Wednesday, April 20, 2005

Payday

In a country where one third of the economy is controlled by state-owned enterprises with huge political intervention, the selection of its executives often neglects merit system. No matter how good is your professional achievement, if you never invest in political process you will end up only in private-owned enterprises.

No matter how bad is your track record, a close relationship with power holders, is surely valuable to be CEO of state-owned enterprise. And even if you made political investment but went to wrong party, you had risked your job.

Some might say, this argument is only valid under Soeharto’s 32-years authoritarian regime. Especially for those who believe reform (reformasi) movement has changed the way we govern the country.

But wait a minute! Is it a coincidence that different presidents have different CEOs of SOEs?

Look at Pertamina, the largest SOE in Indonesia. Soeharto had Faisal Abdaoe as the last CEO, then BJ Habibie with Martiono Hadianto, Abdurrahman Wahid with Baihaki Hakim, Megawati with Arifi Nawawi and Widya Purnama, and now SBY about to kick Widya out and will have new appointee there. First round already started with major shakeup in board of commissioners where Martiono now as the chairman.

And PT Telkom, the largest listed company in Jakarta Stock Exchange. AA Nasution under Soeharto and Habibie, then Muhammad Nazief under Wahid, and Kristiono under Megawati. In the last few months, many parties have tried to get Kristiono’s post.

The same could be seen in almost all SOEs, especially big companies like Bank Mandiri (the largest bank), Garuda Indonesia (flag carrier), or Jamsostek (the monopoly on social security). SOE Minister Sugiharto just installed new boards in Garuda and Jamsostek. Bank Mandiri will be the next. Partly because of poor handling of bad loans related to high profile businessmen or former military officers, and probably of strong affiliation with previous presidents (Wahid and Megawati).

Analyst Lin Che Wei is seen as the strongest candidate to lead Danareksa (largest investment bank). Che Wei is an advisor for Sugiharto. Is it because of Zas Ureawan’s (current CEO) poor performance? Is it because of corruption committed by the board? Is it because his close relationship with Taufik Kiemas (Megawati’s husband) and bet on looser candidate in presidential election?

Surely most of the executives in SOEs made political investments (not necessarily ideological) but some made right investment (to the winning candidate) and some wrongly and publicly supported the looser. It’s payday for those winning investors. It is the winner takes all.

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