Risk seen from SOEs’ financial burden

NUSA DUA: The financial burden placed on Indonesian state-controlled companies to develop infrastructure could result in higher fiscal risks for the government, said the Organisation for Economic Cooperation and Development (OECD).

In an economic report on Indonesia published yesterday, the OECD said the presence of Indonesian state-owned enterprises (SOEs) across the economy is more extensive than any other country it monitors except for China.

Debt taken on by these companies to finance infrastructure projects could expose them to cash-flow constraints, “particularly if interest rates increase or projects are delayed”, according to the report.

“Recognised contingent liabilities were only 0.01 per cent of gross domestic product (GDP) last year, as these are confined to government guaranteed loans. But the potential need for capital injections represents an indirect fiscal risk,” the report said.

The OECD released its report on the sidelines of the IMF-World Bank annual meetings being hosted by Indonesia here.

The report said government policies to keep fuel and electricity prices unchanged despite higher global oil prices have also prevented some firms from passing on rising costs onto customers, hurting their balance sheets.

State utility Perusahaan Listrik Negara (PLN) recorded a net loss of 5.3 trillion rupiah (RM1.5 trillion) in the first half of this year due to the rupiah’s slump. If it books losses this year, it would be the first time since 2013.

State energy firm Pertamina’s first-half profit was its lowest in four years.

The government is awaiting parliamentary approval for its proposal to inject 17.8 trillion rupiah in capital to three SOEs next year, including 10 trillion rupiah to PLN.