Singapore (TheInsiderStories) – Moody’s Investors Service says that state-owned enterprises (SOEs) play a pivotal role in furthering public policy objectives across Asia Pacific (APAC). Its also pose contingent risk to government balance sheets.
Contingent risk explicit in nature, such as when a government guarantees an SOE’ debt. But SOEs are also the source of implicit liabilities, which arise from quasi-fiscal operations that are neither compensated through budgetary subsidies nor covered by explicit government guarantees.
“While unlisted SOEs in frontier markets – including Papua New Guinea (PNG, B2 stable), Bangladesh (Ba3 stable), Sri Lanka (B2 stable) and Vietnam (Ba3 stable) – pose the greatest implicit liabilities, rated and unrated, listed SOEs in advanced economies and emerging markets also show signs of weak financial strength,” says Anushka Shah, a Moody’s VP and Senior Analyst said in the latest report released today (09/12).
In terms of SOEs’ liabilities, she adds, primarily driven by government guarantees and have risen in a number of countries. While, the governments’ management of these liabilities is key in assessing the probability of contingent risk materialization.
In particular, government practices to calculate and quantify risks, and frameworks to control them, are important factors in gauging the probability of contingent liability materialization. Management of explicit liabilities is weakest and potential for crystallization is strongest in Maldives (B2 negative), while regional indices of corporate governance suggest that management of implicit liabilities may be weakest in Indonesia (Baa2 stable), Thailand (Baa1 positive) and India (Baa2 stable), as well as in frontier markets.
The contentious rhetoric about the increasing of state-owned enterprises‘ (SOE) debt has been broadly discussed among observers and economists. Indeed, the debt of the red-plate companies has continued to swell.
The main factor is infrastructure development debt which is from the Joko Widodo government’ strategic program. The total SOEs debt in the non-financial sector has reached Rp1,980 trillion (US$140.42 billion).
While banking activities, assets and liabilities or third party funds recorded Rp3,000 trillion. So, the polemic about the swelling of SOEs debt which reached Rp5,000 trillion is true because the valuation has been calculated by the amount of banking activity.
Based on government data until May 2019, total debt of SOEs and private companies worth of $196.9 billion from the total debt $$386.1 billion. The SOE’s with the largest debt includes PT Bank Rakyat Indonesia Tbk (IDX: BBRI) Rp1,008 trillion, PT Bank Mandiri Tbk (IDX: BMRI) Rp997 trillion, and PT Bank Negara Indonesia Tbk (IDX: BBNI) Rp660 trillion.
Then, PT Perusahaan Listrik Negara Rp543 trillion, PT Pertamina Rp522 trillion, PT Bank Tabungan Negara Tbk (IDX: BBTN) Rp249 trillion, PT Taspen is Rp222 trillion, PT Waskita Karya Tbk (IDX: WSKT( is Rp102 trillion, PT Telkom Indoensia Tbk (IDX: TLKM) is Rp99 trillion, and PT Pupuk Indonesia is Rp76 trillion.
It is crucial for the government and stakeholders to monitor the financial performance of SOEs. The balance sheets of the state companies have been criticizing by various parties.
The spotlight is on the swell debt of the SOEs caused by the government infrastructure development, but the return was still obtained for a long time. Problems occur when projects are delayed or when they require time to generate revenue.
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