September 8, 2026 | 02:20 pm
Merging state-owned enterprises risks worsening the chaos in managing state companies. Sick companies could infect healthy ones.
LIKE humans, ailing state-owned enterprises (SOEs) can infect healthy companies when they are merged under one roof. President Prabowo Subianto’s order to accelerate the consolidation of SOEs risks triggering a financial epidemic among state companies.
In line with the President’s speech when he delivered the financial note to the House of Representatives in August 2026, the Ministry of State-Owned Enterprises has shut down 290 companies deemed unproductive. The closures will continue until only 300 companies remain by the end of the year. Alongside the streamlining, Danantara, the SOEs superholding, is also merging seven companies in the construction sector into three holdings over the next three months.
The three SOE holdings comprise Hutama Karya, which will oversee Waskita Karya and Wijaya Karya as contractors for road and bridge infrastructure; Pembangunan Perumahan, which will be merged with Adhi Karya as a construction contractor for transportation, buildings, and engineering; and Brantas Abipraya and Nindya Karya, which handle water infrastructure projects.
The problem is that not all of these companies are healthy. Late last month, Adhi Karya failed to pay a Rp60.82 billion bond coupon. A plan to restructure Pembangunan Perumahan’s Rp534 billion bonds also failed after it could not secure investor approval, prompting Pemeringkat Efek Indonesia to downgrade its debt rating from idBB+ to idBB with a “Negative CreditWatch” status. Only Hutama Karya is relatively healthy. Even then, this is because the company has received a full government guarantee.
Old problems also haunt the construction SOEs slated for consolidation. Wijaya Karya incurs annual losses of Rp1.7 trillion from working on the Jakarta-Bandung high-speed railway project. Waskita Karya and Adhi Karya, meanwhile, have rarely recorded profits after becoming mired in large, unprofitable projects in the past, including toll roads, light rail, and housing integrated with transportation infrastructure. With total debt of Rp180 trillion, the companies’ assets are insufficient to cover their liabilities.
Therefore, rather than forcing mergers within a short timeframe to meet administrative targets, Danantara and the government must address the problems of state-owned enterprises one by one and gradually. An urgent first step, among others, is to trace the root of each company’s problems and separate the burdens arising from government assignments, losses caused by flawed business calculations, and those resulting from inefficiency and corruption. Without these reforms first, restructuring, let alone mergers, will miss the mark.
Equally important is restoring commercial discipline to the management of construction SOEs by prioritizing cash-flow recovery, divesting troubled assets, and focusing on profitable projects. To do so, the government must stop burdening construction SOEs with assigned projects that generate no profit.
Government project assignments made to fulfill the ambitions of those in power without sound business calculations have further weakened the performance of state-owned enterprises that have been battered since the “cash cow” era. With President Prabowo’s command-style approach to governing, consolidation will only accelerate the spread of chronic ailments among state companies, undermining their role as drivers of economic growth and development.
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