Prabowo’s Radical SOE Overhaul: Indonesia Targets Massive State-Owned Enterprise Purge

JAKARTA, Investortrust.id — President Prabowo Subianto has launched a relentless campaign to streamline Indonesia’s sprawling state-owned enterprise (SOE) landscape, signaling an end to the era of bloated, loss-making government entities. In a bold address at the KSTI 2026 Sarasehan Kebangsaan in Jakarta this Sunday, the President confirmed that the government intends to cull nearly 600 SOE entities, including subsidiaries and sub-subsidiaries, aiming for a leaner, more agile ecosystem of just 250 companies.

This reform represents a seismic shift in Indonesia’s economic management. By cutting the "dead weight" of non-performing state assets, the Prabowo administration is looking to eradicate massive "overhead" costs—funding layers of directors, commissioners, and administrative bloat that have long drained the state budget. This move is designed to restore fiscal discipline and prioritize capital allocation toward competitive, high-growth sectors, directly impacting the broader investment climate of Southeast Asia’s largest economy.

The "Clean-Up" Strategy

The roadmap is clear: from an initial pool of over 1,000 corporate entities, the government has already liquidated or consolidated more than 200 firms. According to the President, the target is to eventually pare down the complex web of state firms to approximately 30 core holding companies, structured under 12 strategic clusters.

"From about 1,000 SOEs, we have already closed more than 200. Eventually, there will be only about 250 left," Prabowo stated during his Sunday address. He emphasized that the survival of these firms now hinges on a strict meritocratic standard: they must be healthy, efficient, transparent, and profit-driven.

Cutting the Fiscal Fat

Prabowo did not mince words regarding the cost of inaction. He highlighted the absurdity of maintaining hundreds of entities that do not generate value for the public, noting that the state has been essentially subsidizing administrative inefficiency with taxpayer funds.

"Imagine if more than 750 SOEs are closed. Think of how many directors, how many commissioners, and how large the overhead costs have been that had to be borne all this time," the President remarked. He emphasized that these firms were consuming capital without providing a return, and that the new mandate is to transform the remaining entities into professional, rationalized players in the global market.

The Political Patronage Problem

However, the aggressive pursuit of efficiency faces significant headwinds from deeply entrenched political patronage. A recent study by Transparency International (TI) Indonesia reveals that despite government rhetoric regarding reform, state-owned enterprises continue to function as a "revolving door" for political appointees. As of September 2025, the research identified 562 commissioner positions across 119 BUMN entities, with a staggering 60% of these seats occupied by bureaucrats and individuals with direct political affiliations.

The findings suggest that the promised reduction in administrative bloat has been undermined by the prioritisation of political interests over corporate competency.

Among the 165 politicians holding commissioner roles, the study highlights that 109 are active members of political parties—led by President Prabowo Subianto’s own Gerindra Party with 53 appointees—while the remaining 56 seats are occupied by political volunteers.

This influx of Politically Exposed Persons (PEPs) is particularly acute in strategic sectors like energy and infrastructure, where bureaucratic and political interests often dwarf the presence of independent professionals.

Conflict of Interest Concerns

The implications for governance are severe. TI Indonesia notes that the appointment process often bypasses necessary due diligence and ignores "cooling-off" periods, allowing party members and former officials to move directly from government roles into corporate oversight positions.

This trend not only blurs the critical line between regulator and executor but also signals a weakening of meritocratic standards. As the administration moves to slim down its corporate portfolio, critics argue that the success of these reforms will ultimately be measured by whether the government can insulate the remaining firms from the influence of political deal-making and inherent conflicts of interest.

Looking Ahead

The administration is racing to complete this restructuring by the end of 2026. While the primary goal is cost-cutting and efficiency, the President is also pushing for a shift in corporate culture. He has expressed strong support for a proposal to force profitable state firms to reinvest a portion of their earnings into research and innovation.

"The proposal for SOEs to allocate part of their profits for research is excellent. The question is, do these SOEs have profits or not? Now, they are starting to. In one year, they have started to show profits," Prabowo added. As the government pivots toward these higher standards, the survivors of this purge will likely emerge as more formidable, tech-capable competitors on the international stage.