Indonesian SOE Reform Bill Clears House Committee, Bolstering Wealth Fund Launch

JAKARTA, investortrust.id – A key commission of the Indonesian House of Representative, or DPR, has agreed upon a landmark reform bill concerning state-owned enterprises, on Saturday, Feb. 1, 2025, paving the way for the launch of the nation's new sovereign wealth fund, Danantara, aimed at attracting foreign investment and driving long-term economic growth.

DPR's Commission VI, which oversees industry, investment, trade, cooperatives, state-owned enterprises, and standardization, has unanimously voted for the Draft Law on the Third Amendment to Law No. 19 of 2003 concerning SOEs.

This landmark decision, made during a working meeting on Saturday sets the stage for for the bill to be presented at a plenary session for final ratification into law. The development is anticipated to expedite the launch of Indonesia's new sovereign wealth fund, Badan Pengelola Investasi Daya Anagata Nusantara, or Danantara.

The approval was granted after representatives from all eight factions within Commission VI submitted their written opinions to government representatives, including Minister of Law Supratman Andi Agtas, Deputy Minister of Finance Thomas Djiwandono, and State Secretary Prasetyo Hadi.

"After receiving and listening to the opinions of the factions, we can conclude that all eight factions in Commission VI of the DPR have approved the draft law on the third amendment to Law 19 of 2003 concerning SOEs to be further discussed at the second level in the DPR plenary session for approval into law, do you agree?" asked Commission VI Chair Anggia Erma Rini during the meeting on Saturday, February 1, 2025.

"Agreed," responded the meeting participants in unison, concluding the afternoon's working meeting.

Prior to the agreement, Eko Patrio, the Chairman of the Working Committee, presented a comprehensive report outlining the key changes to the draft bill that had been agreed upon. These changes reflect a concerted effort to modernize and strengthen the legal framework governing Indonesia's State-Owned Enterprises (SOEs).

A significant aspect of the revised bill involves adjustments and expansions to the definition of SOEs. This broader definition aims to empower these entities to carry out their duties more effectively and in full accordance with relevant laws and regulations. Furthermore, the bill introduces a clear definition for SOE subsidiaries, a crucial element that was previously absent from the existing legislation. The inclusion of this definition is expected to enhance clarity and accountability within the SOE structure.

The proposed legislation also encompasses a range of regulations pertaining to strategic financial and operational aspects of SOEs. This includes provisions related to the newly established sovereign wealth fund, Danantara, as well as Investment Holdings, Operational Holdings, Restructuring, Privatization, Establishment of Subsidiaries, and the Dissolution of State-Owned Enterprises. In addition, the bill introduces regulations concerning the Business Judgment Rule, providing a framework for decision-making within SOEs.

Another key focus of the bill is the affirmation of good corporate governance principles in the management of SOE assets. The legislation emphasizes that asset management must be conducted accountably and in strict adherence to existing laws and regulations, ensuring transparency and responsible stewardship of public resources.

On the human resources front, the bill promotes inclusivity and equal opportunities within SOEs. It mandates that these enterprises provide opportunities for people with disabilities and local communities, in accordance with statutory provisions. Notably, the legislation also encourages the appointment of female employees to leadership positions, including roles on the Board of Directors, Board of Commissioners, and other strategic positions within SOEs.

Finally, the bill provides more detailed regulations regarding the establishment of SOE subsidiaries, outlining the specific requirements and mechanisms governing their creation. This enhanced regulatory framework is intended to foster a more robust and well-governed SOE ecosystem.

The imminent ratification of the RUU BUMN is closely linked to the establishment of Danantara. State Secretary Prasetyo Hadi indicated that the government would provide a definite timeline for Danantara's launch following the DPR's plenary session.

"Yes, we will wait until after this is ratified in the plenary session," Prasetyo stated at the parliamentary complex in Senayan, Jakarta, on Saturday, February 1, 2025.

He further emphasized the urgency of revising the SOE law, stating that it is a government priority to strengthen SOE governance. "As the Minister of Law mentioned earlier, representing the President, we want to strengthen our SOEs, so we feel this is quite urgent for us to complete immediately," he explained.

Prasetyo expressed hope that the revised law would bolster SOEs and the national economy. "With this revision of the SOE Law, we hope that in the future, we can strengthen SOEs, strengthen our economy. That is roughly the urgency, why this is being carried out quickly," he elaborated.

Danantara, which translates to "Nusantara Wealth Fund," is envisioned as a strategic investment vehicle to manage state assets and attract foreign investment. It is modeled after successful sovereign wealth funds in other countries, such as Norway's Government Pension Fund Global and Singapore's Temasek Holdings. 

Earlier, Danantara CEO Muliaman Hadad stated that the seven SOEs were slated to join the fund. These are the oil and gas firm PT Pertamina; utility company PT Perusahaan Listrik Negara (Persero); publicly listed lenders PT Bank Rakyat Indonesia (Persero) Tbk, PT Bank Negara Indonesia (Persero) Tbk, and PT Bank Mandiri (Persero) Tbk; as well as publicly listed telco firm PT Telkom Indonesia (Persero) Tbk; and mining holding company PT Mineral Industri Indonesia (Persero). The fund aims to generate long-term returns for the Indonesian people and contribute to the nation's sustainable development.