Good governance matters

We hardly have reasons to celebrate the annual International Anticorruption Day today, particularly after State-Owned Enterprises (SOEs) Minister Erick Thohir announced the dismissal of Garuda Indonesia president director Ari Ashkara in connection with a smuggling attempt last Thursday. The alleged crime may have caused only small state losses compared with high-profile cases, but the case may be just the tip of an iceberg of noncompliance with good corporate governance principles at our SOEs.

Erick has also demanded that other Garuda executives involved in the case resign or face dishonorable discharge and pledged to review the national flag carrier's board of directors and commissioners to prevent similar incidents.

Credit should go to Erick for his bold move, although it came only after the media and social media began to sniff out the irregularities early last week. Based on the SOEs Ministry’s investigation, a disassembled Harley-Davidson motorcycle and Brompton bicycles were found inside a brand-new Airbus A330-900 aircraft of Garuda that landed at Soekarno-Hatta airport on Nov. 17. The newly bought plane was carrying Ari and his entourage from the Airbus base in Toulouse, France.

The alleged smuggling appears to have been well planned and executed, along with attempts to cover it up, until Erick and Finance Minister Sri Mulyani Indrawati unveiled the incident. Neither of the two ministers have disclosed the whole story as an investigation is underway. A criminal investigation should follow, considering the apparent breach of laws and regulations punishable by prison sentences.

The stakes are too high for the government to quietly settle the case, as Garuda is publicly listed. Transparency matters, for without it the government would put its reputation on the line both at home and overseas.

Strict enforcement of the law aside, the case should push the government to ensure good governance as an integral part of corporate culture at all SOEs. As of today, there are 142 SOEs, and Erick is considering substantially cutting that number through consolidation, because many of them have shifted away from their core businesses.

Erick has won praise for streamlining the bureaucracy within his ministry, but instilling good corporate governance at state companies should top his agenda if he really means sweeping reforms. Too long have SOEs enjoyed privileges from the government and have had to return the favor as evident in the rampant practice of SOEs becoming cash cows of government officials or politicians.

Transparency and accountability as the pillars of good corporate governance matter to the SOEs, not only because of their control of state assets valued at Rp 8.2 quadrillion (US$584.15 billion) and Rp 2.6 quadrillion worth of equity as of last year, but also because of their responsibility to generate revenue the state needs to provide prosperity for its citizens.

Appointing the right men or women to navigate Garuda and other strategic state enterprises is pressing for Erick. No less urgent is setting new rules and norms that will keep the enterprises from gross abuse of corporate power, a practice blamed for the global financial crisis in the past.