A. Irmanputra Sidin, PhD in Constitutional Law/ Constitutional Lawyer
Jakarta, February, 21, 2025
==> Part 1
It is not only a matter of the laws that I mentioned before, more broadly, Article 1 (2) Law of RI No. 31 of 1999 on Eradication of the Criminal Act Of Corruption states that Civil servants include:‘people receiving salaries or wages from the state finance or regional finance; people receiving salaries from a corporation that receives assistance from state finance or regional finance, or people receiving salaries or wages from other corporations which use capital or facilities from the state or from the public.
As a state administrator or civil servants, in their daily works should be based on the principles of the government administration. Moreover, there is a different spirit as a state administrator, or civil servants, their daily work focuses on serving and protecting through the legislative, executive and judicial branch. On the other hand, to be element of SOEs such as Board of Directors or Commissioners or employee the daily work paradigm should be built around entrepreneurship, aimed at generating financial profit, increasing revenue and producing goods and services.
SOEs, are not created to ‘execute state function’ but ‘execute market function’. State function are rooted in executive, legislative and judicial power which are publicly and legally binding. Meanwhile, SOEs as a corporations, do not carry out state functions that are publicly and legally binding, because they depend on the market. Even though they can produce goods and services abundantly, they have no legal basis to force anyone inside or outside the country to distribute or consume their product. This is the difference between the market and the state. SOEs are created to compete, to ignite even to beat the market. That is why the treatment of human resources in SOEs should differ in terms of law enforcement concerning of the prevention and eradication of corruption.
Furthermore, the misconception surrounding the status of state administrators, is also rooted in the equity of SOEs whether majority or entirely owned by the state and the fact that the equity of SOEs originating from state finances. As a further consequences that the financial losses of SOEs are considered “state finances losses or may harm economic of state”. They could be criminally charged with corruption for damaging finance of state, and members of he Board of Directors potentially leading to imprisonment.
Why? Because, according to the definition of corruption in Law No. 31 of 1999 on the Eradication of Criminal Acts of Corruption, as amended by Law No. 20 of 2001 on the Changes in Law No. 31 of 1999, it refers to unlawfully acts, self-enrich or another person or a corporation that could harm the state finances or economic of state.
The phrase “could harm the state finances or economic of state” is the pave way to the criminal law enforcement regarding corruption. They could enter to evaluate all corporate actions of SOEs, and the judge from judicial branch of state will make final decision guilty or not guilty? How come profit or losses in the market decides by the judge in the judicial branch?
The Assets of SOEs
We have to start with the easy story of the establishment of the SOEs, when the first time, people agreed to create SOEs as the hands of the state in the market. All the people realized that it meant they would face an“iron law” in the market, profit or losses are “a roommate” in the market.
This means that, the assets of the state which was turn to equity both majority or entirely to the SOEs, as corporation, so the assets of the state turn to the assets of the SOEs. When SOEs generate profit it means the profit of the SOEs when losses it means the losses of SOEs, This is the story of universal human beings consent (the story of Legend of Peugeut above in this article). This legal fiction is recognized by universal constitutional law, because with corporations such as SOEs, President/Chief of State can not be sue or lead to imprisonment if the SOEs’s goods and services turn into damage or broken or disfunction. Because President hold the power of the finance of state that is source equity of SOEs both majority or entirely shareholder. So inversely, all the profit of the SOEs is the profit of SOEs and all the losses of the SOEs is the losses of the SOEs.
The market has natural principle that all human beings recognize- there are profit and losses. The market including the state, individuals and corporations. Corporations are autonomous legal entities, much like individuals. They own assets , equity, liabilities, receivables, profit and losses and cannot claim each other’s assets even though individuals or the state may participate capital in the equity of the corporations.
That is why as legal entity, the state has designated about the scope of state finances in the constitution confined in the definition of State Budget of Income and Expenditure in article 23 Indonesian Constitution (UUD 1945) explicitly and clearly describes : ‘the state budget of income and expenditure as a form of the management of state finances shall be stipulated every year by a law and A bill on the state budget shall be submitted by the President for joint discussion with the People’s Representative Council by having regard to the consideration of Regional Representative Council.
Why is the scope of state finances confined to the State Budget of Income and Expenditure, because the people recognize that the state assets are unlimited including all the natural resources, human resources and other intangible and tangible assets.
This provisions is the constitutional framework of the state finances, which are confine to the State Budget. Why the people created this provisions because people realized, in the future of the nations may choose to establish corporations such as SOEs or other legal entities, to manage the assets, or wealth of the nations that are not included in the State Budget. This is the intent of the constitution not only in Indonesia but in nations around the world. This is why, we found a universal constitutional foundation for the financial of SOEs as corporation not financial of the State.
To be continue..
Thank You..
