Holding Company For State Owned Enterprises In Indonesia

CM4

Background

Recently, Indonesian Minster of Stated Owned Enterprises (SOE), has announced plans to expand the SOE Holdings, which be the brainchild of SOE Holdings. Under such a plan, Minister of SOE intended to set up one of the biggest SOE Holdings for Oil and Gas. PT Pertamina (Persero), as the major oil SOE in Indonesia, will be assigned to be the Parent Company for the Oil and Gas Holdings scheme, while PT Perusahaan Gas Negara (PT PGN), which runs as a gas SOE, will be the Subsidiary Company.

 

Law of State Owned Enterprises

SOE is regulated under Law No. 19 of 2003 (Law 19/2003) and Governmental Regulation No. 45 of 2005 regarding establishment, management, supervision and liquidation of SOE (GR 45/2005), SOE is a business entity which all or mostly of its capital is owned by the state through direct investment from a separated state asset. Law 19/2003 further elaborates that the separate state assets is a separation from state budget to be the state share subscription.

 

Under Minister Regulation of State Owned Enterprises No. PER-15/MBU/2012 regarding Amendment of Regulation of Procurement of Goods and Service for State Owned Enterprises (Minister Regulation No. 15/2012), SOE Subsidiary is defined as a company which its minimum shares of 90% is owned by SOE, and its Affiliation is defined as a company which its minimum shares of 90% is owned by SOE Subsidiary.

 

These regulations do not define SOE Holdings specifically, though they mention about its competency of forming a subsidiary company. The problem emerges from General Provisions section, first verse of Article 1 of Law 19/2003, which says that a SOE’s capital is owned by the state through direct investment from a separated state asset. This means that if a SOE acts as a Parent Company, the Subsidiary Company (SOE Subsidiary) may not be called a SOE, since the subsidiary company will acquire its capital through its Parent Company.

 

Therefore, based on the above definition, if the definition of SOE under Law 15 of 2003 is not changed, within the establishment of SOE Holdings, the hierarchy of the SOE will be changed, the SOE as we know for today will be replaced with the new establishment of SOE Holdings, and the SOE itself will become the SOE Subsidiary.

 

Procurement of Goods And Services For State Owned Enterprises

The Minister Regulation 15/2012 regulates the Procedure to procure Goods and Services for SOE. The regulation governs the procedure to procure the Goods and Services which utilize the state budget.

 

As mention above, Minister Regulation 15/2012 defined the qualification of SOE, SOE Subsidiary, and SOE Affiliation, and also stated that SOE, SOE Subsidiary, and SOE Affiliation can appointment directly to each other as it is in accordance with their own internal rules and maybe conducted through sectorial regulation.

 

Based on the definition of SOE under Law 19/2003, accordingly, from the viewpoint of the Procurement of Goods and Services for State Owned Enterprises which utilize state budget, within the establishment of SOE Holdings, the ability of either SOE, SOE Subsidiary and SOE Affiliation to conduct the procurement process including direct appointment to each other will not be Affected.

 

The establishment of SOE Holding will cause the SOE is no longer depends on the state share subscription (penyertaan modal negara) to finance their project, and therefore the project development will become more effective since the company procurement using it own budget will only be part of their internal policy.