“If you cannot deliver results, get out.” — President Prabowo, April 28, 2025.
Those words weren’t just a reprimand. They were a signal: Indonesia has officially entered a new era of economic governance. On April 28, the President didn’t just threaten underperforming SOE directors — he declared war on mediocrity. And for the first time in history, 844 SOEs are now consolidated under a single capital command: Danantara Indonesia.
But the real question is: what now?
From Budget Bureaucracy to Capital Strategy
Four days before the President’s firestorm, we published a call for transformation: “From Budget Manager to Capital Architect”. That doctrine proposed a shift in how Indonesia governs its economy. No longer through spending quotas and bureaucratic cycles, but through capital allocation logic, GDP-multiplier metrics, and return-on-invested-capital (ROIC).
Now, with Danantara officially holding the keys to 844 SOEs, that doctrine must become action.
The Reality: Most SOEs Are Zombies
They consume budget without producing GDP returns.
According to the Indonesian Ministry of State-Owned Enterprises, as of 2023, only about 30% of Indonesia’s SOEs are considered financially healthy and contribute significantly to the economy. The remaining 70% either operate at a loss or survive on government bailouts and subsidies. In 2022 alone, the government allocated over IDR 70 trillion (approximately $4.8 billion USD) in capital injections to SOEs, many of which have failed to deliver commensurate returns to the state or the public.
They exist for political placements, not economic productivity.
A 2021 study by the World Bank found that excessive political interference and lack of merit-based appointments are among the top reasons for SOE underperformance globally. In Indonesia, the Ombudsman reported that political appointments remain prevalent, with over 40% of SOE board seats filled by individuals with political affiliations rather than professional qualifications.
They lack real incentives, accountability, or financial performance logic.
Globally, the OECD notes that SOEs often lack clear key performance indicators (KPIs) and are shielded from market discipline, leading to inefficiency and complacency. In Indonesia, only a handful of SOEs are listed on the stock exchange and subject to public scrutiny; the majority operate with minimal transparency and weak accountability mechanisms.
If we treat them all equally, we lose. If we defend them all, we stagnate.
This is where capital discipline must cut through legacy loyalty. The IMF warns that “zombie” SOEs can crowd out private investment, slow economic growth, and drain public resources. Countries that have restructured or privatized non-performing SOEs-such as Vietnam and China-have seen significant improvements in productivity and fiscal health.
The National Playbook: What Must Be Done
To transform these entities into engines of national power, the government must deploy a capital architect framework, not just good intentions. Here’s the roadmap:
1. Create Strategic Clusters
Group SOEs by function (Energy, Logistics, Digital, Manufacturing, Food, Finance). Each cluster must have its own CEO, P&L target, and sectoral strategy aligned to national goals.
- Indonesia’s Ministry of SOEs has already reduced SOEs from 142 to 108 since 2021, with plans to consolidate further into 6 core clusters (e.g., mining, healthcare, tourism) managed by two vice ministers.
- The ADB highlights that clustering improves supply-chain synergies and reduces redundancy. For example, Vietnam’s VinGroup leveraged cluster strategies to transform from a real estate firm into a tech-industrial conglomerate contributing 3% of national GDP.
2. Impose Capital Discipline
Every SOE must justify its existence through ROIC, GDP-multiplier impact, and cash flow generation. Dead weight must be merged, sold, or liquidated.
- Globally, SOEs with ROIC below 8% (the average cost of capital in emerging markets) destroy value. Indonesia’s SOE reforms aim to shut down or merge 33% of underperforming entities by 2025, freeing up IDR 45 trillion ($3.1B) in stranded capital.
- China’s SASAC liquidated 3,000 “zombie” SOEs between 2016–2020, boosting industrial profits by 34%.
3. Launch an Asset Monetization Blitz
SOEs hold trillions in underused land, buildings, and equipment. Monetize them through REITs, leasebacks, or capital recycling.
- Indonesia’s Pelindo (port operator) unlocked IDR 9.2 trillion ($630M) in 2022 by leasing underutilized warehouses to private logistics firms.
- India’s National Highways Authority raised $1.3B via toll-operate-transfer (TOT) models, recycling capital into new infrastructure.
4. Talent Overhaul
Replace politically appointed directors with performance-based leadership.
- Indonesia’s Ministry of SOEs introduced a merit-based mapping system in 2023, requiring candidates to pass competency tests aligned with cluster needs.
- Deloitte’s study of 100 SOE executives found that market-linked compensation (e.g., ESOPs for managers) improved productivity by 22% in reformed Chinese SOEs.
5. Danantara as the Capital Architect
Danantara must act like an activist investor-deploying capital only where there’s strategic return.
- Model after Singapore’s Temasek: 20% IRR targets for strategic sectors and divestment from non-core assets. Temasek’s portfolio grew from $10B to $382B in 30 years via this approach.
6. Public Accountability Dashboard
Publish a national SOE dashboard showing performance, capital deployed, and returns.
- The ADB recommends tracking three metrics: ROIC vs. cost of capital, job creation per IDR 1 trillion invested, and carbon footprint reduction.
- Malaysia’s MOF publishes real-time SOE debt ratios and subsidy dependency scores, cutting bailout requests by 40% since 2020.
This Is Not About Profit. This Is About Power.
We are not calling for privatization. We are calling for strategic state capitalism. The goal isn’t to turn SOEs into dividend machines. It’s to turn them into GDP engines. Into capital weapons. Into levers of geopolitical and domestic power.
This is how China built Huawei. This is how Temasek plays quietly. This is how Saudi uses PIF.
Indonesia can do it. But only if we drop the nostalgia.
Final Word to the President
Pak Prabowo,
Your threat to fire mediocre SOE directors was the right move. Now let’s go further. Let’s give them a framework. A capital doctrine. A clear scoreboard — one that tracks real performance.
This scoreboard should include metrics such as:
- Return on Invested Capital (ROIC) against a benchmark cost of capital
- GDP multiplier effect per IDR 1 trillion invested
- Cash flow sustainability and debt-to-equity ratios
- Operational efficiency (e.g., revenue per employee, asset turnover)
- Job creation and local economic stimulation
- Environmental impact (e.g., carbon footprint per project)
- Subsidy dependency index (how much government support is required for survival)
Only by publishing these metrics and holding each SOE cluster accountable can we shift from slogans to systems — and from policy to performance.
Because this isn’t just about managing companies. This is about building a nation through capital. The Capital Architect era has officially begun.
Let’s make it irreversible.