A. Irmanputra Sidin, PhD in Constitutional Law/ Constitutional Lawyer
Jakarta, February, 21, 2025
All of that matter that I wrote at the previous part is the basis of philosophical, historical and constitutional reasoning. By these reasoning, we could understand the Indonesian Supreme Court when providing formal legal opinion (Fatwa Mahkamah Agung RI) to the Ministry of Finance of RI No WKMA/YUD/20/VIII/2006 Year 2006 Concerning SOEs Receivables August 16, 2006.
In the formal legal opinion Supreme Court described that Article 2 Law of the Republic of Indonesia Number 17 of 2003 on State Finances that stated State Finances, covers state assets/local assets which are… including of restricted/separated assets at the state enterprises/local enterprises;” not legally binding again since Law No. 19 of 2003 on SOEs (Law of SOEs) promulgated and turn into force. The legal reasoning behind this declaration of Supreme Court because In the article 1 (1) Law of SOEs states that ‘State-Owned Enterprises, hereinafter referred to as SOEs, means an enterprise which equity owned by the state either majority or entirely through direct equity participation deriving from the restricted (separated) state assets’. The law also states in Article 4(1) that the equity of SOEs constitutes and deriving from restricted state assets.
The elucidation of the Law on SOEs explains that ‘restricted’ refers to the restriction of state assets from the State Budget of Income and Expenditure (APBN) which are used for the state’s capital participation in SOEs. Furthermore the construction and management are no longer based on the State Budget system, however the construction and management is based on the principles of good corporate governance.
State Finances not covers again restricted/separated assets at the state enterprises/local enterprises. Why? Because SOEs is a corporate like Legend of Peugeot, the receivables of SOEs could not be considered as receivables of the State.
Aligned with Supreme Court Legal Opinion, the Indonesian Constitutional Court’s verdict No 77/PUU-IX/2011 states in its legal considerations that SOEs is a legal entity that own separated assets of the state assets. They have the authority to manage their assets and businesses including resolving the SOEs receivables such as SOEs banks, subject to corporate laws. Receivables of the SOEs are not state receivables, therefore its to be resolved by SOEs itself.
Therefore, we can conclude that the financial losses of SOEs, are not the state finances losses and do not automatically harm economic of state according to the Law of the Eradication of Criminal Acts of Corruption.
Additionally, the law of SOEs, as a product of the the people (House Representatives/DPR) never stated that the financial of the SOEs is the state finances, or the profit and losses of the SOEs is the profit and losses of the state finances.
Government Regulation (GR) of the Republic of Indonesia No. 79 of 2016 on Changes of GR No.44 of 2005 on the Mechanism of Participation and Administration of State Capital on SOEs and Limited Liability Companies states that state capital participation that originating from restricted state asset, through state owned shares in SOEs or other Limited Liability Companies/ corporation, is carried out by the central government without the mechanism of the state budget. The state assets that used as state capital participation in or other corporations are transformed into shares/capital of the state in the SOEs or other corporations and these capital automatically also transformed becomes assets of the SOEs or other corporations. All the ownership of shares/state capital on SOEs or corporations is recorded as long-term investment in accordance with the government’s presentation of ownership in SOEs or corporations.
Constitutional Intention
Since the people approved the proposal that the state should establish corporations as part of the market’s actors through the creation of the SOEs, the also noticed and anticipated the risk of financial losses. That is why, we found on Article 2 (b) Law No. 19 0f 2003 on SOEs, it is stated that the purpose and objective of the establishing SOEs is to gain profit.
This is a clear and expressive statement from the people when they created SOEs, and since they stated that to gain profit at the same time the people understood that the opposite of profit is loss and losses are inevitable. Furthermore the people realized about the financial losses, so It’s impossible if the people would create provisions in the Law of SOEs that the members of directors or commissioners would face criminal charges of corruption if the SOE’s generate financial losses, because it means that the SOEs losses is the state finances losses (even state finances losses caused by state administrator or civil servant as long as in good faith no criminal intent-mens rea can not be charges as criminal ). If this situation persists, no one would be interested in managing and advancing SOEs, like the early history of Homo Sapiens before the concept of corporations was established
It’s one of the reasons why members of directors and commissioners of SOEs actually are not considered state administrator, because they do not work based on State Financial Budget but rathe on the SOEs financial structure . The intention of establishment of SOEs to gain profit which is differs from the intention behind establishment of the state. This argument reflects the constitutional intention of the people when they created laws, and should be understood by all law enforcement officers, to prevent misinterpretation and misapplication. This misunderstanding not only violates individual constitutional rights, but also threatens the investments that Indonesia needs to advance the common welfare. This misapplication also delivered a message to the market about legal uncertainty in Indonesia.
Therefore, the new law of SOEs should states that state capital in SOEs that derived from participation of equity-whether majority or entirely- within the framework of establishing SOEs, constitutes the assets of the SOEs that are owned and responsibility by SOEs themselves. The consequences, any profit or losses which generated by SOEs are considered the profit or losses of the SOEs. Members of the Board of Directors, Board of Commissioners, and Board of Supervisor of SOEs are not considered state administrator, but if any of them such as usually member of the Board of Commissioners or Supervisors are are acting in their capacity as representative of the government, they are still state administrators.
Therefore all the extensive text provisions of the criminal corruption law that still existed including its interpretation and construction should not forcibly applied to SOEs again. Nevertheless I realize that the implementation of the new SOEs law, would face many challenges. This is because SOEs itself are sometimes easily used by incumbent political power to obtain political finances, and this is why true criminal charges such as fraud, and true corruption such as bribery, may be brought against the Boards.
Thank You..
*Featured photo, source : ANTARA News*
