INDONESIA’S state-owned enterprises (SOEs) chief has ambitious plans to reform the South-east Asian nation’s SOE landscape.

“We want to push many of our state enterprises to also become global players,” Indonesia’s Minister of State-Owned Enterprises Erick Thohir told Caixin in an interview.

Speaking from the Far East Finance Centre in Hong Kong’s harbour, Thohir said that Indonesia is seeking high-quality strategic partners and that they are looking at Hong Kong as a potential “investor hub”. His trip at the end of June came as he launched the Hong Kong branch of Indonesia Incorporated, an investment promotion platform aimed at pushing Indonesian SOEs to go global.

Indonesia, the world’s fourth-most populous nation that is endowed with rich natural resources, also has one of the most active capital markets among the member states of the Association of Southeast Asian Nations (Asean). During the first half of this year, the country’s IPO (initial public offering) market ranked fourth globally in terms of capital raised, according to data from financial market platform Dealogic.

On Jul 26, the Hong Kong and Indonesia stock exchanges signed a memorandum of understanding (MOU) to explore opportunities for cross-border listings. It came days before Chinese President Xi Jinping and his Indonesian counterpart Joko Widodo agreed to deepen ties during the latter’s second visit to China in about a year.

Widodo appointed Thohir as SOE minister in 2019. The 53-year-old business leader from a prominent Indonesian family has since launched sweeping SOE reforms in the country.

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From improving corporate governance by strengthening financial regulation to establishing SOE clusters to increase synergy, the transformation plan has now entered the restructuring phase, which focuses on further consolidation and generating cooperation opportunities.

As at January, the number of SOEs in Indonesia has been streamlined to 41 from 142 in 2020. In the ministry’s 2024-2034 roadmap, the country aims to further consolidate them into 30 companies over the next decade.

With the next presidential term set to begin in February 2024, Thohir said that the country’s SOE transformation will continue, as the blueprint also aims to give SOEs a major role in achieving Indonesia’s goal of becoming a developed country by 2045.

Reform effort

At the Sarinah shopping mall in downtown Jakarta, traditional Indonesian products sit on display on the first floor, while the 14th floor houses the office of InJourney.

The company, short for Indonesian Journey, is a flagship project of the SOE reform effort. In 2021, it integrated multiple state-owned company subsidiaries related to tourism, aviation and hotels – including Sarinah, Indonesia’s first skyscraper built in the 1960s – to form the country’s first “state-owned ecosystem group in the aviation and tourism sector”, according to the company’s website.

Following the consolidation, Thohir’s goal is to get more Indonesian SOEs on the Fortune Global 500 list, adding that he hopes to learn from his counterparts in China following previous meetings with officials from China’s State-owned Assets Supervision and Administration Commission.

In 2022, a total of 86 Chinese SOEs made it onto the Fortune Global 500, compared with a single Indonesian firm, according to a report released by Fortune China.

“If we transform aggressively, maybe we can have 20 (on the list),” Thohir said.

Rabin Indrajad Hattari, the newly appointed secretary to the SOE minister, echoed Thohir, telling Caixin that he hopes Indonesia can replicate China’s experience in developing SOEs while striking a balance between economic benefits and public interests.

For a long time, Indonesia’s SOE sector suffered from problems such as overlapping core businesses, lax governance and unsatisfactory performance, according to a 2021 document from the ministry submitted to the Asian Development Bank. Corruption had also plagued the sector – SOEs were used as “cash cows” by former Indonesian president Suharto and his associates.

Recognising these challenges, Thohir regards building transparent corporate governance, corralling capital financing and hunting strategic partners as his three main points of focus. He also expressed hopes for Indonesian companies to play a major role in restoring the global supply chain amid economic uncertainty.

“Indonesia has natural resources and a big market of 280 million people,” he said. “We can balance the world situation.”

Prior to joining the Widodo administration, Thohir led several media companies including Mahaka Group, which he founded in 1992. A former owner of Italian football club Inter Milan, Thohir also serves as president of the Football Association of Indonesia.

Thohir’s father is the founder of TNT Group and made his fortune in a variety of businesses including real estate, energy and mining. Thohir’s older brother, who ranked 15th on the 2023 Forbes Indonesia’s 50 Richest List, is the CEO of Adaro Energy Indonesia, Indonesia’s second-largest coal mining company.

Leveraging capital market

As part of the SOE transformation, Thohir is also pushing for more state enterprises to be publicly listed. He believes transparency and good governance could help eliminate some of the negative impressions associated with SOEs and inspire more confidence among companies looking to work with them.

As at Jul 10, 40 companies had raised a combined US$2.9 billion on Indonesia’s IPO market this year, Dealogic data showed. The country is home to the second-largest IPO market in Asia in terms of capital raised, after the Chinese mainland, even surpassing Hong Kong this year.

Thohir hopes to capitalise on Indonesia’s large, young population and expand into overseas markets.

Under the MOU signed in July between the Indonesia Stock Exchange (IDX) and Hong Kong Exchanges and Clearing (HKEX), the company behind the city’s stock exchange, the two sides officially inked joint efforts to promote opportunities related to cross-border listings, following months of discussions.

As the IDX hopes to “strengthen the global position of the Indonesian capital market”, HKEX chief executive officer Nicolas Aguzin said the goal of the collaboration is to “connect capital with opportunities”, hailing Indonesia as “one of the region’s most innovative economies, known for its talent, creativity and new economy pioneers”, according to a statement from HKEX.

A former business leader in the private sector, Thohir has travelled to Hong Kong many times and sees the city as a “vibrant” financial centre. “Not many cities in South-east Asia are as vibrant as Hong Kong,” he said.

Thohir said that Indonesia is also in talks with a major Hong Kong conglomerate to form a strategic partnership in the healthcare industry, as the country with the world’s largest nickel reserves hopes to develop cooperation overseas in new areas in addition to natural resources and electric-vehicle industries.

“In Indonesia’s capital market, we are seeing increased participation from individual investors and growing foreign capital inflows,” said Swati Chopra, executive director of the emerging markets equity department at Franklin Templeton Investments. “The weight of Indonesia in emerging market investments has also increased.” CAIXIN GLOBAL