The House of Representatives (DPR) has expressed deep concern over the ongoing crisis faced by state-owned pharmaceutical company PT Indofarma (INAF) that requires urgent attention.
Nevi Zuairina, a member of the House’s Commission VI of the Prosperous Justice Party (PKS) faction, emphasizes that the problems at Indofarma might be just the tip of the iceberg for State-owned enterprises (SOEs).
She asks the Ministry of State-Owned Enterprises (SOEs) to adopt a more proactive stance and ensure regular audits of all SOEs as a preventive measure to avoid similar issues in the future.
“We are concerned that Indofarma’s case could be just the tip of the iceberg for SOEs, and we are worried that other companies may face similar situations,” Nevi said during a House Commission VI hearing with the Minister of SOEs in Jakarta, Monday, September 2, 2024.
Deputy Minister of SOEs, Kartika Wirjoatmodjo, said that former Indofarma officials implicated in fraudulent activities would soon face legal action.
He also said that there are plans to transition Indofarma to a made-to-order business model, in which the company will produce drugs only based on orders from its parent company, PT Bio Farma.
Kartika added that Indofarma would also undertake efficiency measures, including gradually selling off assets to fulfill employee entitlements. He noted that contribution allowances amounting to Rp95 billion (US$6 million) would be disbursed soon.
“Employee entitlements for contribution allowances, totaling Rp95 billion, will be paid soon,” Kartika said.
Previously, Minister of SOEs Erick Thohir affirmed the government’s commitment to rescuing troubled state-owned enterprises, including Indofarma. The government has allocated Rp68 billion in state capital injection (PMN) to Bio Farma, Indofarma’s parent company.
The Ministry of SOEs has clarified that this fund will not be used to pay off Indofarma’s debts to online lending platforms (pinjol). Instead, the PMN provided to Bio Farma will be utilized for vaccine development.
Erick Thohir emphasized that problematic BUMNs will still receive support.
“If there’s fraud, we act on it. If there’s corruption, we apprehend those involved. But for Indofarma to survive, we need to ensure its recovery, including addressing vendor debts and other issues,” Erick said after the relaunch of the BUMN Foundation in Jakarta on July 5, 2024.
Erick also stressed that the Ministry of SOEs consistently conducts audit investigations of companies and reports any discrepancies to the Supeme Audit Agency (BPK).
The Ministry is also collaborating with the Corruption Eradication Commission (KPK) to prevent corruption.
“If it’s said that the Ministry of SOEs isn’t investigating, we were the ones who discovered the fraud. SOE ministry conducts audit investigations, then we report to BPK. BPK reviews it, and the process follows,” Erick cited.
Indofarma’s total liabilities reached Rp1.56 trillion in the 2023 financial year, marking a 7 percent increase from Rp1.48 trillion in 2022.
The Bio Farma subsidiary also faces numerous business challenges that have led to its bankruptcy following the Covid-19 pandemic.
The state-owned pharmaceutical company reported negative equity of Rp804 billion in 2023 and is still behind on employee salaries totaling Rp4.23 billion.
Moreover, the BPK found instances of funds being withdrawn from online lending platforms by individuals within the company. Indofarma’s CEO, Yeliandriani, reported that five individuals were involved in this case.
The situation at Indofarma underscores the urgent need for comprehensive reforms and stronger oversight within Indonesia’s state-owned enterprises to prevent future crises and ensure the sustainability of these critical companies.
