Jakarta. Economists have welcomed Indonesia's plan to slash the number of state-owned enterprises (SOEs) but say the overhaul must deliver economic benefits beyond improving efficiency and cutting costs.

Led by sovereign wealth fund Danantara Indonesia, the restructuring aims to reduce a sprawling network of more than 1,000 state-owned entities, including subsidiaries and affiliates, to around 200-300 core companies.

"The restructuring should not stop at improving financial statements," Mohamad Dian Revindo, a researcher at the Nagara Institute, said at a public policy forum in Bali this week.

Profitable SOEs, he said, should help finance strategic investments in underserved regions, creating economic value rather than simply maximizing profits.

President Prabowo Subianto is seeking to overhaul the SOE sector, long criticized for overlapping businesses, bloated corporate structures, political appointments, and serving as a breeding ground for corruption.

Prabowo said Danantara has already closed, merged, or consolidated 250 entities, generating an estimated Rp 50 trillion ($2.8 billion) in annual savings from board salaries, office rent, and other operating expenses. The government aims to reduce the total number of state-owned entities to around 350 by the end of 2026 before eventually trimming them to about 200-300 core companies.

The restructuring is already reaching some of Indonesia's largest SOEs. State-owned telecommunications giant Telkom Indonesia, which has 67 subsidiaries, is expected to consolidate 48 of them through mergers or liquidations. Meanwhile, ailing technology firm Industri Telekomunikasi Indonesia (INTI) is among the companies undergoing closure and intensive restructuring.

Danantara has also taken control of four state-owned asset managers and plans to merge them into a single company managing more than Rp 170 trillion in assets.

Esther Sri Astuti, executive director of the Institute for Development of Economics and Finance (Indef), said the restructuring could strengthen SOEs by improving balance sheets, reducing debt and eliminating overlapping functions through mergers and holding companies.

Healthier SOEs, she said, would be able to pay higher dividends to the state, finance strategic projects, and compete more effectively in global markets. “Stronger governance and transparency should also help curb corruption,” she added.

Add as a preferred source on Google +