ADB $500 Million Loan to Support Reforms to Indonesia’s State-Owned Enterprises
The Asian Development Bank (ADB) has approved a $500 million policy-based loan to support reforms to state-owned enterprises (SOEs) in Indonesia.
The loan will cover the first subprogram under the State-Owned Enterprises’ Reform Program, which will help Indonesia improve the efficiency and resilience of SOEs and strengthen their corporate governance.
The program is aligned with the government’s comprehensive and ambitious State-Owned Enterprises Roadmap (2020–2024), which is introducing wide-ranging reforms to transform SOEs and ensure they contribute to Indonesia’s goal of becoming a high-income country by 2045.
“SOEs can play a vital role in fostering inclusive and sustainable recovery from the COVID-19 pandemic in Indonesia, But to deliver greater value to the public, their structural weaknesses must be addressed. ADB is pleased to support the government’s reforms to SOEs.” said ADB Senior Public Management Specialist for Southeast Asia Yurendra Basnett.
The program is supporting a reduction in the number of SOEs, while requiring them to focus on their core operations so that they can be financially viable and efficiently provide essential public services. It is also supporting measures to improve the quality of SOE boards, strengthen financial monitoring and disclosure, and help SOEs transition to a climate compatiable business model.
The German development bank KfW will provide cofinancing with a loan equivalent of €300 million ($295.8 million).
Indonesia had more than 100 SOEs in 2021, with combined assets of $610 billion, equivalent to about 53% of gross domestic product.
They provide a range of public services, including electricity, pharmaceuticals, air navigation services, food distribution, and logistics.
SOEs are important sources of government revenues through dividends and tax payments, SOEs were at the forefront in responding to the COVID-19 pandemic and were a key pillar in the implementation of the Pemulihan Ekonomi Nasional (National Economic Recovery) plan.
While SOEs were adversely impacted by the pandemic, with consolidated net income falling by 89% between 2019 and 2020, their financial performance is improving.
From 2020 to 2021, SOEs’ consolidated net profit increased from 13.3 trillion Indonesian rupiah to 124 trillion Indonesian rupiah, return on assets increased from 0.2% to 1.4%, and return on equity increased from 0.5% to 4.5%, The sustained implementation of SOE reforms will be vital in ensuring SOEs support Indonesia’s medium- to long-term development goals.
