Page 190 - SUSTAINABILITY ISSUES & COVID-19

maintenance of trading and naval vessels. The ships produced are also exported to several countries such as Japan, Italy,
Germany, Turkey, Australia, and Japan. PAL Indonesia has four business lines, namely merchant shipbuilding, marine
vessels, general engineering, and repair and maintenance. The size of ships that can be produced by this company
reaches 50,000 deadweight tons (DWT). Domestically, these vessels are used by Pertamina, PELNI, and several local
governments. At the end of 2016, the company lost IDR 395 billion with a large revenue of IDR 683 billion. This company
has assets reaching Rp2.98 trillion and an equity value of Rp609 billion (CNBC.Indonesia, 2020).

The purpose of this research is to assess the sustainability of Indonesian SOEs, by 1) assessing the financial performance
of Indonesian SOEs, 2) assessing the fluctuation of debt and equity of SOEs and non-SOEs, 3) comparing the financial
performance of SOEs with non-SOEs in similar industries, and 4 ) comparing the disclosure of sustainability report
between SOEs and Non-SOEs. This research is important because many SOEs are engaged in strategic sectors and
are related to the livelihoods of many people, and are one of the means to achieve Indonesia’s economic sovereignty.
Also, research comparing the sustainability of SOEs versus non-SOEs in Indonesia has not been done much. Therefore,
it is hoped that the results of this research can be used to assess and evaluate the performance and sustainability of
Indonesian SOEs and compare them with similar non-SOEs companies.

2. LITERATURE REVIEW

2.1. The purpose of SOEs
The purpose of SOEs was established to defend the sovereignty of the State, namely sovereignty in terms of food,
clothing, shelter, and security. In protecting all citizens and defending the sovereignty of the state, State intervention
is absolutely necessary, not only relying on private parties. In Indonesia, the reasons for establishing and maintaining
ownership of a state-owned company are stipulated in the 1945 Constitution of the Republic of Indonesia Article 33
paragraphs 2 and 3. The sound of paragraph 2 is that production branches which are important to the State and which
control the livelihoods of the public are controlled by the State. While the sound of paragraph 3 is that Earth, water,
and natural resources contained therein are controlled by the State and used for the greatest prosperity of the people
(UUD_RI, 1945).

The state uses SOEs ownership for the benefit of the general public. The reasons for establishing and maintaining a
state-owned company include (OECD, 2015):

1. The state is more efficient and reliable in managing goods and services needed by society than managed by the
private sector.
2. Regulations on the management of natural resources monopoly are better handled by the State than left to the
market, which is deemed inappropriate and inefficient.
3. Support strategic and economic objectives in the national interest, such as keeping certain sectors under State
ownership, or taking over failed companies that have a systemic impact.

2.2. Factors Causing Failureof SOEs
When viewed from various cases of SOSs that have suffered losses, based on various literature from the mass media, the
factors that cause of SOEs losses include:
1) PT Garuda Indonesia suffered losses due to a corruption case, namely the mark-up on the purchase of Rolls-
Royce aircraft engines from England (CNN.Indonesia, 2018). Besides, it is also because PT Garuda is managed
unprofessionally. For example, they often experience delays, especially during peak holidays (peak season),
Garuda ticket prices are less competitive, and industrial relations are not harmonious with other parties, because
PT Garuda has violated many of the Collective Labor Agreement / Professional Work Agreement that has been
agreed dispute.
2) PT Krakatau Steel suffered losses due to high debt interest expenses. PT Krakatau steel’s debt continued to increase
in 2018, short-term debt increased by 17.38% compared to before 2018. Government regulations that exempt
entry rates for imported steel from China, through the Minister of Trade Regulation number 22 of 2018, caused

International Conference on Sustainability 189
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