Law Number 16 of 2025 Introduces a New Direction for the Reform and Professionalization of State-Owned Enterprises
Summary
Law Number 16 of 2025 on the Fourth Amendment to Law Number 19 of 2003 on State-Owned Enterprises [Badan Usaha Milik Negara (BUMN)] (“Law 16/2025”) was enacted and took effect on its date of promulgation, on October 6, 2025. The primary objective of this law's issuance is to carry out an institutional transformation in SOE management.
This reform centers on the clear separation between the state's function as a regulator and supervisor and its function as a business manager (operator), with the objective of optimizing SOE performance, enhancing efficiency, and increasing contributions to the national economy sustainably.
Background and Context
The issuance of Law 16/2025 is based on several important considerations listed in the considerations section.
First, the state has a constitutional responsibility to control vital production branches that affect the livelihoods of the people for the greatest prosperity of the people, wherein SOEs function as an arm of the state to realize this objective.
Second, to optimize this role, a transformation in SOE management is required to be more effective, efficient, and business-oriented, without relinquishing the principles of state accountability and supervision. This transformation is deemed necessary so that SOEs can provide maximum contributions to the national economy and state revenue.
Third, the previous SOE Law was considered no longer fully aligned with current legal needs and economic challenges, thus necessitating adjustments to its substantive content to address these dynamics.
Comparison with Previous Regulations
Law 16/2025 fundamentally changes the institutional structure and management authority of SOEs that had been regulated since Law Number 19 of 2003 and its amendments.
The most significant change is the total separation between the state's function as a regulator (policymaker and supervisor) and its function as a business manager (operator), where previously both functions were consolidated under the figure of the Minister of SOEs.
| Aspect | Law 19/2003, Law 6/2023, and Law 1/2025 | Law 16/2025 |
| SOE Management Institution | Authority as regulator (policymaker and supervisor) and as state shareholder representative (operator) is consolidated under one institution, the Ministry of SOEs. The Minister acts as the General Meeting of Shareholders [Rapat Umum Pemegang Saham (RUPS)] for Limited Liability SOEs [Perseroan Terbatas (Persero)] and as the government's representative as the capital owner for Public Corporations [Perusahaan Umum (Perum)]. |
Authority is separated into two distinct entities:
|
| State Shareholding Structure | All state shares in SOEs are represented by the Minister of SOEs as the shareholder or capital owner. No distinction exists for special shares for regulatory vs. operator functions. |
The state shareholding structure is differentiated:
|
| Role of the Ministry of SOEs | Functions as the ministry organizing all government affairs in the SOE sector, from policy formulation and development to the exercise of shareholder rights. | The Ministry of SOEs will be dissolved. All duties, functions, personnel, and assets will be transferred to the newly formed BP BUMN. The nomenclature "Minister of SOEs" in all laws and regulations shall henceforth be interpreted as the "Head of BP BUMN". |
| Organs of Persero and Perum | The organs of a Limited Liability SOE (Persero) consist of the GMS, the Board of Directors, and the Board of Commissioners. The organs of a Public Corporation (Perum) consist of the Minister, the Board of Directors, and the Supervisory Board. The Minister of SOEs holds the highest authority in the GMS/as the capital owner. | The organs of a Persero remain the same, but the GMS role is held by the "Agency" as the majority shareholder (Series B) and the Head of BP BUMN as the Series A Dwiwarna shareholder. For a Perum, the organs consist of the Head of BP BUMN (as capital owner), the Board of Directors, and the Supervisory Board. |
| Appointment and Dismissal of Directors/Boards | The appointment and dismissal of the Board of Directors and the Board of Commissioners/Supervisory Board are conducted by the Minister of SOEs acting as the GMS or capital owner. | The appointment and dismissal of the Board of Directors and the Board of Commissioners/ Supervisory Board are conducted by the Series A Dwiwarna shareholder (Head of BP BUMN) with the approval of the President. |
Key Provisions
| Aspect of Regulation | Provision | Article |
| Definitions & New Institutions | Introduces new definitions for SOE management institutions: BP BUMN as the regulator, Daya Anagata Nusantara Investment Management Agency (the "Agency") as the operator, and the Investment Holding and Operational Holding as implementers under the Agency. | Article 1 |
| Affirmation of Series A Dwiwarna Share Ownership | The state holds 1% Series A Dwiwarna shares in every SOE through the Head of BP BUMN. These shares grant special rights (veto) to approve the GMS, propose agendas, access data, and appoint and dismiss the Board of Directors and Board of Commissioners/Supervisory Board. | Article 2 Paragraph (3), Article 4C |
| Establishment & Authority of BP BUMN (Regulator) | The President establishes BP BUMN, which is directly responsible to the President, to set general policies, governance, the SOE roadmap, assign tasks, and supervise SOE compliance. | Article 3A, Article 3B, Article 3C |
| Establishment & Authority of the "Agency" (Operator) | The President delegates SOE management authority to the "Agency," a legal entity 100% owned by the government aimed at optimizing SOE investments and operations. Its authority includes managing dividends to establishing holdings. | Article 3E, Article 3F |
| "Agency" Initial Capital | The "Agency's" capital is set at a minimum of IDR 1,000 trillion, which may be sourced from state capital injections (cash, state property, or shares) and other sources. | Article 3G |
| Legal Protection (Business Judgment Rule) | The Head of BP BUMN, as well as the organs and employees of the "Agency," cannot be held legally accountable for investment losses if they can prove they acted in good faith and with prudence. | Article 3Y |
| Establishment & Share Composition of Holdings | The "Agency" is required to establish an Investment Holding and an Operational Holding. The "Agency" becomes the sole shareholder (100%) in both holdings. | Article 3AB, Article 3AK |
| Professional Holding Board of Commissioners Composition | The Board of Commissioners of the Investment Holding is required to have at least 1 independent member of the Board of Commissioners from professional circles. | Article 3AH |
| Repeal of Article (Holding Share Structure) | Article 3AM is repealed. This article previously regulated the specific shareholding structure in the Operational Holding, where the State (through the Ministry of SOEs) held 1% Series A Dwiwarna shares, and the "Agency" held 99% Series B shares. | Point 22 (repealing Article 3AM) |
| State Capital Injection (PMN) Mechanism | Any State Capital Injection [Penyertaan Modal Negara (PMN)] originating from the State Budget (APBN) must be stipulated by a Government Regulation [Peraturan Pemerintah] and proposed by the Head of BP BUMN to obtain the approval of the DPR RI (House of Representatives). | Article 4A |
| Status of SOE Profit/Loss | It is affirmed that profits or losses experienced by an SOE constitute the profit or loss of the SOE itself, not a direct profit or loss of the state. | Article 4B |
| Repeal of Article (State Administrator Status) | Article 9G is repealed. This article previously affirmed that members of the Board of Directors, Board of Commissioners, and Supervisory Board of an SOE were not State Administrators. This repeal opens new interpretations regarding their legal status. | Point 26 (repealing Article 9G) |
| Transfer of Minister's Authority to Head of BP BUMN | All authorities of the Minister of SOEs under the previous regulation (acting as GMS, proposing the establishment of a Perum, appointing and dismissing directors/supervisory boards of a Perum) are fully transferred to the Head of BP BUMN. | Article 14, Article 27, Article 35, Article 39, Article 43B, Article 56 |
| Prohibition on Concurrent Positions for Ministers & Vice Ministers | The Board of Directors, Board of Commissioners, and Supervisory Board of SOEs are prohibited from holding other concurrent positions. The Elucidation explicitly affirms this prohibition also applies to ministers and vice ministers, as a follow-up to a Constitutional Court decision. | Elucidation of Article 15B, Elucidation of Article 27B, Elucidation of Article 43D, Elucidation of Article 56B; Article II |
| Mandatory Management Contracts | Members of the Board of Directors, Board of Commissioners, and Supervisory Board must sign a management contract and an integrity pact prior to appointment. | Article 15C, Article 27C, Article 43E, Article 56C |
| Management & Establishment of Asset Management SOEs | SOE assets may be transferred, encumbered, or collaborated on. This Law also provides a basis for the Head of BP BUMN to propose the establishment of a special asset management SOE to the President. | Article 62A, Article 62B |
| Write-offs and Discharge of Receivables | The process for the discharge of receivables (hapus tagih) that have been written-off (hapus buku) now requires the approval of the Head of BP BUMN (for Perum) and the "Agency" (for Persero). | Article 62E |
| SOE Corporate Actions | Proposals for major corporate actions such as Mergers, Consolidations, Acquisitions, or Spin-offs of SOEs are submitted by the Head of BP BUMN to the President to be stipulated through a Government Regulation. | Article 62I |
| Committees under the Boards | The Board of Commissioners or Supervisory Board must establish an audit committee and may establish other committees (nomination and remuneration committee, and risk management committee). | Article 70 |
| Financial Audit by BPK | It is explicitly reaffirmed that the Supreme Audit Agency [Badan Pemeriksa Keuangan (BPK)] is authorized to conduct financial audits of all SOEs for transparency and accountability. | Article 71 |
| SOE Restructuring & Rescue | Decisions on SOE restructuring (penyehatan) are determined by the Head of BP BUMN, while decisions on SOE rescue (bailout) are decided by a Rescue Committee led by the Head of BP BUMN with the Minister of Finance and technical ministers as members. | Article 72, Article 73A |
| Privatization Process by Head of BP BUMN | The Head of BP BUMN now leads the Privatization Committee and is tasked with preparing the annual privatization program and implementing the process. | Article 79, Article 81 |
| HR Policy & Gender Equality | SOE employees are determined based on employment agreements (not as Civil Servants) and may occupy leadership positions (Board of Directors, Board of Commissioners, Supervisory Board) based on the principle of gender equality. | Article 87 |
| Special Assignments & Government Funding | The Government may give special assignments to SOEs for public service obligation functions. If such an assignment is not financially viable, the government must provide funding. | Article 87C |
| Special Tax Treatment | Transactions involving the "Agency," the Investment Holding, the Operational Holding, entities thereunder, and third parties will be governed by special tax treatment through a Government Regulation. | Article 89A |
| Exemption for SOEs as Fiscal Instruments | The authorities delegated to BP BUMN and/or the Agency are excluded for SOEs designated as state fiscal instruments in accordance with statutory provisions. | Elucidation of Article 3A Paragraph (5) |
| Transitional Provisions: Dissolution & Personnel Transfer | The Ministry of SOEs is dissolved, and the ministry's employees are transferred to become employees of BP BUMN. The process of establishing BP BUMN must be completed no later than 3 months after this Law takes effect. | Article 93, Article 94C, Article 94E |
| Transfer of Dwiwarna Shares to the Agency | Regulates the obligation to transfer the ownership of 1% Series A Dwiwarna shares in the Investment Holding and Operational Holding to the "Agency" no later than 3 months after the Law takes effect. | Article 94F |
Conclusion
Law 16/2025 brings significant changes to the governance of SOEs in Indonesia. The core of the change lies in the adjustment of the institutional structure aimed at enhancing professionalism and management accountability. It regulates three key point:
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The clear separation of powers between BP BUMN as the regulator and the "Agency" as the operator, designed to eliminate potential conflicts of interest and clarify their respective functions.
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The establishment of a centralized asset management structure through the "Agency" and the Investment and Operational Holdings, indicating a shift towards an SOE management model more akin to a sovereign wealth fund (SWF) with a pure corporate approach.
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The dissolution of the Ministry of SOEs and its transformation into BP BUMN, a step that changes not only the nomenclature but also the entire bureaucratic ecosystem and decision-making related to SOEs.
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