Of Catfish Pond and Old Agreements
The government seeks to turn old assets into money. But the fate of premium assets, such as Hotel Sultan, Taman Mini Indonesia Indah, and Plaza Semanggi, remains a mystery.
IF only the State Asset Management Institute (LMAN) had handed-over the building on the corners of Jalan Cikini Raya and Raden Saleh Raya in Menteng, Central Jakarta, without making renovations, perhaps the Education Fund Management Institute (LPDP) today would not only be managing scholarships. The LPDP could be using the building, which had been turned into the Gedung Danadyaksa Cikini, to raise catfish.
Five years ago, the confiscated asset of Bank Indonesia during the 1998 financial crisis, was handed over to the LMAN. At the time, there was a catfish pond at the basement of the building. After sundown, a pecel lele (fried catfish) stall would open business in front of the building. “It turned out that the seller was the owner of the pond,” LMAN’s Director of Operations and Risk Management Candra Giri Artanto said on Friday, September 25.
Surely, it was impossible to just handover the building to the LPDP in 2018. After being vacant and abandoned for nearly 16 years, the building was almost in disrepair. Cleaning the basement where the fish pond was situated was only one of an array of works to rehabilitate the asset.
Surely, there is not much to expect out of an abandoned structure. Left unattended, the site would be lucky enough to have food sellers open stalls there, as opposed to being a place of prostitution. The LMAN, a public service agency of the finance ministry, was also left with bills to pay, from electricity to land and building taxes.
The government established the LMAN in 2015. Among its purposes was to manage state assets owned by ministries and agencies that were neglected and handed over to the directorate-general of state assets. Some assets were even traded, such as those belonging to Pertamina or other oil and gas cooperation contract contractors. There were also abandoned assets of the now defunct Indonesian Bank Restructuring Agency and Asset Management Company.
And of course, there are assets of Bank Indonesia (BI). One of them is a building managed by the LPDP. If they cannot be made into something profitable, the government wanted these assets to at least be of use to ministries and agencies that do not have their own buildings.
In actuality, the government’s task is not limited to exploiting abandoned assets, like what the LMAN is doing. There are many other state assets that are still controlled by third parties, under management schemes allegedly not bringing the state any profit. The Supreme Audit Agency (BPK) and the Corruption Eradication Commission (KPK) have a list of state assets within that category. Among them are the Taman Mini Indonesia Indah, the Plaza Semanggi complex, the Sultan Hotel complex in Senayan, and a number of other premium property assets in the Bung Karno Sports Stadium area.
government’s efforts to utilize neglected assets by means of the LMAN are beginning to show results. Of the 283 assets managed by the LMAN—estimated to worth Rp37 trillion—31 have started generating revenues. From January-September, these commercialized assets have contributed Rp2.7 trillion in non-tax state revenues. The biggest incomes come from the natural gas refinery complex Arun in Aceh and Badak in Bontang, East Kalimantan.
Currently there are 37 other assets being offered, 77 assets have been cleaned, and 12 others under renovation. One of them an empty building on Jalan Dipati Ukur 31-33 in Bandung, West Java; an asset once owned by Pertamina—now managed by the LMAN. On Friday afternoon, September 25, the building was seen surrounded by a 1.5 meter corrugated zinc panels, with piles of sands on the corners of the yard. Inside the building were a number of workers tearing down old walls and replacing them with bricks.
Usep, the site manager, said the renovation work began not too long ago in August. The old building was being turned into a co-working space with complete facilities. “It should be completed around March 2021,” Usep said.
According to Samsikin, a snack and coffee seller in Jalan Dipati Ukur, the building was a wing of Pertamina’s flats. “Five years ago, it was taken over by the finance ministry,” she said. Samsikin knew exactly the history of the complex because not only is she a native of Dipati Ukur, her husband also worked as a night watchman at the building.
In actuality, the government’s task is not limited to exploiting abandoned assets, like what the LMAN is doing. There are many other state assets that are still controlled by third parties, under management schemes allegedly not bringing the state any profit
The main building of Pertamina’s flats complex remains intact. It had seen some small work three years ago, the building now has a signpost bearing the logo of the finance ministry that says “State’s Land.”
As LMAN often deals with thugs, traders, as well as squatters, other public service agencies tasked with managing state goods also have to deal with white collar rulers. Winarto, chief executive officer (CEO) of the Bung Karno Stadium Complex Management Center (PPK-GBK), has many stories about how they dealt with these premium partners.
Winarto entered the GBK after the state secretariat ministry’s public service agency received many red notes from the BPK. “Right now I’m knocking on partners’ doors, asking them to change the old agreement,” Winarto said on September 25.
In January, the BPK conducted an audit of the management of state property for the period 2017 and 2018 at the state secretariat ministry, the management and development agency for Taman Mini Indonesia Indah, and the Veteran Buildings Foundation of the Republic of Indonesia. It revealed a potential state loss from the mismanagement of PPK-GBK assets. The BPK noted that the PPK-GBK still received money from one of the tenants of the Jakarta Convention Center (JCC), Graha Sidang Pratama. The amount is US$200,000 per year, paid from 2015 to 2018. The actual lease agreed in 2015 was actually higher at US$237,000—valid until 2019.
The PPK-GBK also had not received land-use royalties from Indobuildco. The company—owned by Pontjo Sutowo, the son of former Pertamina CEO Ibnu Sutowo—unilaterally extended the validity period of the building rights certificate (HGB) by 20 years from 2003 to 2023. The asset is now used as the Sultan Hotel, formerly known as the Hilton Hotel complex.
In a judicial review issued by the Supreme Court in 2012, it was clearly stated that the land must be returned to the state. Indobuildco can still manage it, provided they pay the royalty debt from 2003-2023 to the PPK-GBK worth US$350,000 per year. The BPK audit findings noted that Indobuildco had paid royalties from 2003 to 2006—plus interest—amounting to US$2.251 million. However, they have stopped paying since.
Later, Winarto said, Indobuildco submitted additional requirements. They were willing to pay the royalty debts if there is a guarantee that they would get extensions for the building-use agreement after 2023. “I don’t have the legal hold to guarantee that,” said Winarto. “They should just focus on paying their debts first. At least pay the current one first,” he said.
Another finding in the BPK audit shows the weak position of the PPK-GBK in renegotiating agreements with Senayan Trikarya Sempana (STS), owner of the 20-hectare Senayan Square complex’s concession with a build-operate-transfer scheme. Senayan Trikarya Sempana’s concession is 40 years old, and will not expire until 2036. On the land stand luxury assets, from Plaza Senayan to Fairmont Hotel.
Seventy percent of STS’ shares are owned by Japanese firm Kajima Corporation. Aditya Wirabhakti, a joint venture company of Siti Hediati Hariyadi—a.k.a. Titiek Soeharto—and Hashim Djojohadikusumo, has 20 percent. The PPK-GBK only owns 10 percent of STS ‘dormant shares’.
According to BPK’s findings, the old agreement did not include compensation variables from the company’s profits or revenues. In 2018, STS rejected PPK-GBK proposal, in which the latter asked for 3.5 percent of annual income.
Later, the PPK-GBK asked for a variable compensation based on gross revenues, not net profits. “Because we can’t control company costs. JCC’s variable contribution has changed, calculated based on the percentage of income,” Winarto said. “But the negotiations with Kajima are still ongoing.”
SETYA Utama is no longer willing to talk about the fate of state assets under the state secretariat’s management that are still controlled by a third party or are considered as incurring state losses. Setya, the state secretariat ministry’s secretary, opts to wait for recommendations from the KPK on how to pursue the troubled state assets. “We are discussing about the action plan with the KPK,” he said on September 25.
The BPK audit not only discovered the problem of state assets around Senayan, but also in Taman Mini Indonesia Indah (TMII) and the Plaza Semanggi complex. Since 2011, the state secretariat has included TMII’s land in the list of state-owned goods, whereas in fact it is still managed by the Harapan Kita Foundation, chaired by former president Suharto’s daughter Siti Hardijanti Rukmana.
The Bung Karno Sports Stadium Complex in Senayan, Jakarta, August / TEMPO doc./Fakhri Hermansyah 2018./ TEMPO doc./Fakhri Hermansyah
In 2010, the finance ministry proposed three options for TMII. The first was to declare TMII as a state asset and have a public service agency. Second, to designate TMII as a state property, but to hand it over to other ministries or institutions as users. The third option is to appoint TMII as a state property managed by other parties under a joint-use cooperation.
Meanwhile, in 2018, Harapan Kita Foundation had submitted an agreement option so that it can still manage TMII. However, until the results of the BPK audit came out, there had been no answer from the state secretariat. To date, TMII—valued at Rp10.2 trillion—remains under Harapan Kita’s management.
At the Semanggi Plaza complex, the state secretariat through the Republic of Indonesia’s Veteran Buildings Foundation (YGVRI) is stuck with an old agreement. Changes to the old agreement between the YGVRI and Primatama Nusa Indah in 2002 included a clause that Primatama is entitled to automatic extension of management for 20 years—from an initial period of 30 years—by simply sending a notification letter to the YVGRI. How convenient.