BUMN, Politics, and Corruption in the Reformasi Era: A Political

Economy Reflection

Herdi Sahrasad and Teuku Syahrul Ansari

Universitas Paramadina

Keywords: BUMN, Political Party, Reformasi, Democracy

Abstract: BUMN (State-Owned Enterprises-SOEs) is a pillar of the strength of the national economy. But in the reform

era after President BJ Habibie, it must be recognized that the existing SOEs, including Bank Mandiri,

Pertamina, Indosat, Telkom, and so on, have become spoiled or seized by political forces (political parties).

BUMN reform and democratization era faces the problem of corruption. In the reform era, political

competition found 'its reincarnation' on fertile land,' namely SOEs and bureaucracy with the aim of seizing

publicly available political-economic resources. As a result, almost all SOEs continue to be in the public

spotlight as a result of experiencing secret politicization (secret) by the ruling parties in the government since

the Gus Dur-Megawati era and the Mega-Hamzah coalition up to the SBY-Boediono and Joko Widodo-Jusuf

Kalla era. SOEs should be managed professionally and kept away from politicization, but the political reality

speaks differently. SOEs continue to be '' plunder '' political parties that place their people in these publicly-

owned enterprises. BUMN is the target of corruption by its directors who deliberately violate the principles

of the Business Management Rule for personal or group benefit. These problems and challenges must be

solved by civil society and the state if the BUMN wants to develop as a strong, credible, and advanced state

corporation for the benefit of the people.

1 INTRODUCTION

The Indonesian BUMN (State-Owned Enterprises-

SOEs) performance must continue to be highlighted

and criticized because there are indications that SOEs

are spoiled by politicians and political parties in

power.

In fact, in the era of President Joko Widodo, SOEs

Minister Rini M Soemarno once threw a discourse to

make SOEs super holding, like Singapore's Temasek

or Malaysia's Khazanah (Kompas, 2016)

Along with the establishment of SOEs super

holding, Rini said she would remove the SOE

Ministry. Rini's statement instantly invited the

reaction of the DPR and economists as well as being

controversial. If we look at the legal umbrella, the

Ministry of BUMN can indeed be dissolved. Because

according to Law Number 39 the Year 2008, there are

only three ministries that cannot be dissolved, namely

the Ministry of the Interior, the Ministry of Foreign

Affairs, and the Ministry of Defense.(Kompas, 2016)

But the statement of State Minister for State

Enterprises Rini could clearly upset various circles.

The lack of a clear vision of the State Minister for

State Enterprises Rini created chaos in the relations

system. It is not clear how the relationship between

SOE management and shareholders is and who the

SOE shareholder is, the state, or the government. This

must be addressed first. As long as the shareholders

are not right, SOEs will always be wrong forever.

2 DISCUSSION

The Corruption Criminal Act (UU Tindak pidana

korupsi-UU Tipikor) emphasizes that state finances

are state assets in any form, separated / not separated,

including all parts of state assets, rights, and

obligations. The provisions stipulate that as long as

there is a real loss (actual loss) to SOEs, then it is

considered to have harmed state finances. Directors

can be held accountable and can be charged with

committing criminal acts of corruption.

In this case, considering that BUMN is not only a

state organizer, it is also an economic and market

participant, which has the function and duty to

provide welfare for the community, then it does not

necessarily become an absolute element for a BUMN

Sahrasad, H. and Ansari, T.

BUMN, Politics, and Corruption in the Reformasi Era: A Political Economy Reﬂection.

DOI: 10.5220/0009400300900095

In Proceedings of the 1st International Conference on Anti-Corruption and Integrity (ICOACI 2019), pages 90-95

ISBN: 978-989-758-461-9

Director who has made policies that do not benefit

SOE corporations This can be considered as making

a loss to the state

Although "Business Judgment Rule" and "good

corporate governance" have been enforced, there has

been widespread corruption in SOEs, where a number

of SOEs have been gnawed by corruption and

suffered huge losses, making SOEs in the spotlight of

civil society and the media in terms of performance

and BUMN performance in our country.

According to Azyumardi Azra, it is certain that

corruption is one of the main problems facing the

nation-state and the Indonesian government in

particular. For 20 years, Indonesia has experienced

democratization, which can be a way to create good

governance. However, there are no signs that

corruption will decrease significantly. According to

The Borgen Project records, in 2018, corruption in

Indonesia will cost the country 401.45 million US

dollars. That figure is down 55.4 million US dollars

compared to 2017, one of them thanks to the KPK's

steps to arrest public officials and private parties

through arrest operations (Kompas, 8 Agustus 2019).

SOEs have so far claimed to have carried out

reforms and strategic changes by adapting to the

structure and culture of the organization, with

organizational improvement primarily linked to a

fundamental overhaul of organizational structures

that are able to adapt and adopt innovations that

emerge from the external environment (Fitiningrum,

2006)

Reforms in SOEs are in line with the

government's steps to reform the state administration,

which not only improves the organizational structure

but also includes improving the behavior of the

people involved in it. Jose V. Abueva, stated that the

reform of state administration is an emphasis on

changes in institutional and behavioral aspects

(Caidaen, 1991)

It must be admitted, in the current era of reform

and democracy, one of the business sectors that has

been caught in a network of corruption is BUMN.

State-Owned Enterprises (SOEs) have again become

a field of corruption for high-ranking officials. The

Corruption Eradication Commission (KPK) has

named PT PAL President Director Muhammad

Firmansyah Arifin as a suspect receiving bribes

related to the sale of ships to the Philippines.

In addition to Firmansyah, the KPK also set PT

PAL Treasury General Manager Arif Cahyana and PT

PAL Finance Director Saiful Anwar as suspects in the

same case. This case seems to make a long list of SOE

officials caught in the vortex of high-level bribery

cases involving cross-border states. While the arrest

of PT Angkasa Pura II Finance Director Andra Y

Agussalam in the OTT held by the KPK further

increased the length of BUMN officials involved in

corruption, this case has happened for the umpteenth

time since Rini Soemarno has served as Minister of

BUMN since 2014. Andra received nearly Rp1

billion in money to smooth the project designation at

PT Industri Telekomunikasi Indonesia or PT INTI

(Persero). The party who gave the money named

Taswin Nur noted he was only as staff at PT INTI.

However, the KPK believes there are officials behind

Taswin.

Previously, the directors of state-owned

enterprises that have assumed the status of corruption

suspects and handled by the KPK include: Emirsyah

Satar (former Director of Garuda Indonesia), RJ Lino

(former Director of PT Pelindo II), Managing

Director of PT PAL Indonesia Firmansyah Arifin,

Managing Director of PLN Sofyan Basir and

Managing Director PT Asuransi Jasindo Budi

Tjahjono and so on .. This bad record seems to ordain,

governance and supervision are still not in order

within our SOE. In addition, this bad report card also

seems to indicate that this country is still unable to

learn from previous experience. So, the number of

BUMN officials caught in bribery cases, does this

really emphasize that SOEs are indeed a field of

corruption? If it is true, what is the effort to improve

governance and oversight of officials in the SOE

environment? What exactly is the root cause of all

this?

It is feared that corruption in SOEs has become

entrenched, as is corruption in the executive,

legislative, and judiciary institutions, and it is like a

scourge that worries and scares the public. In the New

Order era, SOEs were characterized by chronic

corruption, and in the reform era, SOEs became a

cash cow and a severe arena of structural corruption.

In 2018, ICW revealed that there was a state loss

of Rp 1.3 trillion from corruption cases that occurred

in 19 BUMNs in Indonesia. Corruption caused the

loss of 24 state-owned enterprises in the first semester

of 2017, then in 2018 and 2019. In terms of state

losses, corruption in state-owned enterprises was the

most detrimental to the state, with Rp 3.1 trillion from

19 corruption cases. Corruption in SOEs even

ensnared the highest operational position in SOEs,

namely the president director (president). On July 1,

2019, the president director of BUMN Perum Jasa

Tirta II was named a suspect and banned from going

abroad (Beritasatu, 2019)

In another case, in the era of President Joko

Widodo, PT Krakatau Steel (KRAS Persero) Tbk.

Must suffer a net loss of US $ 320.02 million

BUMN, Politics, and Corruption in the Reformasi Era: A Political Economy Reﬂection

equivalent to Rp4.41 trillion (exchange rate of

Rp13,795 per US dollar) in 2015, swelling 117% of

the 2014 loss in the era of President Susilo Bambang

Yudhoyono (SBY) around the US $ 147.11 million.

Based on the company's financial report (12/3/2016),

it was mentioned that the revenue of the issuer with

the KRAS share code also collapsed 29.28% to the

US $ 1.32 billion from the previous US $ 1.86 billion.

Krakatau Steel's (KRAS) operating loss in 2015

sharply swelled 160.5% to the US $ 183.54 million

from the US $ 70.85 million. However, the

performance was helped by skyrocketing foreign

exchange gains of 995% to the US $ 52.18 million

from the US $ 4.7 million. However, the loss before

tax KRAS still swelled 78.9% to the US $ 327.45

million from the US $ 182.98 million. The current

year's loss also swelled 111.76% to the US $ 326.51

million from the previous US $ 154.18 million.

(Harian Bisnis Indonesia dan Kompas, 2016)

Related to the issue of corruption, in 2018, the

Corruption Eradication Commission (KPK) set the

State-Owned Enterprises (SOE) company PT Nindya

Karya and the private company PT Tuah Sejati as

suspects in suspected criminal acts of corruption.

Both state-owned companies became suspects in the

alleged development corruption Unloaded piers in the

Aceh Sabang Free Trade Zone and Free Port area

financed by the 2006-2011 National Budget.

This alleged corruption resulted in state losses of

around Rp313 billion. "As part of efforts to maximize

asset recovery, investigators have blocked PT NK

accounts with a value of around Rp44 billion," said

KPK spokesman Febri Diansyah. The money in the

account was transferred to the KPK holding account

for the purpose of handling the case.

Regionally-owned enterprises (BUMD)

throughout Indonesia had assets of Rp343.118 trillion

in 2011. Of these, around Rp310.716 trillion (90.6

percent) were still controlled by the Regional

Development Bank (BPD). 10% average BUMN

profit to total state revenue while the average BUMN

profit to the PNBP ratio is 10%.

The government has annually provided a subsidy

of Rp 1,600 trillion, and there is also the participation

of state capital for SOEs of Rp 10 trillion (statement

VII Member of the Supreme Audit Board (BPK),

Bahrullah Akbar 28 October 2013). There are a

number of cases of indications of corruption in 16

SOEs that have the potential to cause state losses of

Rp2.63 trillion and the US $ 9.97 million, which was

reported by the Ministry of SOEs in March 2005.

Based on data from the Office of the State Minister of

SOEs (2005), indications of alleged corruption

occurred in 16 BUMN, namely: BRI, Indofarma,

PGN, PT Angkasa Pura I, PT Jakarta International

Container Terminal, PT Pelindo III, PT Pupuk Kaltim

Tbk, PT Sungai Sungai and Crossing Transportation,

PLN, PT Asuransi Jiwasraya, PT Djakarta Lloyd, PT

Pelindo II , PT Rajawali Nusantara Indonesia (RNI).

Of the 16 SOEs, the four SOEs are no longer listed in

the final list, namely: RRI, TVRI, Bank Mandiri, and

BNI. The reason is that the BNI and Mandiri cases

have been transferred to the AGO. So that the

remaining 12 SOEs will be increased by one, namely

PT JICT. In total, there were 13 corruption cases in

2005 alone.

In practice, many BUMNs have suffered losses,

and the proof is that in the Jokowi era 2014-2019,

there were 24 companies under the auspices of the

Ministry of State-Owned Enterprises (BUMN)

suffered losses. SOE Minister Rini Soemarno failed,

and Jokowi's image was hit with a crucial impact

because the failure of the BUMN Minister tarnished

the credibility of the Jokowi government.

SOEs Minister Rini Soemarno is considered the

most responsible person for the losses experienced by

24 state-owned companies. Rini was urged to resign

because she was considered a failure to lead the

Ministry of SOEs.

Analysts assess, Rini failed to foster and improve

the performance of SOEs, causing losses to 24 state-

owned enterprises in the first semester of 2017, then

in 2018 and 2019. The loss of 24 BUMNs in the first

semester of 2017 amounted to Rp 5.852 trillion. This

indicates that there has been a failure in fostering the

minister of BUMN. "So we urge State Minister for

State-Owned Enterprises Rini Soemarno legowo to

resign," said Chairperson of the Executive Board of

the Indonesian Muslim Students Federation

(FEMMI) Abdullah Amas in his demonstration

protesting State-Owned Enterprises Minister Rini

Soemarno in Jakarta. (Konfrontasi.com, 2019)

It must be admitted, in the era of President

Jokowi, the concept of forming a super holding

Minister for State-Owned Enterprises (BUMN) Rini

Mariani Soemarno is unclear.

At least Rini's two plans have no clear vision.

First, the acquisition of PT Perusahaan Gas Negara

(Persero) Tbk by PT Pertamina (Persero). And

second, the consolidation of Islamic banking.

In the case of PGN, PGN, which has gone public,

is relatively more open, transparent, and can be

monitored, compared to Pertamina, which in the past

had a dark record indicated by the oil and gas mafia.

Although Pertamina's subsidiary, Petral, has been

liquidated, various groups find it strange that PGN

must be annexed by Pertamina. If the goal is the

synergy of energy SOEs, then the NUMN State

ICOACI 2019 - International Conference on Anti-Corruption and Integrity

Minister should only issue regulations for the gas

industry. Because the two SOEs also already have

their own gas infrastructure. Regarding BUMN

banking holding plans, it is odd that only Islamic

banking will be consolidated. In fact, the Islamic

banking market share is only two percent of the total

banking market.

Faisal Basri reminded that there is an oil and gas

mafia in Pertamina because it has not yet gone public,

so it is easy to be looted. However, PGN is more

difficult to loot because it went public. (Kompas,

2016)

In another case, in the era of President Joko

Widodo, PT Krakatau Steel (KRAS Persero) Tbk.

Must suffer a net loss of US $ 320.02 million

equivalent to Rp4.41 trillion (exchange rate of

Rp13,795 per US dollar) in 2015, swelling 117% of

the 2014 loss in the era of President Susilo Bambang

Yudhoyono (SBY) around the US $ 147.11 million.

Based on the company's financial report

(12/3/2016), it was mentioned that the revenue of the

issuer with the KRAS share code also collapsed

29.28% to the US $ 1.32 billion from the previous US

$ 1.86 billion. Krakatau Steel's (KRAS) operating

loss in 2015 sharply swelled 160.5% to the US $

183.54 million from the US $ 70.85 million.

However, the performance was helped by

skyrocketing foreign exchange gains of 995% to the

US $ 52.18 million from the US $ 4.7 million.

However, the loss before tax KRAS still swelled

78.9% to the US $ 327.45 million from the US $

182.98 million. The current year's loss also swelled

111.76% to the US $ 326.51 million from the

previous US $ 154.18 million. (Harian Bisnis

Indonesia dan Kompas, 2016)

Seeing the KRAS phenomenon above, there is no

need to be surprised and surprised. Because in this

reform era, as if history repeats itself, the political

grip of Suharto's New Order era, has again occurred

in the reform era. Both the era of President Gus Dur

and President Megawati Sukarnoputri, even up to the

era of SBY-Boediono to Joko Widodo now.

In the post-BJ BJ Habibie era, it must be

acknowledged that the existing SOEs, including Bank

Mandiri, Pertamina, Indosat, Telkom, and so on, have

become a struggle for political forces. The political-

economic competition found "reincarnation" infertile

land. 'namely BUMN and bureaucracy such as Bank

Mandiri, Social Security, BNI, Telkom, BNI, Indosat,

and so on. (Herdi Sahrasad dan Al Chaidar, 2000).

As a large SOE, Bank Mandiri and almost all

SOEs continue to be in the public spotlight due to the

secret politicization (secret) by the ruling parties in

the government of Gus Dur-Megawati and the Mega-

Hamzah coalition until the SBY-Boediono era.

In the eyes of the grassroots who have been

victims of the actions and rivalry of the political and

economic elite to date, widespread the notion that the

hostile political elites and economic elites,

conglomerates, and state elites whose KKN, along

with their ranks seem unwilling to assume

responsibility. They seem comfortable in the upper

layers of the Indonesian political economy pyramid

without feeling guilty. While the corruptors and

officials who break the law seem untouchable and too

much power. While law enforcement is not carried

out firmly and impartially, it even seems that the rule

of law promised by the ruling government is only at

the stage of rhetoric. (Herdi Sahrasad, 2001).

In the era of Gus Dur and Mega-Hamzah,

politicians from the Indonesian Democratic Party of

Struggle, the Golkar Party, PAN, PKB, PPP and so

on, in coalition or competition, competed for

important positions with SOEs, including at Bank

Mandiri, which was the subject of this book. Parties

put "people" in wet institutions where Gus Dur,

President Megawati PDI-P, PAN, PKB, and the

Golkar Party, as influential political forces, tried to

accommodate conflicting aspirations, by building on

principles " mutual understanding "through

compromise commonly known as" cattle trade

politics." (Herdi Sahrasad, 2001)

Some of the state-owned enterprises were losing

money and being corrupt. While the absence of a

strong vision makes it difficult for state-owned

enterprises to progress because there is no clear

direction to go to. In addition to being too numerous,

SOEs are also scattered, inefficient, and become cash

cows for every ruling government.

The absence of a vision and concept agreed upon

with all elements of the Indonesian nation has made

the management of state-owned enterprises (BUMN)

never independent and professional, always in the

bondage of power relations that hinder and damage

performance.(

This opinion was raised in a discussion

held by the Public Policy Observer Institute (LPKP)

in Jakarta, (23/3/2005). The discussion themed

"Highlighting the Performance of SOEs as Business

Entities" presented speakers at the University of

Indonesia Faculty of Economics (FE) lecturer Faisal

Basri MA, FE Gadjah Mada University Revrisond

Baswir MBA lecturer, and DPR member Dradjad

Wibowo Ph.D)

We do not have a concept that is mutually agreed

upon. As a result, any step taken by every government

in power over SOEs will always be blamed.

BUMN, Politics, and Corruption in the Reformasi Era: A Political Economy Reﬂection

While the absence of this vision is biased, whether

SOEs are owned by the state or the government in

power. It should refer to its name, BUMN is the

property of the state. However, in reality, BUMN is

controlled by the ruling government. As a result, each

time it changes, the new authority will also replace

the directors and commissioners of the BUMN.

The absence of this vision creates chaos in the

relations system. It is not clear how the relationship

between SOE management and shareholders is and

who the SOE shareholder is the state, or the

government. This must be addressed first. As long as

the shareholders are not right, SOEs will always be

wrong forever.

There was an error in approaching assessing the

performance of SOEs so far, namely when the

performance of SOEs was assessed with a neoliberal

approach, a paradigm that has nothing to do with the

paradigm of economic democracy (Article 33 of the

1945 Constitution) that underlies the establishment of

SOEs.

According to Kompas notes, in 2003, 10 SOEs

dominated the total losses suffered by state-owned

companies under the SOE State Ministry. Of the 157

existing SOEs, as many as 47 SOEs suffered losses,

with a total loss of Rp 6.08 trillion. Of the total loss,

84.4 percent of them or Rp 5.13 trillion came from 10

SOEs alone.

The ten SOEs that dominated the total losses were

PLN with losses of Rp 3.558 trillion or 58.52 percent

of the total losses of 47 BUMN. Following the

Indonesian Trading Company with a loss of Rp

418,224 billion, Pelni Rp 382,336 billion, PANN

Multifinance Rp 152,258 billion, Indofarma Rp

129,570 billion, Nusantara Clothing Industry Rp

114.777 billion, Aceh Kraft Paper Rp 108.444 billion,

PT Perkebunan Nusantara II Rp 96.166 billion,

Inhutani I Rp. 90,972 billion, and Cipto

Mangunkusumo (Prognosa) Hospital Rp. 81,221

billion.

Some BUMN has been privatized. However,

corruption also hit the privatization program. In the

matter of privatization (remember the case of Indosat,

BCA, Telkom, and so on), according to IMF and

World Bank recommendations - acute corruption is

expected. According to economist Nobel prize winner

Joseph Stiglitz, privatization in Southeast Asia,

especially Indonesia, turned out to be generally

wrong and inconsequential, malpractice, and

miserable people. In the case of privatization, the

scent of KKN has stung the executive and legislative

branches. Even though the divestment was carried out

neatly, and the KKN actions were attempted to be

hidden, it still felt the stench of our people. This

privatization deserves to be questioned-questionable

because of the climate of corruption-collusion-

nepotism and the absence of transparency that is still

strong, covering the landscape of the Habibie-Gus

Dur-Megawati administration in the past.

. Privatization can only work well in a conducive

business and political climate, where good

governance with elements of transparency and

accountability and honesty can be proven. As Josepf

Stiglitz said, privatization in the midst of a corrupt

government environment, as in the past President

Habibie-Gus Dur-Megawati era, would only increase

the personal income of officials and elites who were

powerful.

Instead of increasing efficiency and improving

management quality, privatization in the midst of a

corrupt government environment only adds to the

problems and burdens for the people. Stiglitz once

revealed: "I believe in privatization, but only if it

helps companies become more efficient and lower

prices for consumers."

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BUMN, Politics, and Corruption in the Reformasi Era: A Political Economy Reﬂection