New Regulations on State Enterprises

New Regulations on State Enterprises

The Government of Indonesia ("GOI") is continuing its policy of reforming state-owned enterprises (Badan Usaha Milik Negara or "BUMN"). Global competition requires that BUMNs should compete with the private sector. Since the 2003 enactment of Law No. 19 of 2003 Regarding State-owned Enterprises (the "BUMN Law"), many efforts have been made to tighten up the organization of BUMNs, including implementation of good corporate governance and a program to privatize and restructure BUMNs to make them financially sound and able to contribute more to the country. To make BUMNs more competitive, the BUMN Law reduced them to only two types: state-owned limited liability companies or Persero (with at least 51% state capital participation) and public service companies or Perum (which are entirely owned by the state). As a consequence, all departmental enterprises (Perusahaan Jawatan or Perjan) had to be converted to Persero or Perum.