPA
Garuda
Posindo
BRI
Mandiri
Turnaround
Rejuvenator
KAI
PelindoII
PupukIndoesia
Leader
TerminatorInitial
Growth
Merpati
Iglas
ega a an
PGN BNI
KawasanIndustri
PTPNIII,IV
Pelni
PLN
Telkom
Pertamina
EarlyStages
IndustriSandang
Citilink
saw t
PTPNVIII
(teh)
PTPNX,XII
(gula)
KKA
SangHyangSeri
BUMNGeotermal
PrasadhaPamunah
LimbahIndustri
GMF
EnergiManajemenInd.
15
Leader
Entrepreneur
Leader
Stabilizer
Leader
InnovatorStrategist
Leader
System
Establisher
Source:LosoJudijanto(2009)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
16/29
Transformational challenges for SOE leaders (i)
Aspects Past Transformation for better SOEs
Management system Bureaucratic structure Real corporate structure
listed on the stock exchange)
market discipline)
Shareholders involvement Micro-management (keep on
interfering on minutiae or irrelevant
robe
Macro-management (set the targets,
develop framework, support the
im lementation
Asset management In accordance with the respective
companies on individual basis
In accordance withmodern portofolio asset
managementprinciple
Decision making process Most business decisions must be Directors are responsible according to
Shareholders
, , ,
and avoidance of conflict of interest
Management philosophy Accounting profit creation Value-based Management (efficient value
creation)
rectors remunerat on ormu a ase on reac ng
accounting profit
ormu a ase on per ormance o ac ua
value creation
Management of returns
and financial resources
Throw good money into bad ones;
rigid because the disbursement of
Put the money where the value is; More
flexible based on competitive investment
16
limited.
.
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
17/29
Transformational challenges for SOE leaders (ii)
Management performance Comparing with the previous years
performance
Stretched targets, benchmarked with the
best performer in each industry
services
from the Government Regulation logistic needs of each company
Career planning Limited to an internal path within the Cross-posting and career path in various
same company compan es an open compe on
Source of directors
succession
Comfy-cozy-cabal group inner circle
management
Job tender from a gene leadership pool
and open competition
improvement activities
GCG implementation Just for the sake of conforming or
compliance
To develop optimum situation for
performance
Board of Commissionersperformance
Ceremonial [passive] or at maximumliberated [has started to become
active but no yet systematic or
comprehensive]
Progressive [capable, constructive,collaborative, real contribution to an added
value creation process]
17
Commissioners and
Directors actions
Underperforming, overacting,
creating unnecessary conflicts
Performing
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
18/29
Conclusion Besideitscommon functionas aneconomicagent,SOEsinIndonesiahave a unique
rolestokeeponbalancingtheinterestsofbigplayersineconomy.
Suchimbalancemayburdenthe majorityplayersinIndonesiaeconomywhich
o o u u o y u o o o
pie. Theresultsmay vary asreflectedinthescaleandtheperformancesofSOEsintheir
respectivesector.
FurthergrowthandbetterbalancearenecessarytosupportIndonesiasnext
economyandhenceSOEsareexpectedtobecomeoneofapowerhouseasmore
systematicand
consistent
approach
is
needed
to
improve
the
competitiveness
of
.
SOEscandobetterinsupplyingmorebasicinfrastucture,betterandbroaderaccessto
financingforSMEs,exemplaryleadersincorporategovernanceimplementation,
creatingbetterbusinessenvironment,bettermodelinindustrialrelations,justtoname
afew.
ManySOEsproblemscouldbereduced,shouldtheGovernment focusonfindingthe
mostappropriateleadersineachSOEs throughopencompetition.
ensurethatitcanimprovethemselvesbeforecreatingvalueaddedandsupporting
Indonesiasnext
economy
as
required.
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
19/29
ThankYou
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
20/29
Appendices
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
21/29
PerformanceComparisonofSOEsandListedCompanies:
Plantation Sector
Source:MinistryofSOEs(2013)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
22/29
SizeComparisonofSOEsandListedCompanies:
Oil,Gas,andMiningSector
Source:MinistryofSOEs(2013)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
23/29
RevenueComparisonofSOEsandListedCompanies:
Oil
Gas
and
Minin
Sector
Source:Ministry
of
SOEs
(2013)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
24/29
PerformanceComparisonofSOEsandListedCompanies:
BankingSector
Source:Ministry
of
SOEs
(2013)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
25/29
PerformanceComparisonofSOEsandListedCompanies:
LifeInsuranceSector
Source:Ministry
of
SOEs
(2013)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
26/29
PerformanceComparisonofSOEsandListedCompanies:
GeneralInsuranceSector
Source:MinistryofSOEs(2013)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
27/29
PerformanceComparisonofSOEsandListedCompanies:
ConstructionSector
Source:Ministry
of
SOEs
(2013)
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
28/29
ElectricityProductionComparison
Source:MinistryofSOEs(2013)
Sourceofgrowthismorecomingfromtheprivates
Theprivates aretakingup fromaboutafourthintoathirdoftotalelectricity
pro uct ona ongt eyears
8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil
29/29
IndonesiaasanEfficiencydrivenEconomy
(GlobalCompetitivenessIndex20132014)
Source:GCI(2014)