Indonesian SOEs currently manage assets totaling Rp 10.4 trillion (around US$670 billion) and play strategic roles in critical sectors such as infrastructure, energy and transportation. However, legal uncertainties and governance challenges have hindered SOE growth and their ability to compete globally. The seminar aimed to identify concrete solutions to these challenges, emphasizing the importance of legal protection through the Business Judgment Rule (BJR) and governance improvements to enhance SOE flexibility and innovation in the face of competition.

The keynote speakers, Prof. Hikmahanto Juwana, SH, LL.M., PhD; Amien Sunaryadi, Ak. MPA.CISA; Dr. Oki Ramadhana, MBA; and Dr. Soebowo Musa, MBA, discussed how M&As could help SOEs expand operational scale and strengthen international competitiveness, though legal uncertainties remain a key obstacle.

Prof. Sari Wahyuni, M.Sc., Ph.D., president of the ISMS, and Dr. Ardan Ardiperdana, MBA, chair of the IAI, emphasized that the seminar's outcomes were expected to serve as the foundation for legal reform recommendations to accelerate the effective implementation of M&A strategies while protecting SOE decision-makers from unwarranted criminalization risks.

The “Building the Nation” discussion series, initiated by FEB UI, the ISMS and IAI, aims to foster interdisciplinary and professional collaboration to provide practical solutions supporting Indonesia’s sustainable economic development. Through appropriate governance and legal reforms, SOEs can increasingly serve as drivers of Indonesia's economic growth.

Optimizing M&A for SOE Growth

One primary strategy to enhance SOE competitiveness is through M&As. Through M&As, SOEs can expand market share, optimize resources and increase operational scale. Sectors such as banking and telecommunications in Indonesia have shown great potential for M&As; however, legal uncertainty often poses obstacles. Inconsistent regulations make SOE executives hesitant to make strategic decisions due to potential legal risks. Without legal certainty, both SOEs and private companies targeted for acquisition tend to avoid M&As, ultimately limiting SOE growth potential (Wijayati et al., 2021).

Additionally, several fundamental challenges in the legal framework affect M&A implementation, such as contradictions between Law No. 17/2003 on state finance and Law No. 19/2003 on SOEs regarding the interpretation of "separate state finances." Constitutional Court Ruling No. 48/PUU-XI/2013 further added uncertainty by stating that state assets invested in SOEs remain part of state finances.

Strengthening the Business Judgment Rule (BJR) in Indonesia

To protect SOE executives from undue criminalization, a robust BJR framework is essential. In countries like Australia, the BJR provides legal protection for executives who make business decisions in good faith and with due care, helping to alleviate concerns about criminal charges (Nicolson, Wilcock, & White, 2021). In Germany, the BJR helps mitigate hindsight bias, which often leads to criminal liability for executives when business decisions yield unfavorable outcomes (The ‘Business Judgment Rule’ and the problem of hindsight bias, 2016).

Clarifying protections for directors

For the BJR to be effective in Indonesia, a clear distinction is needed between errors in business decisions and criminal liability. This standard can be aligned with other jurisdictions, such as the United States and Germany, to reduce excessive prosecution risks and enable executives to make decisions without fearing personal legal repercussions.

Establishing standards for fiduciary duties and due diligence

Indonesia needs to establish clear standards for fiduciary duties and due diligence. These standards are aimed at protecting directors as long as they act in the best interests of the company, in accordance with international standards such as the Corporations Act in Australia (Tan & Associates, 2020).

Enhancing judicial understanding and consistent application of BJR

Comprehensive education on BJR principles for stakeholders, including judges, legal practitioners and executives, is crucial to ensure consistent application. For example, in Germany, intensive training for judges on the BJR has strengthened fair protection for executives, allowing them to focus on innovation without the risk of criminalization for good-faith business decisions. Consistent application of the BJR will strengthen a culture of measured risk-taking, enabling Indonesian SOEs to be more competitive in global markets.

Additionally, this educational program would ensure that the judiciary can clearly distinguish between unintentional strategic mistakes and deliberate criminal acts. This consistency gives executives strong legal assurance, enabling them to make strategic decisions in the company's best interest without undue concern over personal legal repercussions (Asian Development Bank, 2021).

Executives also need to understand BJR principles to know the limits of their legal responsibilities, allowing them to act confidently, knowing that good-faith, prudent decisions will be legally protected. This understanding encourages them to make bolder, strategic decisions, thereby promoting sustainable growth for SOEs.

Conclusion: The importance of collaboration, legal reform and follow-up for SOE growth

Close collaboration among regulators, SOE executives, academics and legal practitioners is a strong foundation for implementing effective and sustainable M&A strategies and legal reforms. Through this partnership, SOEs can overcome legal and governance barriers that hinder growth, enabling them to take innovative steps without undue risk of criminalization.

Legal reforms that strengthen the BJR framework and elevate fiduciary standards are an urgent need. With government policy support, these reforms will create a conducive business environment, support sustainable SOE growth and accelerate M&A implementation to enhance global competitiveness.

The seminar also outlined concrete follow-up plans, including risk mitigation, preparation and post-acquisition monitoring to ensure that each M&A delivers long-term value for SOEs and the Indonesian economy.

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