The Indonesian Government has enacted Law No. 16 of 2025 on the Fourth Amendment to Law No. 19 of 2003 on State-Owned Enterprises (“Fourth Amendment”). The initial Law No. 19 of 2003 established the basic structure for the management of State-Owned Enterprises (“SOE”) and positioned the Minister of SOEs in a dual role as both regulator and shareholder of SOEs. Earlier this year, through the third amendment of the SOE Law, the government introduced Daya Anagata Nusantara Investment Management Agency (“BPI Danantara”), separating the State's operational and investment functions, allowing professional management of strategic assets. The Fourth Amendment now completes this separation by designating SOE Regulatory Agency (Badan Pengaturan BUMN or “BP BUMN”) as the sole regulator and supervisor.

Key Changes

1. Establishment of the BP BUMN

The Ministry of SOE has officially been transformed into BP BUMN, led by the Head of BP BUMN acting as the representative of the Central Government and the regulator of SOEs. BP BUMN is responsible for formulating, regulating, supervising, coordinating, and overseeing the implementation of SOE management policies. This institutional change addresses the long-standing issue of the Minister’s dual function by clearly separating the State’s roles into a dedicated regulator (BP BUMN) and an investment operator (BPI Danantara).

The Fourth Amendment maintains the change introduced by the third amendment of the SOE Law, which shifted from the earlier approach where the State held a single special Dwiwarna share to a standardized requirement that the State must hold 1% Series A Dwiwarna shares, ensuring a clear statutory minimum for State ownership. It further clarifies that this 1% is exercised through the Head of BP BUMN, while the remaining 99% Series B shares are held by BPI Danantara. Despite its small percentage, the Series A Dwiwarna share grants the State veto rights over strategic matters, including board appointments and dismissals, major corporate actions, and amendments to the Articles of Association, ensuring continued State control. In addition, dividends from this special share may now be managed directly by BP BUMN, subject to approval from the President, ensuring that their use remains aligned with aligned with national policy priorities and Presidential oversight.

2. Strengthening of Good Corporate Governance

The SOE Law reinforces good corporate governance in SOEs by ensuring greater independence and accountability. It prohibits Ministers and Vice Ministers from serving on SOE boards to prevent conflicts of interest and maintain a clear separation between regulatory and operational functions. It also removes the previous provision stating that SOE directors, commissioners, and supervisory board members are not state officials, reaffirming their legal accountability.

In addition, the amendment also opens the possibility for foreign nationals to serve as directors in State Share Companies (Perusahaan Perseroan or “Persero”). While the general rule still requires directors to be Indonesian citizens, BP BUMN is now allowed to waive this requirement to provide Persero with more flexibility when specific expertise is needed. This exemption applies only to Persero, and does not extend to Public Company (Perusahaan Umum) SOEs.

3. Audit Authority of the Audit Board of Indonesia

The Fourth Amendment also expands the Audit Board of Indonesia’s (Badan Pemeriksa Keuangan or “BPK”) authority over SOEs by placing SOEs within the State’s financial accountability framework. Previously, BPK could only audit SOEs for specific purposes and only when requested by the House of Representatives. Under the new provision, BPK may carry out audits based on its general mandate under the national state-finance framework and the applicable state audit standards, without requiring a request from the House of Representatives. This change enables BPK to conduct independent and regular financial audits of SOEs, ensuring stronger and more consistent oversight.

Conclusion

The SOE Law represents a major milestone in the reform of Indonesia’s SOE governance framework. By establishing BP BUMN, enhancing governance standards, and expanding BPK’s audit authority, the government seeks to strengthen institutional accountability and transparency within SOEs. These changes are expected to promote more professional management, reduce potential conflicts of interest, and align Indonesia’s SOE governance with international best practices.

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