Indonesia to Inject Funds Into Infrastructure-Related Firms

JANUARY 19, 2015

Krakatau Steel's blast furnace plant in Cilegon, Banten. (Photo courtesy of Krakatau Steel)

Jakarta. Indonesia will inject Rp 7 trillion ($555.42 million) into state-controlled miner Aneka Tambang and Rp 956 billion into steelmaker Krakatau Steel, according to state enterprise ministry documents presented to parliament on Monday.

The government will also pump in Rp 3.5 trillion into construction firm Waskita Karya and Rp 1.4 trillion into peer Adhi Karya.

The announcements are part of President Joko Widodo’s plan to inject Rp 48 trillion of capital into 35 of the country’s state-owned firms to boost development spending this year.

State Enterprise Minister Rini Soemarno said last week the government would increase the capital of Bank Mandiri, Indonesia’s biggest bank by assets, through a capital injection and rights issue.

According to the documents, Waskita Karya, Adhi Karya, and Aneka Tambang will also sell new shares to raise funds to support the government’s plans to develop the archipelago’s crumbling infrastructure.

The objective is “to increase state firms’ role as agents of development in priority sector, like infrastructure and connectivity, maritime, food security, processing industry, tourism, and defense,” the ministry said in a statement.

Joko’s government wants state firms to make changes and become more efficient. It will allow them to retain more of their profits and then leverage their funding to develop more projects.

The government expects to receive dividends from state firms totaling Rp 34.97 trillion this year, compared with an earlier projection of Rp 44 trillion in the original budget proposed by the previous administration in mid-2014.

Dividend payouts for state firms will range from 5 to 40 percent of profits, depending on each companies’ cash and capital conditions.

All of these will be subject to parliament’s approval, due in February, along with the overall state budget for 2015.