Business merger, uniting two or more existing companies into one new company, is a normal practice in business. Minister of state-owned enterprises (SOEs) Erick Thohir has stated plans, as quoted by tempo.co on January 18, 2020, to merge some state companies or some SOEs subsidiary companies.
In fact, doing merger of some SOEs is not a new thing. The step had actually ever been taken by the earlier government regimes. Let us say in 1998 after Indonesia facing monetary crisis that seriously hit our banking sector. This forced the government to merge some banks. Some state banks of Bank Bumi Daya (BBD), Bank Ekspor Impor Indonesia (EXIM), Bank Dagang Negara (BDN), and Bank Pembangunan Indonesia (BAPINDO) merged into Bank Mandiri.
This step was successful. Bank Mandiri has been competitive and becoming one of the national biggest banks.
Hence, the initiative of Erick Thohir to merge some of state companies in a bid to improve their competitiveness should be appreciated. If they are merged according to their core business, they might be able to build up their competitiveness. Let say all subsidiary companies with core business in hospital be merged into one and so do the state companies with core business in hotel, insurance, ports, terminals, and so on.
Actually, some have responded this initiation positively, including in the port business. State port operator PT. Pelabuhan Indonesia I (Persero)/PT Pelindo I for example, has just merged its Belawan International Container Terminal (BICT) with its domestic terminal of Terminal Peti Kemas Domestik Belawan (TPKDB) into Terminal Peti Kemas (TPK) Belawan.
This merge remains a strategy to provide a better service and to satisfy port customers in container handling. The terminal service is more efficient, while the operating cost is also more efficient. Since the terminal can make the service more efficient while the operating cost is also cheaper, it is more competitive in getting the market share. In addition, the corporate can save more operating cost, thus giving them a higher margin and bottom line.
Pelindo I step to merge BICT with TPKDB is meant to create cost and service efficiency, thus finally making this terminal more competitive.
Can this step be copied by other state port operators? Surely! The state port operator PT Pelabuhan Indonesia II (Persero)/IPC can also do similar step for its terminals.
The Jakarta International Container Terminal (JICT) can be merged with Terminal Petikemas Koja (TPK Koja) since both have similar business. The two terminals are actually very probable to merge since they run similar business and both are controlled by the same shareholders of PT Pelindo II and Hutchison Port Holding (HPH/HPI).
Merging these two Indonesia’s main gateways of containerized export/import cargoes will totally make it more competitive even in international market share. In addition, since merger can create cost efficiency, this will create better margin and higher bottom line. Shareholders will get more cash, of course.