Saturday, 14 December 2019

Minister Rini's Poor Management

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  • SOE Minister Rini Soemarno at the Indonesia Investment Forum 2018 held on the sidelines of  IMF-World Bank Annual Meeting 2018 in Nusa Dua, Bali, October 2018.  ICom/AM IMF-WBG/M Agung Rajasa

    SOE Minister Rini Soemarno at the Indonesia Investment Forum 2018 held on the sidelines of IMF-World Bank Annual Meeting 2018 in Nusa Dua, Bali, October 2018. ICom/AM IMF-WBG/M Agung Rajasa

    TEMPO.CO, JakartaMinister Rini Soemarno failed to implement good governance in the replacement of the board of directors of state-owned banks. This could lead to the public losing out. 

    The system of reward and punishment is a gray area for State Minister for State-Owned Enterprises (SOEs) Rini Soemarno. This was apparent in her decision to transfer Suprajarto from CEO of Bank BRI to Bank BTN, which was not based on the performance of the banker. Minister Rini should start using the principles of good governance at the end of her term in office.

    This change of jobs ended in a row when Suprajarto, who had only been at the head of BRI for two years, refused to take up his new post. Having seen BRI make its largest profits last year -Rp32.4 trillion – he felt that he was being punished because he was being moved to a much smaller bank. He also said that there had been no communication with him before the decision was taken at an Extraordinary General Meeting of Shareholders two weeks ago last Thursday.

    This fuss over the change of jobs need not have happened if President Jokowi had been consistent with his statements. In July, he ordered ministers not to take strategic decisions, including replacing officials at SOEs, before the formation of the new cabinet in October 2019. Instead of banning it, he agreed with Rini’s reshuffle of the management at state-owned banks, particularly BRI, BNI and BTN. Jokowi said that the ban only applied to “the replacement of directors of state-owned enterprises without my knowledge.”

    The replacement of the directors or commissioners of SOEs is within the authority of the SOEs Minister as representative of the government shareholding. However, the criteria used should be transparent and based on performance. It is rather strange if a CEO said to have not made any major mistakes is replaced in the middle of his or her contract, rather than at the annual general meeting of shareholders. Four BRI board of directors seen as ‘Suprajarto people’ were also fired. But at the same time, minister Rini did nothing at all about the Garuda Indonesia CEO who, according to the Financial Services Authority, was responsible for a misleading financial report.

    It is as if the reward and punishment system does not apply in the hands of Minister Rini. CEOs with good performance have been fired, while those who have done wrong have been retained. This has given rise to suspicions that appointments to senior positions are on the basis of like or dislike, not on performance. It would be very regrettable if this were the case because the public would lose out through the decisions made in public companies.

    This ‘leadership style’ of Minister Rini in the management of SOEs was also apparent in the reshuffle of the management at BRI. This year, she ordered three general meetings of shareholders to be held – something which has never happened in a government-owned bank of this size. In January, she even established a new position, that of deputy CEO with authority over the main business sectors of BRI. This decision created ‘twin suns’, exactly the same as when Rini wanted to replace the CEO of Pertamina at the start of 2017.

    The president needs to be consistent in banning ministers from taking strategic decisions at the end of his first administration. State-owned companies should be kept well away from decisions that result in the public losing out.

    Read the Complete Story in this Week's Edition of Tempo English Magazine