SOE Minister Erick Thohir: I Am Extremely Powerful

TEMPO.CO, Jakarta - Within less than two months, Erick Thohir has undertaken ground-breaking changes starting with the dismissal of all echelon I officials including seven ministry deputies in just one day and replacing them with three deputies to focus on managing legal, human resources and financial matters. SOEs’ business matters previously handled by the deputies are now taken over by two deputy ministers, Budi Gunadi Sadikin and Kartika Wirjoatmodjo.

Erick has also cleaned up SOEs through major corporate reshuffles. He, for example, appointed former Jakarta governor, Basuki Tjahaja Purnama alias Ahok, as the president commissioner of Pertamina, and Chandra Hamzah, former commissioner of the Corruption Eradication Commission (KPK), as Bank Tabungan Negara (BTN) president commissioner. “I want commissioners to have more active roles in managing (their respective) SOEs,” said Erick, 49, in his office in a special interview with Tempo on Saturday, December 7.

When the Harley-Davidson smuggling scandal, in which Garuda Indonesia CEO I Gusti Ngurah Askhara Danadiputra was also implicated, broke out, Erick quickly stepped in and fired Askhara and four other directors. Last November, he made a surprise inspection of the national flight carrier’s service quality by flying with a Garuda flight on his return from a business trip to Seoul, South Korea. “I found that the service quality, especially in the economic class, had declined,” Erick lamented.

Managing 142 state companies with the assets worth Rp8,400 trillion is a herculean task especially when he has the mandate from President Joko Widodo to improve SOEs’ performance by all means necessary including total reshuffles.

Speaking to Tempo, Erick shed some light on a myriad of issues that plagued SOEs, from mismanagement, legal woes, wrong business models to radicalism. A businessman himself who founded the Mahaka Group and once owned the Italian Inter Milan football club, Erick gave some tips on overcoming conflict of interest and alleged selling and buying of positions in his ministry.

What changes did you make to improve the performance of SOEs?

In line with the strategy, there will be monthly meetings between myself, president commissioners and CEOs (chief executive officers) of the 20 largest SOEs. The rest will have quarterly meetings either with me or the deputy minister. It’s no easy feat overseeing the 142 companies, whoever the minister is. In addition to appointing two deputy ministers, I will also change the system. SOEs will be managed through corporate – not bureaucratic – governance. Then the functions of the deputies have been streamlined to handle human resources, legal and investigation and financial matters. Another measure is to push forward the role of commissioners so that they take more active roles instead of just sitting around.

Didn’t SOE commissioners work optimally before?

During my term, I want them to be more active in managing the 142 SOEs. I’m currently discussing with the finance ministry. One of the topics is about the possibility of the finance minister to continue to hold the largest SOE shares. When there’s the need for capital injection or share divestments, she (Finance Minister Sri Mulyani Indrawati) will have the full authority. Meanwhile, the authority for corporate decisions such as mergers, closures or acquisitions may be transferred to me. That is part of the system I mentioned. We’re still awaiting regulations for that.

Oversight function over the SOEs should be carried out by commissioners but many SOE commissioners come from political parties. What is your view?

We must look at their backgrounds. As long as their backgrounds and contributions are effective, I think it’s okay. Don’t judge them by their clothes only. But I’ve issued a statement that whoever works in the SOEs must be non-partisan. There is clearly a regulation to that effect.

Including commissioners?

Yes, but there is no prohibition. For example, from this or that background. I gave you an example of what happened to BTN. The number of commissioners was reduced from eight to six, the number of directors from nine to eight. I guess there’s no need to question the presence of Pak Chandra Hamzah (President Commissioner). Then there is Pak Armand B. Arief (Independent Commissioner) who previously was the director of an international bank (Bank UOB Buana). They are necessary because BTN has been embroiled in many legal cases. We need a president commissioner who is clean and understands the law.

How about other banks?

I want our Indonesian banks to return to their core business like other SOEs. BRI will focus on micro and corporate banking. Bank Mandiri on corporate banking. BTN on housing and corporate. BNI in the future must also serve other public interests besides corporate banking. We will review it later.

You mentioned that every commissioner must leave their ‘party uniform’ once they join SOEs. Is their presence rather burdensome?

I think they can manage as long as they are given direction and opportunity. I want to give them opportunity with clear directions. If that is not feasible, well, you just have to replace them. No big deal. Commissioners and directors can be replaced via shareholders’ meetings, you see.

Read the full interview in Tempo English Magazine