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Preventing corruption in SOEs through fair competition
Fair competition serves as a natural deterrent to corruption by introducing higher levels of scrutiny.
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Workers wait for customers at a filling station of state-owned oil company Pertamina in Surabaya on March 4, 2025.
(AFP/Juni kriswanto)
S
tate-owned enterprises (SOEs) play a crucial role in driving the nation’s economy. These entities dominate strategic industries such as oil and gas, electricity and transportation, holding significant influence over public services and infrastructure development.
However, many SOEs, including the state-owned energy giant Pertamina, have faced serious corruption allegations that have cost the government and the people billions of dollars.
The root of corruption within SOEs often lies in their monopolistic nature, lack of transparency and limited market competition. When an enterprise dominates an industry without adequate checks and balances, opportunities for unethical practices increase.
Fair competition serves as a natural deterrent to corruption by introducing higher levels of scrutiny. Competitive industries are subject to external pressures from market players, regulators and the public, making it more difficult for corrupt activities to go unnoticed.
In contrast, when a company holds excessive control over a market, there is a greater likelihood that internal misconduct will persist undetected.
Pertamina’s control over the fuel import and distribution system has long raised concerns about monopolistic tendencies. Despite Indonesia theoretically opening the market to private competition, regulatory barriers and infrastructure constraints have given Pertamina a dominant advantage.
The company’s strong influence over pricing and procurement decisions has allowed corruption to flourish, as seen in the recent case.
