ADB Approves USD 500-Million Loan For SOEs

According to a recent article in Antara News, the Asian Development Bank (ADB) has approved a policy-based loan of USD 500-million to support the reform of Indonesian State-Owned Enterprises (SOEs.) The German Development Bank, or Kreditanstalt Fur Wiederaufbau (KFW), will also provide co-financing, with a loan worth 300-million Euros, or USD 295.8-million.

The article says the loan will cover the first subprogram under the SOEs Reform Program that will help Indonesia to improve the efficiency and resilience of SOEs as well as strengthen their corporate governance framework.

In an official statement received on Friday, ADB Senior Public Management Specialist for Southeast Asia Yurendra Basnett noted that SOEs could play a vital role in encouraging inclusive and sustainable recovery from the COVID-19 pandemic in Indonesia.

“However, to deliver greater value to the public, their structural weaknesses must be addressed. ADB is pleased to support the government’s reforms to SOEs,” he stated.

The program aligns with the comprehensive and ambitious 2020-2024 SOEs Road Map that introduces a series of reforms to transform SOEs and ensure their contribution to Indonesia’s goal of becoming a high-income country by 2045, say Antara News.

The program will support the reduction in the number of SOEs as well as necessitate them to focus on their core operations, so that SOEs can become financially viable and provide essential public services efficiently.

The program supports efforts to boost the quality of SOE boards, strengthen financial monitoring and transparency, and help SOEs transition to a climate-compatible business model.

As of 2021, Indonesia has over 100-SOEs, with total assets of USD 610-billion, or equivalent to around 53-percent of Indonesia’s GDP. They provide various public services, including electricity, pharmaceuticals, air navigation services, food distribution, and logistics.

Antara News say that SOEs are an essential source of state revenue through the payment of dividends and taxes. They have been on the forefront of responding to the COVID-19 pandemic and were the main pillars of the national economic recovery.

Despite the COVID-19 pandemic having negatively impacted SOEs, with an 89-percent decrease in consolidated net income between 2019 and 2020, their financial performance continues to improve.

From 2020 to 2021, the consolidated net profit of SOEs rose, from IDR 13.3-trillion to IDR 124-trillion. Thereafter, the return on assets increased, from 0.2-percent to 1.4-percent, and the return on equity increased, from 0.5-percent to-4.5 percent.

The continuous reform of SOEs will be essential to ensure that they continue to support Indonesia’s medium- to long-term development goals.

Source: Antara News

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