McKinsey and BCG tapped for massive state assets overhaul in Indonesia

Management consulting firms McKinsey and BCG have been appointed to overhaul more than a hundred state-owned enterprises in Indonesia, with combined revenues of above $170 billion.

American management consulting giant McKinsey & Company and big-league rival Boston Consulting Group have been appointed to guide an overhaul of 114 Indonesian state-owned enterprises with combined revenues of $172 billion, according to a report in the Jakarta Post. The assignment follows McKinsey’s recent work in assessing options for the relocation of the capital from Jakarta, with a number of the firm’s alumni presently advising the president.

Citing comments from Indonesia’s State-Owned Enterprises Deputy Minister Budi Gunadi Sadikin, the Post reports that McKinsey and BCG will be responsible for preparing a restructuring roadmap to “promote business innovation, technological leadership and the ability to partner with world-class companies” at the targeted state-owned firms, which operate in a range of industries including the energy, construction and telecom sectors.

Among them are oil & gas giant PT Pertamina, which generates revenues around the $60 billion mark alone, and national flag carrier Garuda Indonesia – which will be the latest in a string of global airlines working with leading consultancies on restructuring and other projects, including McKinsey at Air France and Cathay Pacific, BCG at Air France’s Dutch sister airline KLM, and both McKinsey and BCG together at India’s defunct Jet Airways.

McKinsey and BCG are expected to finalise the roadmap by the end of this month, with the restructuring initiative fitting within President Widodo’s broader 2020-24 national plan.

Recently, tech entrepreneur and former McKinsey consultant Adamas Belva Syah Devara was appointed as a special presidential advisor, where in the sphere of influence he joined Gojek founder and ex-McKinsey consultant Nadiem Makarim, now Minister of Education & Culture.

According to the report, state-owned companies operating in the basic industries will be encouraged to partner with foreign firms for advanced technology, with Pertamina’s recent signings with Abu Dhabi’s sovereign investment fund Mubadala cited as a previous move to access newer technologies. “We would like to create an ecosystem, where all state owned CEOs have the skills to deal with international investors,” Budi told the Jakarta Post in an interview.

Budi is deputy to Indonesian entrepreneur Erick Thohir, founder of local media company the Mahaka Group (and former owner and chairman of Inter Milan football club), who the Post notes was appointed toward the end of last year as State-Owned Enterprises Minister with a mandate to build enterprises “capable of expanding into global markets,” pledging on his appointment to overhaul the companies through mergers or liquidation while reducing operational overlaps.