Restructuring and Revitalizing State-Owned Enterprises

The State Minister of State-Owned Enterprises has issued Regulation No. PER-01/MBU/2009 setting out the guidelines for restructuring and revitalizing State-Owned Enterprises (SOEs) by the Asset Management Company (PT Perusahaan Pengelola Aset / PT PPA) as provided for under Article 1(2) of Government Regulation No. 61 of 2008.

The basic terms of the regulation are defined in the General Provisions section and state that restructuring is fixing the internal conditions of the SOE in order that those conditions are more conducive to long-term sustainability. Furthermore, revitalization is defined as the provision of loans and capital injections. Other terms defined include Letter of Commitment and Due Diligence, both of which are critical elements of the envisaged success of any restructuring and revitalization program undertaken by the PT PPA of any SOE.

The objectives of the regulation and the restructuring and revitalizing process are simply to ensure long-term viability and sustainability of the SOE through short-term assistance. The driving principles are of good corporate governance and include, among others, transparency; accountability, responsibility, independence, and sustainability.

The guidelines require that the SOE submit a recommendation for restructuring and revitalization to the State Minister. The State Minister is then to instruct PT PPA to undertake due diligence to assess whether the recommended restructuring and revitalization is feasible. The recommendation requires that there is a Letter of Commitment included that sets out that the SOE and the relevant directors and commissioners are committed to carrying out the restructuring and revitalization as envisaged and stipulated by PT PPA.

The due diligence process is enumerated through Articles 5 – 7.

The regulation provides for the establishment of a Restructuring and Revitalization Committee that is to include inputs from the Department of State-Owned Enterprises, the Department of Finance, and other relevant agencies.

Once a restructuring and revitalization has been agreed, the terms and conditions are to be enumerated in an agreement. This agreement is to include:

The use of funds from Asset Management is to be restricted to 15% of total capital deposited for the purposes of restructuring and revitalization.

All expenses related to the restructuring and revitalization are to be borne by the relevant SOE.

The PT PPA is to report to the Minister of Finance and the State Minister of State-Owned Enterprises at least once every three months or as required.

The regulation has been in force since 8 April 2009.