Semen Padang‘s Crumbling Foundation: Calls for Strategic Shift Amidst Market Challenges
Jakarta – A concerning picture emerges from a recent visit by the Commission VI of the Indonesian House of Representatives (DPR) to Semen Padang amidst growing anxieties over the company’s performance. Deputy Chairman of Commission VI, Andre Rosiade, painted a worrying portrait, revealing that the cement giant, a subsidiary of PT Semen Indonesia Group (SIG), is faltering under the current operating holding company model.
Andre expressed concerns over Semen Padang’s diminishing financial health and shrinking market share in West Sumatra, citing stiff competition from both national and international private cement players.
“The achievements of Semen Indonesia Group in West Sumatra are worrying. Semen Padang’s financial situation is declining now. The market in West Sumatra has even been penetrated by many competitors,” Andre said during the delegation’s working visit to Padang, West Sumatra, marking the first recess for the 2024-2025 session.
He attributed the downward spiral to the imposition of an operating holding company structure implemented by SIG in 2018. According to Andre, this policy has ultimately hampered the subsidiary’s autonomy and stifled its growth potential.
“We see that since 2018, the operating holding has been implemented until 2024. We need to evaluate this because it turns out that Semen Indonesia Group’s market share continues to decrease, EBITDA continues to decrease. We see that there needs to be a comprehensive evaluation, one of which is the operating holding policy adopted in the last 7 years needs to be evaluated,” stressed the Deputy Chair of the Gerindra Fraction of the DPR.
He championed a transition towards a strategic holding company structure, citing the successful track record of other state-owned enterprises (BUMNs) that have adopted this model. His argument rests on the principle of granting subsidiaries greater autonomy and flexibility to chart their own course.
“We see that the BUMNs that have used strategic holding are all on average successful. That’s why we encourage the failure of this operating holding (SIG, ed) to be evaluated as a strategic holding. So that in the future these subsidiaries, opco-opco (operating companies) can have more freedom to develop their company, where later the holding company only needs to prepare KPIs (Key Performance Indicators) or targets,” Andre emphasized.
He highlighted the restrictive nature of the existing operating holding system, which concentrates decision-making power within the parent company, SIG, leaving subsidiaries with minimal say in their own operations, including production, marketing, and financial management.
Andre expressed hope that a shift towards a strategic holding company would empower subsidiaries like Semen Padang to reclaim control and effectively compete in the challenging market landscape.
“Now, the operating holding is all pulled up, sales including marketing. Opco is only limited to producing cement. If in the future the distribution of authority is reduced to the regions through the implementation of strategic holding, we hope how these subsidiaries can carry out production and sales and manage their finances,” said Andre.
Fellow Commission VI DPR member, Herman Khaeron, echoed the need for Semen Padang to bolster its marketing strategies in the face of intensifying competition. He asserted the competitive edge of Indonesian cement, underscoring the potential of Semen Padang to thrive if equipped with robust marketing efforts.
Mufti Aimah Nurul Anam, another member of Commission VI DPR, disagreed with the suggestion to address SIG’s challenges by replacing the board of directors.
“Previously my friends shouted for the directors to be replaced, I did not agree to solve the problem by
According to Commission VI, what are the potential benefits of shifting to a strategic holding company model for Semen Padang?
## Semen Padang: In Urgent Need of a Strategic Shift?
**Interviewer:** Deputy Chairman of Commission VI, Andre Rosiade, recently painted a concerning picture of Semen Padang’s financial health. Could you elaborate on the main issues facing the company and what Commission VI suggests as solutions?
**Andre Rosiade:** Semen Padang, once a titan of the cement industry, is facing steep challenges.Its financial situation is deteriorating, and its market share in West Sumatra is steadily shrinking due to intense competition from both domestic and international players.
The current operating holding company structure, implemented in 2018, seems to be hindering Semen Padang’s growth. This structure concentrates decision-making power within the parent company, SIG, leaving subsidiaries like Semen Padang with limited autonomy in areas like production, marketing, and financial management.
**Interviewer:** What specific changes does Commission VI propose?
**Andre Rosiade:** We strongly believe a shift towards a strategic holding company model is crucial. This approach has proven triumphant for other state-owned enterprises, granting subsidiaries greater autonomy and adaptability to adapt to market dynamics.
Under a strategic holding structure, subsidiaries like Semen Padang could have more control over their operations, allowing them to develop tailored strategies for production, sales, and finance. This would empower them to effectively compete and reclaim their position in the market.
**Interviewer:** Some argue that the focus should be on replacing the board of directors instead of structural changes.What are your thoughts on that?
**Andre Rosiade:** While leadership is certainly vital, structural reform is essential to address the root causes of Semen Padang’s woes. A strategic holding structure creates a more conducive environment for strong leadership to flourish
