TEMPO.CO, Jakarta - The plan by Pertamina to turn its company subholdings into limited companies is a good omen for the establishment of good corporate governance. With a portion of the shares held by the public, the management of these subsidiaries will be more transparent and professional.
THE plan is that Pertamina will sell shares in its five subsidiaries, or subholdings, on the capital market. Another subsidiary, Perusahaan Gas Negara (PGN), is already a public company. The five subholdings are Pertamina Hulu Energi which manages the upstream sector, Kilang Pertamina Internasional (refineries and petrochemicals), Pertamina Power Indonesia (energy), Patra Niaga (commercial and trading), and Pertamina International Shipping (shipping). But there is considerable opposition to the plan, particularly from the unions in Pertamina.
This opposition is strange because once they are public companies, these subholdings will be free to raise public funds and will be better able to expand. Pertamina could learn from PGN. In 2020, PGN's market capitalization is Rp27.5 trillion, almost nine times higher than in 2004 before the company went public. Other data shows that PGN’s assets in 2003 were Rp9.1 trillion, while at the end of 2019 they had increased to Rp102.2 trillion.
Perhaps State-Owned Enterprises (SOEs) Minister Erick Thohir took a glance at a company in a neighboring country, because Pertamina's new structure resembles that of Petronas. Under the Petronas holding there are five subholdings traded on the Kuala Lumpur Stock Exchange, namely Petronas Chemicals Group Bhd, Petronas Dagangan Bhd, Petronas Gas Bhd, MISC Berhad for Logistic and Maritime, and KLCC Properties Holdings Bhd. These five subholdings are the driving force behind Petronas.
We know that Petronas performs far better than Pertamina. In 2009 Fortune Global 500, Petronas was ranked at number 158 with sales of US$62.23 billion and profits of US$11.87 billion (profit margin 19 percent). Pertamina, on the other hand, was at number 175 with sales of US$57.93 billion and profits of US$2.53 billion (profit margin 4.4 percent). At the very least, we can assume that Petronas management is far more efficient.
This thin profit margin shows that there is something wrong with Pertamina. Petronas actually has more subsidiaries, with a total of 179. But the structure of Petronas makes it possible for the company to be far more agile. Meanwhile, Pertamina has 142 subsidies, many of which have no connection with the core business - from hotels and insurance to mini-markets - and which are controlled directly by the Pertamina chief executive officer (CEO). With the subholdings, the Pertamina director can focus on more strategic matters.
Another problem is the intensive government intervention through the SOEs ministry. For comparison, from 2005 to 2020, Petronas had three CEOs with terms of five years. Over the same period, Pertamina was led by eight CEOs. The term of office of the Pertamina CEO is not remotely clear. Only Karen Agustiawan "succeeded" in leading Pertamina for five years.
Therefore, Pertamina has no choice but to restructure, including reducing the number of subsidiaries that have no connection to the core business. This move must be supported by all Pertamina stakeholders, including the unions. Pertamina's managers and employees must realize that the company is no longer as successful as it was in the 1970s and 1980s. It is time for consolidation.
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