Indonesia is shutting off the public funding tap for state-owned companies, pushing them to turn to the markets for capital.
From toll-road operator PT Jasa Marga to electricity producer PT Perusahaan Listrik Negara, these 118 companies – with combined sales of $133bn – must embrace new sources of fundraising starting next year, State-Owned Enterprises Minister Rini Soemarno said. 
Jasa Marga last week sold the country’s first rupiah-denominated global notes, called Komodo bonds, after joining Listrik Negara in offering securities backed by roads and power plants in August.
“We want to let state-owned companies be the pioneers, to do the study and give suggestions to the government on what should be changed” to access new sources of financing capital expenditure, Soemarno said in an interview. “We do all this so that our capital market becomes better, more liquid and more attractive to investors.”
The state-owned companies have planned 616tn rupiah ($46bn) of capital spending next year to build airports and dams, provide electricity and to ensure uniform fuel prices throughout the archipelago. 
The ministry will focus on housing development in 2018, with plans to offer mortgage-backed securities, sell more Komodo bonds, as well as shares in hospital and hotel units to the public and strategic investors, Soemarno said.
“I’m excited about diversification in the market,” Ernawan Rahmat Salimsyah, who manages 7.5tn rupiah as chief investment officer at PT Indo Premier Investment Management, said by phone in Jakarta.
“I see this as being good for both investors, who get more options, and issuers, as they would need to operate and interact at a level of professionalism demanded by investors.”
The capital market in Southeast Asia’s largest economy is dwarfed by its neighbours. The size of Indonesia’s local-currency bond market amounted to $180bn in September, compared with $299bn for Malaysia, according to the Asian Development Bank. The stock market capitalisation is about $482bn, compared with $507bn for Thailand, an economy that’s half in size.
The Jakarta Composite Index has rallied 13% this year, reaching a record 6,098.779 on Nov.20. The gauge was at 5,980.671 points yesterday.
Shallow local funding pools constrain companies from being able to raise capital without needing to take on the risk of borrowing in foreign currencies, a conundrum that Soemarno bets will be solved once state-owned firms establish a Komodo bond market – named after the big lizards found in eastern Indonesia.
“The most crucial part is liquidity and having different types of issuers from different sectors, so this is what we’re preparing,” Soemarno said, adding that infrastructure companies will lead the way, followed by airports and telecommunication. “But what we’re pushing for sure is that it has to have a good rating. We want to make sure that all the SOEs that go there are the best ones.”
Indonesia’s state-owned enterprises or SOEs dominate sectors from construction to telecommunication and cement and had assets worth 6,694tn rupiah, according to ministry data. 
The minister’s plans for these companies include:
n Merging about 70 hospitals to be offered in an initial public offering next year
n IPO of oil producer PT Pertamina’s hotel and property unit PT Patra Jasa 
Construction firm PT Adhi Karya and railway operator PT Kereta Api Indonesia to form a joint venture to build Jakarta light-rail transit
n Listrik Negara to add 2,000 kilometres of new transmission lines to bolster bargaining power to switch off independent power plants charging high rates.
n Free up more funds to help President Joko Widodo achieve 35,000-megawatt of electricity generation target by the end of his term in 2019
“A country like Indonesia that’s so big, so vast, so diverse, it needs the support of everybody, not just the government,” Soemarno said. 
“Sometimes I hear people say, how come the SOE is doing so many different things? But if we need to improve the economic condition and push the economic growth in a country such as Indonesia, SOEs have to do their part.”


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