BLACK MARKET OF SOEs DIRECTORS: Candidates of SOEs Minister to replace Rini

There are dozens of state-owned companies (BUMN/ SOEs) which are still in trouble. People are competing for chairs of directors and commissioners of prestigious state-owned companies which perform well. Political parties are trying hard to get the position of the Minister of SOEs. Why does Rini Soemarno, the Minister of SOEs, want to make changes to SOEs management during the limited time she has? Is it true that there is a ‘black market’ for SOEs management (and the seats of prestigious state-owned companies like BRI become one of the favorites? Who will be the next SOEs Minister to replace Rini Soemarno? Karnoto Mohamad

President Joko Widodo (Jokowi) and his deputy Ma’ruf Amin are busy deciding names that will fill the Government Cabinet. Political parties, especially those which have worked hard to win Jokowi and Ma’ruf Amin in the 2019-2024 presidential election, have given the names of prospective ministers to Jokowi. One of the most important position which becomes favorite target is the position of the minister of state-owned enterprises (BUMN). The position has been occupied by Rini Soemarno for five years. The SOEs Minister oversees 117 companies with total assets of Rp 8,118 trillion per 2018.

Rini Soemarno is one of the ‘tough people’ in the Government. Rini is the only person who can be the minister of SOEs for five years. Previously, on average, they only lasted 2.5 years. Rini has a long relationship with Megawati Sukarnoputri. When Rini was despised by Senayan, boycotted by the DPR’s Commission VI (Lawmakers) and, then, she was proposed to be fired, Jokowi still believes in her. In fact, Jokowi seemed to have immense trust to Rini when he asked Rini to carry out SOEs holding processes without any recommendations from MPR/DPR (the People’s Consultative Assembly/ the People’s Representative Council). Therefore, Rini has the freedom to lead all SOEs. She has the power to lead the companies.

Rini also feels very powerful. Despite the recent rumor that her relationship with Megawati is not quite good, she has bargaining power. Even if she is replaced, Rini will get a new post—the rumor said that she will be the Team Leader of Accelerate Team of the Change of the Capital. Before leaving the position as the SOE minister, Rini has also tried to place people whom she considers as loyal to her in the system.

The questions become: Who will replace Rini Soemarno in the Ministry of SOEs? Which SOEs become targets of Rini to place her people? Infobank’s source said that there are five names in the President’s list. They are M. Arsjad Rasjid, Eko Putro Sanjoyo, Wahyu Trenggono, Achmad Baequni, and Budi G. Sadikin. Ignasius Jonan, who was mentioned as an opportunity to become the Minister of SOEs (BUMN), will be assigned to lead the State Electricity Company (PLN). Dwi Soetjipto will be the Minister of Energy and Mineral Resources (ESDM).

Achmad Baequni and Budi Sadikin are two bankers which are nominated by Rini to replace her. It has become a public discussion among bankers and media that Baequni, who is the president director of Bank Negara Indonesia (BNI), is close with Rini. Budi Sadikin, who is the president of Inalum, was an expert staff of the Minister of BUMN. Therefore, he is close with Rini. Rini has been spotted in various BUMN Ministry’s events with the two bankers. She also went the hajj pilgrimage with directors of SOEs including them.

A source of Infobank said that those who will be retained or promoted to higher positions in state-owned companies are those who are considered loyal to Rini. They are directors who are always willing to follow Rini going around Indonesia for SOEs events and other ceremonial events. Before stepping down from the Minister of SOEs, Rini wants to raise the positions of her people to higher ranks. Budi Sadikin, who has retired from the president director of Bank Mandiri, became an expert staff of her. Then, Budi is appointed as the president of Inalum. While Baequni was not only offered to be a candidate for the Minister of SOEs, but it was said that he will occupy the chair of Bank Rakyat Indonesia (BRI)’s president director.

Rini also mentions Sunarso to be the president director of BRI. Other alternatives are Priyastomo and Rico Budidarmo. The extraordinary general meeting of shareholders (RUPSLB) which was to replace Suprajarto from the seat of BRI 1 was responded negatively by the market—until it affects BRI’s share price. The market is questioning why BRI, as a go public company having riveting performance, replaces their president director.

In fact, under the leadership of Suprajarto, BRI’s position has been very good. The bank is superior compared to other state-owned companies. After successfully overtaking Bank Mandiri in 2017 as the largest bank in terms of consolidated assets, in 2018, BRI became a state-owned company with the largest market capitalization (market cap) overtaking Telekomunikasi Indonesia (Telkom). The bank is also an issuer with the second largest market cap in the country after the Bank Central Asia (BCA). In 2019, BRI was successful in overtaking Telkom as the state-owned company contributing largest dividends to the country.

These days, BRI is the most targeted state-owned company (SOE). Previously, Pertamina was in the position. Pertamina was considered the most strategic state-owned company. The authorities, political elements, and the oil mafia have an interest in placing their people in Pertamina. In addition to the large oil imports, it can create economic rent. Pertamina was also the largest profit-making SOE. Now the largest profit-making SOE is BRI. Under Suprajarto’s leadership, BRI has become the largest bank after overtaking Bank Mandiri’s consolidated assets at the end of 2017. In 2019, BRI becomes the largest dividend contributing SOE Indonesia. In 2018, the position was held by PT Telekomunikasi Indonesia.

Being the biggest profit maker, BRI’s directors and commissioners automatically get a bigger bonus than other state-owned companies (BUMN). “So it is natural that BRI’s management chair has become the target,” said a source, as it was quoted by infobanknews.com (26/8). In order to place loyal people in BRI, Rini tried to depose Suprajarto and several of his directors.

Are the changes of SOEs’ directors that have been massively carried out for five years based on the level of loyalty of BUMN directors to the Minister of SOEs?  According to the notes and tracing conducted by Infobank team, there are three striking considerations from the Minister of SOEs in appointing or replacing people in the management of state-owned companies in the last five years.

The first consideration is that the placement of BUMN commissioners is more accommodating of political interests rather than economic interests. This can be seen from the number of people who are not in the background of bankers or economists sitting on the chairs of BUMN banks’ commissioners. Political parties that entrust their people to get positions in the chairs of the commissioners of BUMN companies have become a phenomenon for a long time.

The second consideration is that to place people in the positions of directors of state enterprises do not have clear objectives and more for career development as well as testing the expertise of executives in state-owned companies. It can be viewed when Rini Soemarno put Pahala Mansyuri to lead Garuda which was hit by a crisis in 2017. After 17 months, there was no inprovements in Garuda. Pahala was strongly opposed by unions and pilots. Then, Rini removed Pahala from Garuda. She said that Pahala’s expertise was not suitable to lead Garuda. Rini moved him to the finance director of Pertamina. Career development was also given to Sunarso. He was moved from the BRI’s deputy director to the Pegadaian’s president director in October 2017. However, after 14 months at Pegadaian, Sunarso was returned to BRI in early 2019.

The third consideration is ‘like and dislike factor’. A source of Infobank said that Rini has shown a kind of distasteful towards Suprajarto for a year. It is because Suprajarto is rarely willing to attend ceremonial and social activities with the Minister. As a leader of go public bank (BRI), Suprajarto chooses more in the market and oversees the transformation process that has been being carried out by BRI. It has been a common knowledge among bankers that the relationship between Sunarso and Suprajarto does not run quite well, just as Sunarso could not maintain a good business relationship with Budi Sadikin when he was at Bank Mandiri.

Rini’s effort to remove Suprajarto from the position of the president director of BRI (BRI1) was obvious when Sunarso—who had been assigned to lead Pegadaian—was asked to be the deputy of BRI’s president director (BRI2) in early 2019. It is expected that there will be a dispute between Suprajarto and Sunarso, so that the bank will be unstable. Therefore, the Ministry of SOEs has reasons to replace Suprajarto. It turns out that there is no feud between the two top bankers. However, the Ministry of SOEs keeps continuing on scheduling changes in management through an extraordinary general meeting of shareholders (RUPSLB) on August 28 to September 2, 2019.

The Ministry of SOEs has denied the ‘like and dislike’ motive behind the plan to replace the directors of state-owned companies. “There is no like and dislike. The Minister’s priority is working professionally, no gimmick, and without conflict of interest. Besides, they [the state-owned companies] must understand the role of SOEs as development agents, “Gatot Trihargo, Deputy of Financial Services Business, Survey Services, and Consultant of the Ministry of SOEs told Infobank last month. According to Gatot, these days, the role of development agencies and the synergy between SOEs are important factors of state-owned companies’ directors.

According to Infobank’s data, state banks have done a lot of synergies; for example, the merger of automatic teller machine (ATM)’s terminals owned by four state-owned banks to create efficiency. To support the infrastructure program running by the Government, state-owned banks are heavily involved in infrastructure funds both themselves and through synergies. However, it is still not common for a state bank to share the business with other state banks. When a state-owned bank gets a business deal through a competition, The Ministry of SOEs encourages the bank to share the business with other state banks.

Because the changing of SOEs’ directors is too massive without a clear pattern, the plan to replace the management of state banks that performed very well during injury time (before the new Government Cabinet) also receives a negative response from the market. Politicians and economists criticize Rini Soemarno’s plan. According to Bima Yudistira, an economist at Indef, the Ministry of SOEs should be oriented towards performance and the restructured of SOE companies—SOE companies which have poor performance. “It is very clear that the appointment of SOEs’ directors tends to be the cause of closeness and loyalty. It is not about the directors’ ability to score good financial performance, “Bima Yudistira, Indef’s economist, told Infobank last August.

The National Committee of Governance Policy (KNKG) takes part in assessing Rini’s plan to overhaul the management of SOEs in the transitional period of government as an unwise move. According to Mas Achmad Daniri, the Chairman of KNKG, the change of directors become urgent when the companies are in problematic situation. “However, according to governance ethics, when there is no problem that is very dangerous to the company and nothing that is very strategic, the director should be allowed to work until the end of his/her term of office,” he said as it was quoted by CNBC (14/8).

However, harsh criticism from the public and President Jokowi’s instruction that The Ministry of SOEs cancels the plan to changing directors do not discourage Rini’s steps. Many critics, including the advice given by the chief of Presidential Staff, Moeldoko, saying that all ministers have to follow the president’s orders are seen by Rini as objections from people who did not like her. Rini tried to face the president for approval. “Let’s just see what it will look like. Every decision should be reported to the President. Let’s see what the decision will be,” said Rini as it was quoted by infobanknews.com (21/8).

In the context of SOEs (BUMN) development, what has been said by Jokowi is actually quite clear. Jokowi thinks in corporate way. He asks SOEs to expand. He suggests that state-owned companies should not only be good at home (Indonesia), but they should also expand to other countries. In fact, Jokowi has suggested a foreign chief executive officer (CEO) if a state-owned company needs one. Jokowi’s plan on SOEs is different from Rini Soemarno’s plan. It is true that Rini has made some actions on Jokowi’s request to make a roadmap to make SOEs strong, agile, and brave. Therefore, SOEs will be able to face the era of competitive competition. The steps to make SOEs holding should keep SOEs from the bureaucracy and closer to the market.

However, in the implementation, SOEs holding is like a reversal. Companies are encouraged to become agents of development in which they are full of interventions both in the appointment of management and business programs. In fact, through dividend contributions, tax payments, employment, and suppliers that absorb capital expenditure, SOEs have also become agents of development.

If Rini changes the directors of growing state-owned banks, the President’s instruction prohibiting the reshuffle of SOEs’ directors is merely a lip service for negative public response. It can also because Rini is too ‘powerful’ in the Government, so that President Jokowi seemed to be inconsistent with his statement about the importance of SOEs competing in the open era or the need for SOEs to be led by foreign CEOs. The Government’s idea that is inconsistent with the development of SOEs will only create a ‘black market’ for the appointment and dismissal of SOEs management. When the Ministry of SOEs frequently changes the directors of SOEs in the middle of their working time, the mafia dealing with the position will be happy.

If SOEs are occupied by professionals who join the companies via the “black market”, SOEs will be filled by directors or figures who are merely seeking for the promising office positions. Therefore, it is no surprise when there will be many directors of SOEs who are caught in corruption cases, as they have happened recently. It should be noted that the best professionals are those who are sought and found in the market, not those who are close to power. The best professionals are often independent, results oriented, and brave. Besides, they have strong will to resist interventions and other temptations. Meanwhile, the management of SOEs entering via the “black market” are certainly not independent. Although they are clean, but because they have some deals with the parties appointing them, they do not dare to reject interventions of parties that have helped them acquire the positions. (*)