After three years leading Indonesia’s largest state-owned bank by assets, former Bank Mandiri chief executive officer Budi Gunadi Sadikin has a new role as special staff to Rini Soewandi, the Minister of State-Owned Enterprises (SOE).
In this role, which he started in late June 2016, Budi is charged with establishing a holding company made out of state-owned mining enterprises to re-do the way the government handles its future stakes in the industry.
The vision is at the heart of longstanding nationalist arguments that say the country’s vast and unrenewable mineral reserves should be controlled by Indonesia – instead of the foreign investors that have operated for decades in Indonesia under a contract of work system that splits revenues with the government.
Budi says he aims to make a significant mark on Indonesia’s economic growth and leave a legacy by creating a sovereign fund from the proceeds of Indonesia’s natural resources to be used for future generations.
Tell us about your role in the SOE Ministry?
Budi Gunadi Sadikin: I am a special staff for the minister, specifically to handle activities related to the economy, because I was a banker, and to handle all businesses related to Europe and the United States, and to take part in creating state holding companies. We plan to create six state holding companies: energy, mining, housing, toll-roads, banking, and food commodities. We are starting with holdings for energy and mining. We have cleared the way within the government for energy and mining holdings. It looked like the mining holding company could start first so I was assigned to it.
Do you also need approval from the House of Representatives?
The authority to set up state holding companies lies 100 percent with the government. With lawmakers it was more like a consultation back and forth because SOEs have a unique political constellation, that’s why the consultation takes a bit longer. If we don’t get the lawmakers’ approval that’s fine. It is merely a courtesy call to avoid any fuss. It’s been a year now since I started at the ministry. At that time they said it was going to be finalized in three months, and it extended to the end of the year and now it’s already a year.
What will be the holding company’s structure?
Aluminum producer Indonesia Asahan Aluminium (Inalum) will be the parent company and we will have a 60 percent share of coal miner PT Bukit Asam, tin miner PT Timah and gold miner PT Aneka Tambang, respectively, as well as [eventually acquiring] shares of Freeport Indonesia. Inalum is the holding company because it is 100 percent state-owned and publicly listed. It will be the same with the holding company for banks. The largest one will not be the parent company but the financial services company Danareksa, because it’s 100 percent owned by the government. Bank Mandiri, BNI, BRI and BTN will be subsidiaries.
What’s the plan for this mining holding company?
There are three objectives. First, we want to control Indonesia’s vast mineral reserves. Second, we want to downstream the business. Third, we want to be a world-class company. Each objective has its reasons and strategies. For the first one, this is a non-renewable, God-given endowment. It only exists in Indonesia for a single time and we can never have it again once it’s exhausted. So, it only makes sense that it benefit most for our people. It’s better if we take it instead of letting others take it. It’s very logical and it should be for our next generations.
Why are we doing this? We wish to emulate Norway. Mining companies may argue that they are the biggest taxpayers but the taxes paid only benefit us, the current generation, while our children and grandchildren will not benefit. In Norway, the natural reserve is exploited but they put the royalty into an oil or petroleum fund and live off the interest now. The fund is about $900 billion for around five million people. Imagine if they distribute it evenly for every citizen. What’s good about it is that the wealth stays. When the current generation fades and dies, their children and two or three generations ahead can still enjoy God’s gifts that have been exploited. I think it’s very noble and fair, so it’s not just the current generation who enjoy it. This is our goal. We want to take control of all our vast mineral reserves such as gold, bauxite, or coal.
This article was first published by AmCham Indonesia. Read the full story here.