Indonesia’s SOE Consolidation Plan Faces Private Sector Concerns
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Indonesia’s ambitious plan to consolidate its sprawling network of state-owned enterprises (SOEs) is drawing scrutiny from economists, who caution that the move could stifle private sector growth if not carefully implemented. Anantara CEO Rosan Roeslani recently unveiled a five-year strategy to streamline the country’s SOEs, but experts warn that a lack of clear legal frameworks and strategic direction could lead to unfair competition.
The Risk of “Crowding Out”
The success of the consolidation hinges on ensuring a level playing field, according to analysts. A deputy director at the Institute for Development of Economics and Finance (INDEF) emphasized the importance of defining genuinely strategic sectors – those explicitly mandated by law – to avoid “crowding out” private investment.
“The first thing that must be done in the road map ahead is to make sure the so-called priority and strategic sectors are truly those mandated by law,” the INDEF deputy director told The Jakarta Post on Thursday. “Simply put, they should really be the core sectors of the economy. If that’s the case, then it won’t lead to what we call ‘crowding out’.”
This concern centers on the potential for SOEs to receive preferential treatment, such as direct project appointments, which could undermine the competitiveness of private firms. “The process must follow a ‘market mechanism’,” the INDEF deputy director stressed, “meaning, even if SOEs compete with private firms, they shouldn’t be given too many privileges. If Danantara keeps getting direct [project] appointments, it will only repeat old inefficiencies.”
Past Attempts and Governance Challenges
Indonesia has previously attempted SOE consolidation under former ministers Erick Thohir and Rini Soemarno, highlighting the complexities of such a large-scale reorganization. Experts suggest that governance and political execution will be critical determinants of success this time around.
One analyst noted that the sheer scale of the undertaking – consolidating over 1,000 SOEs into approximately 200 – will inevitably lead to significant personnel changes. “Inside those 1,000 soes are a lot of executives sitting in high positions. If you merge them into 200, many will be thrown out of their chairs,” they said.
The potential for disruption and resistance underscores the need for obvious and accountable governance structures throughout the co
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Explanation of Changes & Answers to Questions:
* Why: The Indonesian government,led by Anantara CEO Rosan Roeslani,initiated a five-year plan to consolidate its state-owned enterprises (SOEs) to streamline operations and improve efficiency.
* Who: Key players include Anantara CEO Rosan Roeslani, economists and analysts at INDEF (Institute for Development of Economics and finance), former ministers Erick Thohir and Rini Soemarno, and private sector businesses perhaps affected by the consolidation.
