State equity participation that is no longer generous
This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - PMN yang tak lagi jorjoran
21 August 2023
By: Nasori & Arnoldus Kristianus
Jakarta - Next year, the government will no longer be generous in disbursing state equity participation (PMN) to state-owned enterprises (SOEs). The 2024 state budget draft (RAPBN) will only allocate Rp18.6 trillion in PMN or 40.6% of the total budget this year that reaches Rp45.8 trillion. The budget is also far below the SOE Ministry’s PMN proposal that reaches Rp57.9 trillion.
From the total PMN that reaches Rp18.6 trillion, Rp12.5 trillion will be injected to PT Hutama Karya (Persero), Rp1.9 trillion to PT Sarana Multigriya Finansial or SMF (Persero), and Rp3.6 trillion to PT Bahana Pembinaan Usaha Indonesia or BPUI (Persero). Besides the three SOEs, the government is also planning to provide non-cash PMN for PT Len Industri (Persero) worth Rp0.6 trillion.
PMN that is worth Rp18.6 trillion for SOEs that will be used to support infrastructure development and housing financing is part of the investment financing in the 2024 RAPBN that is allocated Rp176.2 trillion. The direction of the investment financing policy next year is in line with the fiscal policy direction in 2024, which is to accelerate economic transformation to be inclusive and sustainable.
“[The investment financing], besides infrastructure expenditure, will also be used by LMAN (State Asset Management Agency), Tapera, and several construction SOEs in the form of PMN for construction. However, their financial conditions must be recovered,” Finance Minister Sri Mulyani Indrawati said when she explained about the financial notes and the RAPBN for 2024 in Jakarta last week.
When she was asked to explain the PMN budget in the 2024 RAPBN that significantly plummeted, State Budget Directorate General Secretary of the Finance Ministry Robi Toni said that the investment financing allocation included PMN, and it has considered various aspects. The aspects include the urgency and the socioeconomic impacts of the investment financing (PMN) as well as the readiness of the receiving SOEs and institutions.
“Then, the government is also considering the fiscal capacity of the APBN (state budget). The APBN’s fiscal capacity is determined by several factors, such as the APBN deficit amount and the effort to maintain the APBN’s fiscal sustainability [that can be achieved] by maintaining the debt-to-GDP ratio at a controlled level,” Robi said to Investor Daily on Sunday (20/8/2023).
By considering those aspects, he said that the government would allocate PMN worth Rp18.6 trillion for SOEs in the 2024 RAPBN. “Besides that, the government is also encouraging structural reforms in SOEs or other legal entities so that they can be more independent and healthier to carry out their businesses sustainably. Besides that, they do not always rely on the APBN to finance their business activities,” Robi said.
The House of Representatives (DPR) reckoned that the government started to realise that the PMN provided for SOEs was ineffective, so, next year, PMN will no longer be disbursed generously. Moreover, PMN has also been cut this year as the PMN worth Rp3 trillion for PT Waskita karya (Persero) Tbk has been cancelled as there is a concern that it will be used to pay for their debt.
A PMN worth Rp12.5 trillion has been provided for Hutama Karya to support the completion of their tasks that were assigned by the government, which include Bakauheni-Banda Aceh toll road or the 24 toll segments of Trans-Sumatra Toll Road (JTTS) spanning 2,812 kilometres (km). The PMN that is smaller than the last three years is required as JTTS is economically feasible, but it is not financially feasible.
During the conference on the financial notes and the RAPBN for 2024, it was mentioned that the assignment to construct JTTS was in line with the 2020-2024 National Medium-Term Development Plan that is meant to strengthen infrastructure to support economic development and basic services. Infrastructure development is meant to support economic activities and support equitable national development.
From 2019 to 2023, the government has provided PMN for Hutama Karya to improve national connectivity, which includes toll road construction. In 2019, the PMN received by the construction SOE reached Rp10.5 trillion, Rp11.0 trillion in 2021, Rp31.4 trillion in 2022, and Rp28.9 trillion (outlook) in 2023. If the 2024 PMN proposal is approved by the DPR, the total PMN that has been received by Hutama Karya since 2019 will reach Rp119.5 trillion.
