Indonesian finance ministry has allocated Rp19.7 trillion (US$1.3 billion) for five state-owned enterprises through a non-permanent government investment scheme in the second half of this year - Photo by SOEs Ministry Office

JAKARTA (TheInsiderStories) – Indonesian finance ministry has allocated Rp19.7 trillion (US$1.3 billion) for five state-owned enterprises (SOEs) through a non-permanent government investment scheme in the second half (2H) this year. The support as part of the country’ economic recovery program from the COVID-19 outbreak.

The capital will be allocated to the national flag carrier, PT Garuda Indonesia Tbk (IDX: GIAA) of Rp8.5 trillion, the railway operator PT Kereta Api Indonesia (KAI) of Rp3.5 trillion, Perumnas Rp700 billion, PT Krakatau Steel, Tbk (IDX: KRAS) of Rp 3 trillion, and PT Perkebunan Nusantara III of Rp4 trillion.

“Non-permanent investment which is a loan that serves as a stimulus for working capital for companies affected by COVID-19 and must be returned to the government along with the interest,” reads the ministry report in the State Budget, quoted on Tuesday (07/14).

The government sees that currently airline Garuda is transforming the company and has shown good performance. However, it has again declined due to the COVID-19 pandemic, which caused a decrease in passengers by 95 percent.

Then, the support for KAI is expected to maintain the sustainability of the Light Rail Transit (LRT) project in the Greater Jakarta area. In addition, these funds are also allocated so that the company continues to operate and provide public transportation services in the midst of a pandemic.

While, support for Perumnas is expected to be used to maintain company liquidity, as well as working capital for housing projects for Low-Income Communities throughout Indonesia.

Furthermore, Krakatau Steel is projected to have a negative cash balance until the end of 2020 due to the impact of the pandemic. The company has seen a significant decline in steel demand by up to 50 percent, both at the domestic and overseas levels.

The government considers the company has a very broad multiplier effect, especially in terms of providing jobs, reducing dependence on imports, and increasing the competitiveness of national industries.

Finally, Perkebunan Nusantara needs more support due to a decrease in the price of Crude Palm Oil (CPO), as well as the volume of export demand that would affect the peoples’ economy such as smallholders sugar cane. Moreover, the plantation is one of the sectors included in the labor-intensive.

Previously, Febrio Kacaribu, who heads the ministry’s fiscal policy office, said in an online news conference that state companies on the list would receive capital injections or some form of compensation to help with their financial woes, adding they include companies that are important for the economy.

Such support to state companies would be executed as soon as this quarter, although the government may also provide assistance later in the year, Kacaribu said.

“Some state companies need our treatment right now, but we must wait for a clear design that will be discussed at a cabinet meeting,” he said. He did not say when the meeting is expected to occur.

US$1=Rp14,200

Written by Lexy Nantu, Email: lexynantu@theinsiderstories.com