Debt-Ridden State-Owned Enterprises at Risk

The new research conducted by Moody’s Investors Service revealed that the level of liabilities of several state-owned enterprises (BUMN) in Indonesia was worrying. These enterprises were in debt. Such contingent risk originated from the uncertainty of profits or losses in the government’s fiscal balance and was the result of quasi-fiscal expenditures applied by the state-owned enterprises. Moody’s assessed that the government did not guarantee several state-owned enterprises expenses since they were not in the government’s subsidy budget.

As quoted by Kontan, Moody’s mentioned that there are six state-owned companies in Indonesia that are at risk: PT Waskita Karya Tbk (WSKT), PT Garuda Indonesia Tbk (GIAA), PT Adhi Karya Tbk (ADHI), PT Kimia Farma Tbk (KAEF), PT Krakatau Steel Tbk (KRAS), and PT Indofarma Tbk (INAF). According to Moody’s’ research, all of them recorded extra costs which are the result of a relatively small number of liabilities. Using debt to equity ratio (DER), Moody’s stated that WSKT had the highest DER at 359.1 percent, followed by GIAA at 211.2 percent, ADHI at 137.5 percent, KAEF at 126.2 percent, KRAS at 114.2 percent, and INAF at 112.4 percent.