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Indonesia mulls closing loss-making state firms

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October 1, 2008

Indonesia mulls closing loss-making state firms

Indonesian government has identified three state-owned companies suffering hefty losses, which are unlikely to remain in operation for much longer, in their present form, reported local daily the Jakara Post.

Indonesian State Minister for State Enterprises Sofyan Djalil said the firms included public transportation provider Perum Perusahaan Pengangkutan Djakarta (Perum PPD), cement company PT Semen Kupang and cement and paper factory PT Kertas Kraft Aceh (KKA).

Sofyan said recently the ministry would seek various ways to help the companies stay solvent, before selling them off to other parties.

Between 2005 and 2007, the ministry had injected 40 billion rupiah ($4.3 million) of capital into Perum PPD, 100 billion rupiah into KKA and 50 billion rupiah into Semen Kupang.

"Perum PPD is an example how the government has failed to keep a company solvent after injecting funds in the hope of keeping the firm going normally," he said, adding there was now more chance that the government would sell off the company.

Perum PPD currently operates around 1,187 buses serving routes around Greater Jakarta. With an aging bus fleet, the company is facing stiff challenges from privately owned bus operators.

Besides PPD, Sofjan said, KKA was also among the companies being closely monitored by the ministry for poor performance following a shortage of raw materials.

"The company is facing problems in obtaining raw materials after the Aceh administration turned down its request to cut down pine trees to supply its raw material."

"Unless the local authorities allow KKA to secure its raw material within a month, the ministry will shut down the company," said Sofyan.

Located in Lhoksemauwe, the company focuses on producing paper sacks. KKA has a plant with 135,000 tons production capacity.

Aside from liquidation and sales of assets, the government would also allow private investors to buy a stake in these ailing companies, including in Semen Kupang, which is located in East Nusa Tenggara, Sofyan said.

India-based Nava Bharat Pte. Ltd. is currently in negotiation to purchase a 38 percent stake in Semen Kupang, which is owned by state-controlled Bank Mandiri.

Aside from Bank Mandiri, the central government owns a 61.5 percent stake in the company, with the remaining 1.1 percent held by the provincial company PD Flobamor.

The government is planning to privatise 44 state companies this year, including 10 carried over from last year.

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