Good Corporate Governance Implementation In Indonesia s State-owned Enterprises

Ministry of State-owned Enterprises Republic of Indonesia

Good Corporate Governance Implementation In Indonesia’s State-owned Enterprises

Presented by Gatot Trihargo, Deputy Assistant for Strategic Industry & Manufacturing SOEs II

May 18th 2011

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

AGENDA 1

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

2

Rightsizing Policy to tackle uneven Performance between SOEs

3

Implementation of GCG in Indonesia’s SOEs


2

142 SOEs in Various Industry Sectors Currently there are 142 state-owned enterprises.. and 18 companies in which the government has minority stake. Total Number of SOEs

Listed Corporations (Non Listed) Special Purpose Entities Total SOEs Corporations in which the Ministry has a minority stake

2007

2008

2009

2010

2011*

14 111 14 139

14 113 14 141

15 112 14 141

17 111 14 142

18 110 14 142

21

21

19

18

18

* As of February 2011

SOEs by Industry Printing 6 Telecommunication 5 Energy 5

Fishing 2

Forestry Plantation 6 15 Agriculture Supporting 5

Strategic Industries 12 Mining 6

Transportation & Infrastructure 17 Miscellaneous 8 Industrial Area Construction 6 13

Banking 4 Insurance 10 Finance 8 Logistic & Certification 11 Tourism 3

Portfolio encompasses various sectors providing diversification and synergy opportunities 3 3

Vision and Role of the Ministry Vision

Increasing the role of State-Owned Enterprises as state instruments for national welfare based on corporate practices Role of the Ministry Focus on on implementing a strong corporate mechanism to ensure sustainable valuevalue enhancement of SOE… Focusing implementing a strong corporate mechanism to ensure a sustainable enhancement of SOEs  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 …Whileencouraging encouragingSOEs a stronger role by SOEsrole in accelerating nation …while to play a stronger in accelerating the development nation’s 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

Creating world class corporations …

4 4

SOEs’ Significant Capex & Opex Spending Help Enable and Sustain Indonesia’s Economic Growth The multiplier effect created from SOEs’ expenditures is a significant engine of growth for Indonesia’s economy 

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 Capital Expenditure (Rp Trillion)

State’s expenditure budget in APBN P 2010 & APBN 2011 SOEs * Percentage of SOEs to State GDP Percentage of SOEs spending to GDP

Operating Expenditure (Rp Trillion)

2010

2011F

2010

2011F

95.0

121.7

112.6

131.5

196.9

210.1

932.2

1,020.9

207.3%

172.6%

827.9%

776.3%

6,253.8 **

7,019.9 ***

6,253.8 **

7,019.9 ***

3.1%

3.0%

14.9%

14.5%

*) Excluding the subsidiaries of SOEs **) Source : APBN-P 2010 ***) Source : APBN 2011

5

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

Telkom

53.2% Subscribers of Cell Telco

Banking

Mandiri BRI BNI BTN

37.1% Total of Assets

Cement

Gresik Group Kupang Baturaja

52.0% Total of Sales

Energy & Mining

Pertamina PTBA PGN

> 50% Energy Supply

as of December 2010

6

AGENDA 1


2


3



7

26 Biggest SOEs (By Revenues) Performance of Indonesian SOEs are unevenly dominated by 26 of its Biggest As of December 2010 (figures are proximate for non listed SOEs and audited for listed SOEs)

No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

26 Biggest SOEs (By Asset) PT Pertamina PT Perusahaan Listrik Negara PT Telkom Tbk PT Bank BRI Tbk PT Bank Mandiri Tbk PT Pusri PT Bank BNI Tbk Perum Bulog PT PGN Tbk PT Garuda Indonesia Tbk PT Krakatau Steel Tbk PT Semen Gresik Tbk PT Jamsostek PT Taspen PT Antam Tbk PT Timah Tbk PT Bukit Asam Tbk PT ASKES PT Bank BTN Tbk PT PPA PT Wijaya Karya Tbk PT Adhi Karya Tbk PT Perkebunan Nusantara III PT Perkebunan Nusantara IV Perum Pegadaian PT Kereta Api Indonesia Total of 26 Biggest Total of 142 SOEs 26 Biggest to Total

Revenues 444,855 163,764 68,629 50,160 43,898 33,363 23,850 20,721 19,766 19,534 14,856 14,228 14,124 9,169 8,744 8,339 7,909 7,829 7,756 6,152 6,023 5,675 5,624 5,396 5,373 5,354 1,021,095 1,129,015 90.4%

Net Income 15,829 10,316 11,537 11,472 9,218 3,139 4,103 861 6,239 516 1,061 3,599 1,581 614 1,683 948 2,009 1,733 916 243 285 189 1,012 812 1,222 372 91,511 98,606 92.8%

IDR Billion

% of 26 to Total

Asset

Equity

278,586 369,051 99,758 404,286 449,775 34,790 248,581 15,807 32,087 13,666 17,584 15,136 102,898 43,787 12,311 5,881 8,723 10,898 68,386 6,863 6,286 4,928 7,310 6,771 20,313 6,050 2,290,511 2,476,055 92.5%

103,548 Others 9.6% 149,931 56,415 36,673 41,542 16,733 26 SOEs 33,149 90.4% 5,484 15,101 3,469 9,425 Revenue 11,773 5,555 4,164 9,601 4,203 6,441 26 SOEs 92.5% 7,083 6,447 3,121 1,917 868 3,600 Others 3,314 7.5% 3,337 Asset 4,678 547,574 617,004 88.7%

Others 7.2%

26 SOEs 92.8%

Net Income

26 SOEs 88.7%

Others 11.3%

Equities

8

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

8

Rightsizing Scheme to Optimize SOE Performance Structural restructuring Kontribusi Terbesar Berasal dari 26 SOEs 142 SOEs Mostly with 2011 performance that can still be greatly improved and are small sized

Others 9.6%

Others 7.2%

26 SOEs 92.5%

26 SOEs 88.7%

26 SOEs 92.8%

26 SOEs 90.4%

Revenues

Net Income

Others 7.5%

Others 11.3%

Asset

Equity

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

Rightsizing Policy Restructuring through various shareholder actions based on rigorous mapping aimed at addressing uneven performance between 142 SOEs

By end of 2014

± 81 SOEs Disiapkan untuk diskusi kalangan terbatas oleh Kementerian SOEs. Dilarang memperbanyak tanpa izin tertulis

9

SOEs in FORBES GLOBAL 2000 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 progresses.

Posisi Posisi Posisi 2008 2009 2010 1 2 3 4 5 6 7

PT Telkom Tbk PT Bank Mandiri Tbk PT BRI Tbk PT BNI Tbk PT Perusahaan Gas Negara Tbk PT Semen Gresik Tbk PT Tambang Batu Bara Bukit Asam

729 1132 1035 1862

675 1014 988 1960

sumber: forbes.com


684 796 843 1412 1915 1977 1986

AGENDA 1


2


3



11

Corporate Governance in Indonesia’s Two Tier System

Taxes

Interest Rate

Gov

Creditors

Bi Dividend

CG in wider context

Capital

AGMS

Dekom

Shareholder Capital & Equity

CG in corporate context

Direksi

Market Price

Productivity

Labor Union

Suppliers

Welfare

Good&Sevices

Manager CSR

Community Corporate Citizenship

Manager

Employee

Corporate Management

Manager Market Price

Consumers Goods & Services

12

GCG Roadmap: From Compliance to Corporate Citizenzhip

GCG Good corporate governance

GGC Good governed corporation

Preparation

GCC Good corporate citizenship

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

Continuous Improvement


13

GCG Roadmap has been initiated since 2002 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 different ministers ever since.

Laksamana S

Sugiharto

• Voluntary GCG Assessment & Review assisted by MSOE and Govt Auditors; • Ministerial Decree on Audit Committee

• Appointment of Advisor on GCG to Minister of SOEs;

• Integration of GCG principle to Law 19/2003 on SOEs

Sofyan Djalil

• Mandatory signing of Management’s Integrity Pact for new SOE Directors/Commissioners • Ministerial Decree on Remuneration for SOEs’ Directors and Commissioners

Mustafa Abubakar • 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

• Foundation laid out to facilitate whistleblowers

• GCG implementation started to be included in the SOE’s Management KPI

2002

2003

2005


2008 14

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%


Regulation Issues 

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



Such condition will propel inequal level of playing field compared to private sectors

Corporate Law (UU PT)

Capital Market Law (UU Pasar Modal)

Sectoral Law

SOE

(UU Sektoral)

SOEs Law

Private Sector 3 Regulations

(UU SOEs)

8 Regulations

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)

16

GCG has assisted SOEs Steady Improvement 140

120 115 110 105 100

99 94

90

88

90

96

94

96

97

89

87

80 Healthy Not Healthy

60 53

51

47

51

54 47

45

42

40

52 45

44 36

30

26 20

0 1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010


State-owned Enterprises’s Financial Summary (2009-2011) Our SOEs have consistently shown stable and significant growth, as seen by 14,97% increase in revenues and 19,61% increase in net profit

In Trillion IDR

No

Items

2009

2010

2011

(Audited)

(Audited, Tbk)

(RKAP)

Growth 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%

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

18

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 

Market Capitalization, 18 SOEs vs 422 Non SOEs

• As of end of March 2011, 18 SOEs contributed 27% to IDX total capitalization. There are 440 companies in IDX

26,79% 73,21%

• Market Capitalization of 18 listed SOEs as end of march was IDR 837 trillion.

SOE

Others Dec’05 – Mar’11 Total Return for Shareholders – SOEs Top List 30,000

5 of 10 biggest companies in IDX by market cap are SOEs Market Cap Mar 31, 2011 (Rp Triliun)

No. Company Name

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

25,000 1225.16%

20,000 15,000 495.39% 50.89%

10,000

392.53% 345.18%

5,000

211.29% 277.47% 287.71

Jan-11

Sep-10

May-10

Jan-10

Sep-09

May-09

Jan-09

Sep-08

May-08

Jan-08

Sep-07

May-07

Jan-07

Sep-06

May-06

Jan-06

0

Total BMRI

BBRI

BBNI

TLKM

PGAS

ANTM

PTBA

1,290

SMGR

19

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 contribution to State budget or other support to the economy in general. • GCG implementation has been started since early 2000s and has been sustainably maintained by different Ministers of SOEs. • Independent assessments and reviews assessment on GCG implementation have been carried out by State Auditors. More than half of SOEs has implemented GCG, 40% of which has properly implemented GCG principle to their operation. • GCG implementation, along with Rightsizing policy, will continue to be key policies to sustain and improve SOEs performance which has consistently shown steady improvement already.

20

Ministry of State-owned Enterprises Medan Merdeka Selatan No.13, Jakarta, Indonesia http://www.bumn.go.id

Thank You

Good Corporate Governance Implementation In Indonesia s State-owned Enterprises

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