Good Corporate Governance Implementation In Indonesia s State-owned Enterprises

(1)

Disiapkan untuk diskusi kalangan terbatas oleh Kementerian BUMN. Dilarang memperbanyak tanpa izin tertulis

Ministry of State-owned Enterprises

Republic of Indonesia

Good Corporate Governance Implementation

In Indonesia’s State-owned Enterprises

May 18

th

₂₀₁₁

Presented by Gatot Trihargo,

(2)

2

AGENDA

1 Profile of Indonesia’s State-owned Enterprises (SOEs)

2 Rightsizing Policy to tackle uneven Performance between SOEs

(3)

3

Currently there are 142 state-owned enterprises..

and 18 companies in which the government has minority stake.

142 SOEs in Various Industry Sectors

Portfolio encompasses various sectors providing diversification and synergy opportunities

Total Number of SOEs

2007 2008 2009 2010 2011*

Listed 14 14 15 17 18

Corporations (Non Listed) 111 113 112 111 110 Special Purpose Entities 14 14 14 14 14

Total SOEs 139 141 141 142 142

Corporations in which the Ministry has a minority stake 21 21 19 18 18

* As of February 2011

SOEs by Industry

3 Construction 13 Industrial Area 6 Miscellaneous 8 Transportation & Infrastructure 17 Mining 6 Strategic Industries 12 Energy 5 Telecommunication 5 Printing 6 Fishing 2 Forestry 6 Plantation 15 Agriculture Supporting 5 Banking 4 Insurance 10 Finance 8 Logistic & Certification 11 Tourism 3

(4)

4

Increasing the role of State-Owned Enterprises as state instruments

for national welfare based on corporate practices

Focus on implementing a strong corporate mechanism to ensure sustainable value enhancement of SOE…



Improving quality of SOEs’ management to become more accountable and transparent



Strengthening succession and selection process of SOEs’ top management and continuously enhancing

their compensation structure



Implementing a stricter performance goal setting and evaluation through the Board of Commissioners of

SOE

…While encouraging a stronger role by SOEs in accelerating nation development



Increasing role of SOEs to promote economic growth and to contribute to state revenue



Increasing quality of the execution of Public Service Obligation



Increasing role of SOEs in pioneering business to increase participation of micro and small business

players

Vision and Role of the Ministry

Vision

Role of the Ministry

Creating world class corporations …

…while encouraging SOEs to play a stronger role in accelerating the nation’s development

Focusing on implementing a strong corporate mechanism to ensure a sustainable value enhancement of SOEs

(5)

5 5 5

SOEs’ Significant Capex & Opex Spending

Help Enable and Sustain Indonesia’s Economic Growth



The SOEs’ total capital expenditure and operating expenditures consistently exceed the State’s capital expenditure

budget, reflecting the relative importance of SOEs in powering Indonesia’s future economic growth



SOE’s capex investments in basic infrastructure (e.g. to increase connectivity) lay the groundwork for Indonesia’s

future economic growth

The multiplier effect created from SOEs’ expenditures is a significant engine of growth for

Indonesia’s economy

Capital Expenditure (Rp Trillion)

Operating Expenditure (Rp Trillion)

2010

2011F

2010

2011F

State’s expenditure budget

in APBN P 2010 & APBN 2011

95.0

121.7

112.6

131.5 SOEs *

196.9

210.1

932.2 1,020.9

Percentage of SOEs to State

207.3%

172.6%

827.9%

776.3%

GDP

6,253.8 **

7,019.9 ***

6,253.8 **

7,019.9 ***

Percentage of SOEs spending to GDP

3.1%

3.0%

14.9%

14.5%

*) Excluding the subsidiaries of SOEs **) Source : APBN-P 2010

(6)

6 6 6

SOEs are Market Leaders in Strategic & Competitive Sectors

Such as Telecommunications, Banking, Cement, Energy, Mining, Infrastructure



SOEs command around 53.2% of market share in the cellular telecommunication sector in terms of number of

subscribers



State-owned banks constitute around 37.1% of the banking sector’s total assets



Cement-producer SOEs command 52.0% of sector’s total sales



Energy & Mining contribute more than 50.0% of energy supply

Telecommunications

Banking

Cement

Energy & Mining

53.2% Subscribers of Cell Telco

Telkom

Mandiri

_BRI

BNI

BTN

37.1% Total of Assets

Gresik Group

Kupang

Baturaja

52.0% Total of Sales

> 50% Energy Supply

Pertamina

PTBA

PGN

(7)

7

AGENDA

1 Profile of Indonesia’s State-owned Enterprises (SOEs)

2 Rightsizing Policy to tackle uneven Performance between

SOEs

(8)

Disiapkan untuk diskusi kalangan terbatas oleh Kementerian SOEs. Dilarang memperbanyak tanpa izin tertulis 26 SOEs 92.5% Others 7.5%

8

8 8

26 Biggest SOEs (By Revenues)

Performance of Indonesian SOEs are unevenly dominated by 26 of its Biggest

IDR Billion

% of 26 to Total

Revenue

Net Income

Asset

Equities

26 SOEs 90.4% Others 9.6% 26 SOEs 92.8% Others 7.2% As of December 2010 (figures are proximate for non listed SOEs and audited for listed SOEs)

No

26 Biggest SOEs (By Asset)

Revenues

Net Income

Asset

Equity

1 PT Pertamina 444,855 15,829 278,586 103,548 2 PT Perusahaan Listrik Negara 163,764 10,316 369,051 149,931 3 PT Telkom Tbk 68,629 11,537 99,758 56,415 4 PT Bank BRI Tbk 50,160 11,472 404,286 36,673 5 PT Bank Mandiri Tbk 43,898 9,218 449,775 41,542 6 PT Pusri 33,363 3,139 34,790 16,733 7 PT Bank BNI Tbk 23,850 4,103 248,581 33,149 8 Perum Bulog 20,721 861 15,807 5,484 9 PT PGN Tbk 19,766 6,239 32,087 15,101 10 PT Garuda Indonesia Tbk 19,534 516 13,666 3,469 11 PT Krakatau Steel Tbk 14,856 1,061 17,584 9,425 12 PT Semen Gresik Tbk 14,228 3,599 15,136 11,773 13 PT Jamsostek 14,124 1,581 102,898 5,555 14 PT Taspen 9,169 614 43,787 4,164 15 PT Antam Tbk 8,744 1,683 12,311 9,601 16 PT Timah Tbk 8,339 948 5,881 4,203 17 PT Bukit Asam Tbk 7,909 2,009 8,723 6,441 18 PT ASKES 7,829 1,733 10,898 7,083 19 PT Bank BTN Tbk 7,756 916 68,386 6,447 20 PT PPA 6,152 243 6,863 3,121 21 PT Wijaya Karya Tbk 6,023 285 6,286 1,917 22 PT Adhi Karya Tbk 5,675 189 4,928 868 23 PT Perkebunan Nusantara III 5,624 1,012 7,310 3,600 24 PT Perkebunan Nusantara IV 5,396 812 6,771 3,314 25 Perum Pegadaian 5,373 1,222 20,313 3,337 26 PT Kereta Api Indonesia 5,354 372 6,050 4,678

Total of 26 Biggest 1,021,095 91,511 2,290,511 547,574 Total of 142 SOEs 1,129,015 98,606 2,476,055 617,004 26 Biggest to Total 90.4% 92.8% 92.5% 88.7% 26 SOEs 88.7% Others 11.3%

(9)

Disiapkan untuk diskusi kalangan terbatas oleh Kementerian SOEs. Dilarang memperbanyak tanpa izin tertulis

Kontribusi Terbesar Berasal dari 26 SOEs

26 SOEs 92.5% Others 7.5%

By end of 2014

± 81 SOEs

142 SOEs

Mostly with

performance that

can still be greatly

improved and are

small sized

2011

Rightsizing Scheme to Optimize SOE Performance

Structural restructuring

Major Consideration to determine whether State’s majority ownership is to be retained

Urgency; Sectoral Prospect; Performance of the SOEs; Value Creation Potential; Role in Synergi; Relevant

principles laid out in the Constitution regarding public economic interest & wealth of the nation

Revenues

Net Income

Asset

Equity

26 SOEs 92.8% Others 7.2% 26 SOEs 88.7% Others 11.3% 26 SOEs 90.4% Others 9.6% 9

Rightsizing Policy

Restructuring through various

shareholder actions based on rigorous

mapping aimed at addressing uneven

performance between 142 SOEs

(10)

Posisi

2008

Posisi

2009

Posisi

2010

1 PT Telkom Tbk

729

675

684 2 PT Bank Mandiri Tbk

1132

1014

796 3 PT BRI Tbk

1035

988

843 4 PT BNI Tbk

1862

1960

1412

5 PT Perusahaan Gas Negara Tbk

1915

6 PT Semen Gresik Tbk

1977

7 PT Tambang Batu Bara Bukit Asam

1986

SOEs in FORBES GLOBAL 2000

sumber: forbes.com

In 2010, 7 (seven) SOEs made their way to Forbes Global 2000, almost doubling the number from

4 SOEs in previous years. More SOEs are expected to be included in the list as rightsizing policy

(11)

11

AGENDA

1 Profile of Indonesia’s State-owned Enterprises (SOEs)

2 Rightsizing Policy to tackle uneven Performance between SOEs

(12)

12

AGMS

Dekom

Direksi

Employee

Manager

Community

Corporate Citizenship

CSR

Suppliers

Good&Sevices

Market Price

Shareholder

Capital & Equity

Dividend

Gov

Bi

Taxes

Consumers

Goods & Services

Market Price

Labor Union

Welfare

Productivity

Creditors

Capital

Interest Rate

CG in wider

context

CG in corporate

context

Corporate

Management

(13)

GCG Roadmap: From Compliance to Corporate Citizenzhip

13

Consensus to comply to

all GCG regulation

Sound management

practices utilizing proper

internal control, risk

management &

Whistleblower facilitation

Corporation which stands

for just cause and contribute

to improvement of welfare in

general

Pr

epar

atio

n

Continuous Improvement

GGC

Good governed corporation

GCC

Good corporate citizenship

GCG

(14)

GCG Roadmap has been initiated since 2002

14

Laksamana S

Sugiharto

Sofyan Djalil

_Abubakar

Mustafa

• Ministerial Decree on

Audit Committee

• Integration of GCG

principle to Law 19/2003

on SOEs

• GCG implementation

started to be included in

the SOE’s Management

KPI

• Voluntary GCG

Assessment & Review

assisted by MSOE and

Govt Auditors;

• Appointment of Advisor on

GCG to Minister of SOEs;

• Mandatory signing of

Management’s Integrity

Pact for new SOE

Directors/Commissioners

• Ministerial Decree on

Remuneration for SOEs’

Directors and

Commissioners

• Foundation laid out to

facilitate whistleblowers

• Reform on Fit and Proper

test for directors, making

professionalism count

more than political

background;

• Further reform on

remuneration for SOE

management;

• Mainstreaming sound risk

management in all SOEs

2002

2003

2005

2008

Fully aware of the importance of GCG, the Ministry of State-owned Enterprises has started to prioritize

steps to ensure implementation of GCG in SOEs since 2002 and has been sustainably continued by

(15)

Result of GCG Assessments and Review

Assessment Result

2010 Result

Expected 2014 Result

Properly implemented

57 40,14%

90%

Minimum requirements

are sufficiently

implemented

37 26.06%

10%

Poorly implemented

15 10.56%

-

No Assessment yet

33 23.24%

-

Total

142 100%

100%

(16)

16 16

Regulation Issues

Corporate Law

(UU PT)

Capital Market Law

(UU Pasar Modal)

Sectoral Law

(UU Sektoral)

SOEs Law

(UU SOEs)

State-Finance Law

(UU Keuangan Negara)

Treasury Law

(UU Perbendaharaan Negara)

State-Audit Law

(UU Pmeriksaan Pengelolaan & Tg Jwb Keu Negara)

Anti Corruption Law

(UU Tipikor)

SOE

8 Regulations

Private

Sector

3 Regulations



SOEs are mandatory to comply with much more rules & regulations, which are more stringent, in terms of numbers,

than private sectors

(17)

Disiapkan untuk diskusi kalangan terbatas oleh Kementerian SOEs. Dilarang memperbanyak tanpa izin tertulis 88 94 99 90 90 94 87 96 89 96 97 105 115 110 53 47 42 51 51 47 54 45 52 45 ₄₄ 36 26 30 0 20 40 60 80 100 120 140 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Healthy Not Healthy

(18)

18

State-owned Enterprises’s Financial Summary (2009-2011)

2009

2010

2011

(Audited)

(Audited, Tbk)

(RKAP)

10/09

11/10

1 Assets

2.257,54

2.515,10

2.976,96

11,41%

18,36%

2 Liabilities

1.683,73

1.894,25

2.255,21

12,50%

19,06%

3 Equity

573,81

620,85

703,87

8,20%

13,37%

4 Revenues

987,37

1.135,16

1.294,37

14,97%

14,03%

5 Net Profit

86,90

103,94

113,72

19,61%

9,41%

6 Capital Expenditures

107,45

196,91

210,12

83,26%

6,71%

7 Operational Expenditures

832,99

932,15

1.020,87

11,90%

9,52%

Growth

No

Items

18

In Trillion IDR

Our SOEs have consistently shown stable and significant growth, as seen by 14,97% increase in

revenues and 19,61% increase in net profit

(19)

19 19 19

SOEs Play a Major Role in Indonesian Capital Markets

As of end of March 2011, among 10 biggest market capitalization in Indonesian Stock Exchange, 5 are SOEs

No. Company Name

Market Cap Mar 31, 2011

(Rp Triliun)

1 PT Astra International Tbk 231

2 PT Bank Central Asia Tbk 171

3 PT Bank Mandiri (Persero) Tbk 159

4 PT Telekomunikasi Indonesia

(Persero) Tbk 148 5 PT Bank Rakyat Indonesia

(Persero) Tbk 142

6 PT Unilever IndonesiaTbk 117

7 PT Perusahaan Gas Negara

(Persero) Tbk 95

8 PT Gudang Garam Tbk 81

9 PT Bank Negara Indonesia

(Persero) Tbk 74

10 PT United Tractors Tbk 72

Total 1,290

Market Capitalization, 18 SOEs vs 422 Non SOEs

Dec’05 – Mar’11 Total Return for Shareholders – SOEs Top List

26,79%

73,21%

SOE

Others

1225.16% 495.39% 50.89% 392.53% 345.18% 211.29% 277.47% 287.71 0 5,000 10,000 15,000 20,000 25,000 30,000

Ja

n-06

M

ay

-0

6 S

ep

-0

6 Ja

n-07

M

ay

-0

7 S

ep

-0

7 Ja

n-08

M

ay

-0

8 S

ep

-0

8 Ja

n-09

M

ay

-0

9 S

ep

-0

9 Ja

n-10

M

ay

-1

0 S

ep

-1

0 Ja

n-11

BMRI BBRI BBNI TLKM PGAS ANTM PTBA SMGR

• As of end of March 2011, 18

SOEs contributed 27% to IDX

total capitalization. There are

440 companies in IDX

• Market Capitalization of 18 listed

SOEs as end of march was IDR

837 trillion.



5 of 10 biggest companies in IDX

by market cap are SOEs

(20)

20 20 20

Key Points

GCG has been a major KPI for SOE for a decade and has helped maintain steady

performance

• Indonesia has 142 SOEs, 26 of which contributed more than 90% of most

financial gains. Other smaller SOEs might be important for the state as it carries

out mission that the private sector can not accomplish.

• Indonesia’s SOEs play major role in Indonesia’s development, be it from direct