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State-Owned Enterprises Law needs to be revised: expert

  • The Jakarta Post

    The Jakarta Post

Jakarta | Fri, March 4, 2016 | 09:10 am
State-Owned Enterprises Law needs to be revised: expert

The office of the State-Owned Enterprises (SOEs) Ministry is displayed in the picture. Constitutional law experts have said that the SOEs Law provides loopholes that leave it open for various interpretations and counter-productively disrupts the management of strategic sectors in Indonesia.(Kontan/Ahmad Fauzie)

The State-Owned Enterprises (SOEs) Law provides loopholes that leave it open for various interpretations and counterproductively disrupt the management of strategic sectors in Indonesia, constitutional law experts have said, urging it be revised to remove the problem.

Article 33 of the 1945 Constitution mentioned that branches of production that were essential to the state and affected the livelihood of the masses must be controlled by the state. However, confusion arose during of the implementation of the 2003 law about state-owned enterprises, law expert Satya Arinanto said.

'€œSince the Constitutional Court was formed [in August 2003], they started to give different interpretations about Article 33 in different cases, such as on cases related to the Electricity Law, the Water Resources Law, the Oil and Natural Gas Law, the Mineral and Coal Law, or the Shipping Law,'€ he said in a hearing with the House of Representative'€™s commission VI on Wednesday.

According to him, several interpretations that appeared on reading Article 33 were: the state shall control all natural resources, the state can only impose regulations and policies, or the state can only supervise.

Satya was involved in the expert team to amend 1945 Constitution during 1999 to 2002. '€œThe biggest question was whether we stayed with socialism or turned to capitalism. Eventually, we decided to use a combination of both systems,'€ he said.

Hence, the state still controlled all natural resources with the additional terms of '€œefficiency'€ and '€œfairness'€ put in the Constitution, he said. Unfortunately, SOEs often run businesses that contradicted these principles by running non-core businesses, ranging from hotels to hospital industries.

'€œSOEs should be working in public interest sectors, which indeed need the state'€™s presence. For example, intervention from third parties is not allowed in the defense industry,'€ said economist Ine Minara S. Ruky in the hearing.

Many SOEs, she continued, have privatized their ownership. It is possible to do, according to the law, but the state must hold dominant control, especially in the strategic industries.

However, this led to another interpretation saying that the assets SOEs held in their subsidiaries are not the state'€™s assets and therefore the Supreme Audit Agency (BPK) did not have the authority to audit them. This may lead a fraud and corruption in the companies.

'€œThe subsidiaries are not SOEs from a legal point of view. However, from an economic perspective, they are not detached in terms of the cash flow,'€ said Ine. '€œThis needs to be clarified in the revision of the law.'€ (vps/ags)(+)