Isa Rachmatarwata, director general of state assets at Indonesia's Finance Ministry. (Directorate general of State Assets at the Finance Ministry)

How Rich Is the Indonesian Government Really?


FEBRUARY 19, 2018

Jakarta. It is easy to find out how much money a government owes (and to whom), but determining how much it is worth is much less straightforward.

The Indonesian government lays claims to assets ranging from the Presidential Palace in Jakarta, roads and bridges in Kalimantan to rudimentary gutters for irrigation in remote corners of Papua, as well as shares in various state-owned enterprises.

Keeping track of their value — lands, buildings and other physical infrastructures across the country — requires resources that the government can only afford to spare once every decade.

The last time the government did that was in 2007 and it took them three years to complete the assessment on physical assets.

At the time the tangible items were valued at Rp 1,244 trillion ($92 billion) — almost half of the central government's Rp 2,424 trillion in total assets.

Fast forward to 2016, the government's entire assets were then valued at Rp 5,285 trillion, thanks mainly to investments in SOEs and rising stock prices, as well as equity in international institutions Asian Infrastructure Investment Bank and Asian Development Bank.

The values of government lands and buildings, on the other hand, have not changed since a decade ago.

Meanwhile, the government had amassed debts of more than Rp 4,637 trillion, almost triple what it owed in 2010in order to afford spending more in energy subsidies, defense, education and infrastructures.

This can make the government's net worth appears smaller than it really is.

So, in August last year the government launched a new asset revaluation to update the values of 934,409 government assets, comprising 108,525 plots of land, 444,801 buildings and 391,075 roads and irrigation systems in Indonesia and abroad.

The responsibility to account for all of the government's fixed assets falls on Isa Rachmatarwata, the director general of state assets at the Finance Ministry, who already feels the weight of how complicated and time-consuming the revaluation process can be.

"In the beginning of the program in August-September last year, we wanted to revaluate a total of 408,000 items," Isa told Jakarta Globe in an interview early this month.

"But there were some assets that were not ready to be reassessed yet… because the locations were beyond reach, or [the items] cannot be identified by the owners [ministries and agencies]. There were also administrative problems, so they asked to push the revaluation process back to 2018," Isa said.

He said the values of some of the assets are now believed to have increased by two or three times while others could have been ruined beyond repair.

For the assessment, Isa has assembled 313 teams and a staff of 900 with expertise in valuation. Some of the teams go to remote parts of the country to examine land, buildings and infrastructures in person, while others examine documents and digital records across ministries' and agencies' database, Isa said.

By the end of last year, the team had only managed to revaluate 38 percent of the government's total assets, or 365,242 items, with an estimated value of Rp 2,499 trillion. That suggests an ample upside to the government's total asset value once Isa and his team completed their task.

Put Assets to Use

Higher asset value can translate to more alternative income for the government, who can now lease or auction the properties for more money.

Isa said the revaluation team found 78 idle assets, which if sold or leased, could boost funding for the government's infrastructure development program.

"We get a lot of prime locations for our embassies, which other countries desire. If Indonesia moves, they will be happy to buy the land and building," Isa said.

"It's up to us what we want to do with our idle assets, including ones overseas," he said.

Isa said the government will also use some of the assets as underlying for bond issuances worth around Rp 300 trillion this year. At higher valuation, fewer properties will be locked in as underlying assets than they were in the pasts.

The revaluation process will also help the government identify locations of its own land that are ideal for infrastructure projects. This will cut down on time-consuming land acquisition, Isa said.

Bhima Adinegara, an economist at the Institute for Development of Economics and Finance (Indef), said the government should hire more staff to be deployed in regional areas to ensure data validity and try to complete the revaluation this year.

According to him, revaluation should be done routinely to keep data up to date, ensuring the assets' worth is based on real market value.

"[The government] needs to be consistent and perform a revaluation every two or three years," Bhima said.