Indonesian SOE Shares in the Green as Ex-Inter Milan Boss Is Appointed Minister

Jakarta. Stocks of Indonesian state-owned enterprises closed in positive territory on Wednesday evening, hours after young tycoon Erick Thohir was inaugurated as SOE Minister replacing Rini Soemarno. 

Erick, 49, is the former owner of Italian football club Inter Milan and Washington-based D.C. United. He now oversees more than 100 SOEs in Southeast Asia's biggest economy.

Erick vowed to conduct a thorough evaluation of SOE management in Indonesia, including those of SOE companies listed in the Indonesia Stock Exchange (BEI).

He has met with president directors and other top executives of every SOE in the country.

"We had a meeting and I said 'give me time to learn,'" Erick said.

Several major tasks are waiting for him, including the completion of the Jakarta-Bandung high-speed train project and the much anticipated partnership between oil company Pertamina and Saudi Aramco. 

Erick also commented on ballooning SOE debts, saying they were needed to improve cash flows.

"It’s okay to take on debts as long as we can repay them. It's only dangerous if we take on debts and then misappropriate them," he said. 

The president of the Indonesian Olympic Committee said his background as a businessman would help him to take an objective approach into SOE management, stressing that he did not want to pay lip service to the implementation of good corporate governance principles.

"We want to be professional [and create a] good and healthy [business] climate," he said.

Erick was credited for Indonesia's success as host of the 2018 Asian Games, during which he was the chair of the organizing committee.

Shortly afterward, he got involved in politics for the first time after President Joko "Jokowi" Widodo appointed him chief of his presidential election campaign.

Back in October 2013, a company led by Erick bought a 70 percent stake in Inter Milan and he became chairman of the famous football club until October 2018 when he began selling off his shares. 

Erick is also known as a big basketball fan and the owner of Satria Muda, a top-flight club in the Indonesian basketball league.

Rini in Tears

His predecessor, Rini, was in tears as she bid farewell to her former staff and SOE executives during a handover ceremony in Jakarta.

"To all SOE Ministry staff and directors, please accept my sincere apology. During the five years of my tenure, there must've been words and actions from me that might have offended you," she said.

Rini said local SOEs had gone through many changes in the past five years and her successor should continue her efforts to gain them more recognition on the global stage. 

She told Erick about her long-term target of establishing an SOE holding company similar to Singapore's Temasek.

In an attempt to streamline management and make SOEs more efficient, the government has already set up several SOE holdings in various sectors including forestry, oil and gas, mining and fertilizer.

Right Man for the Job

Non-governmental SOE watchdog, BUMN Watch, welcomed Erick's appointment as minister, saying he was the right man for the job.

Erick's strong business background and lack of obvious affiliation to any political party will give him advantages in managing SOEs professionally and independently, according to the group's chairman Naldy N. Haroen.
 
"The SOE minister must not come from any political party, so Erick is a good fit for the job," he said,

In addition to improving SOE businesses, Erick is also tasked with preventing state officials and party leaders from milking SOEs dry, a notorious practice that had marred SOEs' performance in the past, he said.

In the evening after President Jokowi installed Erick as SOE minister, state construction companies went into the green at the stock exchange, with Wijaya Karya enjoying the biggest gain of 5 percent, followed by Pembangunan Perumahan (2.31 percent), Adhi Karya (1.57 percent) and Waskita Karya (1.23 percent).

State banks also gained, including Bank Mandiri (3.66 percent), Bank Negara Indonesia (3.07 percent), Bank Rakyat Indonesia (0.97 percent) and Bank Tabungan Negara (0.78 percent). 

In the mining sector, Perusahaan Gas Negara was the biggest gainer with 4.02 percent, followed by Bukit Asam (3.81 percent), Timah (3.31 percent) and Aneka Tambang (2.69 percent).

Other major SOE shares also closed on the up on Wednesday evening, including Krakatau Steel (0.59 percent), Telekomunikasi Indonesia (0.59 percent), cement producer Semen Indonesia (0.8 percent) and pharmaceutical companies Kimia Farma (0.36 percent) and Indofarma (0.45 percent). 

However, shares of Mahaka Media, a company founded by Erick, fell sharply by 16.8 percent.