25 Mar 2025
Danantara and the Future of SOEs: What will change?

In February 2025, Indonesia enacted amendments to its Law on State-Owned Enterprises (SOE Law), [1]  introducing major reforms to the regulation of SOEs.

 A key development under this law is the launch of Daya Anagata Nusantara (Danantara), being Indonesia’s new sovereign wealth fund.

Primary changes under these amendments include: the introduction of an expanded definition of State-Owned Enterprises (SOEs), clearer processes for the separation between the assets of SOEs and the State, greater emphasis on the business judgment rule, and introduction of limited liability protections for SOE directors and commissioners.

1. Key Updates to SOE regulation

   1. Broader Definition of SOEs

Previously, Indonesia’s regulatory framework defined SOEs as companies wholly or majority-owned by the Government. 

The revised SOE Law expands this definition to include companies where the Government holds a "special right", even if it does not hold a majority stake. This right is typically exercised through a special share called “Saham Seri A Dwiwarna” or “A Class Dwiwarna share” ("Special Share"). This ownership grants the Government significant control.

The rights conferred under these amendments include, but are not limited to:

1. the right to vote and propose agendas at General Meetings of Shareholders (GMS);
2. access to company data and decision-making authority on key policies;
3. the power to appoint or dismiss directors and commissioners, subject to Presidential approval.

The introduction of these rights means that companies in which the Government retains Special Shares will now be classified as SOEs.  This potentially subjects such companies to stricter requirements of the applicable SOE regulations. However, at the time of writing, it is unclear whether, in practice, the Government will hold Special Shares in SOE subsidiaries.

2. Clarity in the Separation Between State and SOEs

A long-standing issue has been whether SOEs should be treated as extensions of the State, particularly concerning financial resources and liability. The amendments aim to resolve this by affirming a clear separation:

1. Separating of SOE Funds from State assets 
   Capital contributions allocated to SOEs are no longer considered State funds, even when sourced from the national budget.
    
2. Clarification of SOE profit and loss matters
   SOEs retain full ownership of their financial results, which are not considered part of the State’s financial position.
    

3. Limited Liability for SOE Directors and Employees

   1. SOE personnel are not classified as State officials unless they also hold a government position.
   2. SOE directors are exempt from liability for corporate losses if they can prove they:

   • acted in good faith and in line with the company’s best interests.
   • had no conflicts of interest.
   • took reasonable steps to prevent or mitigate the loss.

Additionally, Indonesia’s Audit Board (BPK) may only investigate SOEs in relation to State funds that are unrelated to regular corporate matters, unless otherwise requested by Parliament. 

3. Monopoly Rights for SOEs

The revised SOE Law authorizes the President to grant monopoly rights to SOEs or their subsidiaries if they operate in sectors deemed crucial to national interests. These sectors may include: 

1. essential goods and services; and
2. strategic industries vital to the economy.

At of this writing, the Government has not issued further clarification on how these monopoly rights will be applied, leaving room for interpretation and potential future regulatory developments.

2. Introduction of Danantara: Indonesia’s Sovereign Wealth Fund

As part of these SOE reforms, the Government has launched Danantara, a sovereign wealth fund currently holding a massive IDR 1,000 trillion (USD 62 billion) in capital, primarily sourced from State funds.

1. Danantara’s Role and Impact on SOEs
   1. Shift in SOE Management – Danantara will take over the management of SOE investments, while the Minister of SOEs will focus solely on policy and regulatory oversight.
   2. Investment and Asset Optimization – Danantara will manage and consolidate SOE assets to enhance efficiency and profitability.
   3. SOE Restructuring – The Government plans to transfer all SOEs under Danantara’s control by March 2025.
       
2. Initial SOEs Under Danantara’s Management

Danantara will initially oversee seven major SOEs, including:

1. PT Bank Mandiri (Persero) Tbk
2. PT Bank Rakyat Indonesia (Persero) Tbk
3. PT PLN (Persero)
4. PT Pertamina (Persero)
5. PT Bank Negara Indonesia (Persero) Tbk
6. PT Telkom Indonesia (Persero) Tbk
7. PT Mineral Industri Indonesia (Persero) / MIND ID

With these companies in its portfolio, Danantara will manage USD 600 billion in assets, positioning it among the world's largest sovereign wealth funds.

3. How these changes affect business operations?

The expanded definition of SOEs signifies that some companies previously classified as private may now be reclassified as SOEs and, consequently, subject to the stricter regulation. Impacts may include:

1. Procurement processes – Reclassified SOEs must follow stricter procedures for goods and services procurement.
2. Regulatory compliance – More SOE=-classified companies may be required to comply with SOE-specific reporting and governance obligations.
3. Investment decisions – Businesses working with SOEs, including SOEs themselves, must monitor how Danantara's management strategy may affect commercial transactions involving SOEs and their assets.

Conclusion: A Major Shift in Indonesia’s SOE Landscape

The amended SOE Law marks a significant shift in the governance of Indonesia’s SOE, reinforcing their commercial function while clarifying their legal separation from the State. Simultaneously, the establishment of Danantara, Indonesia’s new sovereign wealth fund, is set to reshape how SOEs are managed and how they invest.

These developments will impact not only SOEs but also businesses that engage with them. The broader SOE definition means that certain private companies meeting applicable criteria may now be classified as SOEs, thereby becoming subject to more stringent regulatory requirements, particularly regarding procurement and governance.

Businesses are advised to closely monitor these developments carefully and ensure compliance with the evolving regulatory landscape. As Danantara begins optimizing and restructuring SOE assets, companies should prepare for shifts in investment strategies and new business opportunities.

By partner Ayik C. Gunadi (agunadi@abnrlaw.com), senior associate Novario Asca H (nhutagalung@abnrlaw.com), and associate Joshua Situmeang (jsitumeang@abnrlaw.com)

This ABNR News and its contents are intended solely to provide a general overview, for informational purposes, of selected recent developments in Indonesian law. They do not constitute legal advice and should not be relied upon as such. Accordingly, ABNR accepts no liability of any kind in respect of any statement, opinion, view, error, or omission that may be contained in this legal update. In all circumstances, you are strongly advised to consult a licensed Indonesian legal practitioner before taking any action that could adversely affect your rights and obligations under Indonesian law.