Good Gov at BUMN With Mr Sofyan Djalil

8/10/2019 Good Gov at BUMN With Mr Sofyan Djalil

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EmpoweringSOEs

o yan

a ,


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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


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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


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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)


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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


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Illustration2:BankingSector


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


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Illustration3:TelecommunicationsSector


,

shareholdings andignitedveryfiercecompetitionnotonlyonservicesbutprices.

Whileothercompaniesarefocusingmostlyonurbanareasandavoidingruralareas,

SOEanditssubsidiariesareservingmoreremoteandfrontiersaswell.

7


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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)


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FurtherGrowthandBetterBalanceareNecessary

Source:WorldEconomicForum(2014)

9


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CompetivenessRankofIndonesia20062014

Thetrendisincreasingalbeitfluctuatingalongthewaysince20067

ow o y

Moresystematicandconsistent approachisneededtoimprovethecompetitivenessof

Indonesianeconomy 10


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CompetitivenessRank(20132014)

11


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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


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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

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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.


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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)


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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

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limited.

.


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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]

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Commissioners and

Directors actions

Underperforming, overacting,

creating unnecessary conflicts

Performing


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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.


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ThankYou


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Appendices


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PerformanceComparisonofSOEsandListedCompanies:

Plantation Sector



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SizeComparisonofSOEsandListedCompanies:

Oil,Gas,andMiningSector



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RevenueComparisonofSOEsandListedCompanies:

Oil

Gas

and

Minin

Sector

Source:Ministry

of

SOEs

(2013)


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BankingSector

Source:Ministry

of

SOEs

(2013)


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LifeInsuranceSector

Source:Ministry

of

SOEs

(2013)


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GeneralInsuranceSector



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ConstructionSector

Source:Ministry

of

SOEs

(2013)


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ElectricityProductionComparison


Sourceofgrowthismorecomingfromtheprivates

Theprivates aretakingup fromaboutafourthintoathirdoftotalelectricity

pro uct ona ongt eyears


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IndonesiaasanEfficiencydrivenEconomy

(GlobalCompetitivenessIndex20132014)

Source:GCI(2014)

Good Gov at BUMN With Mr Sofyan Djalil

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