Challenges in State-Owned Enterprise Consolidation
Following the issuance of Government Regulation Number 3rypt 38 of 2026 regarding the Management of SOEs in late August 2026, efforts to consolidate State-Owned Enterprises (SOEs) have gained a clearer path forward. Under this regulation, ‘cut loss’ and write-offs are permitted, meaning the SOE consolidation process is expected to be completed before the year ends.
This is the hope expressed by the Head of the State-Owned Enterprise Regulatory Agency (BP BUMN), Dony Oskaria, after attending a closed-door meeting led by President Prabowo Subianto at the Presidential Palace Complex, Jakarta, on Wednesday (30/9/2026).
As explained by Dony, SOE consolidation was previously hindered because the processes of ‘cut loss’ and write-offs lacked a clear legal umbrella as a reference. However, following the publication of Government Regulation Number 38 of 2026, the consolidation process can proceed.
Nevertheless, the permission to perform ‘cut loss’ and write-offs does not negate the fact that these measures are necessitated by underlying issues. When several SOEs are merged while in an unhealthy and loss-making condition, those losses remain losses for the SOEs; therefore, corporate governance must be improved moving forward.
SOE consolidation—whether through the formation of holdings, sub-holdings, mergers, or the liquidation of unproductive companies—is fundamentally aimed at creating greater economies of scale, reducing internal bureaucracy, and eliminating business cannibalism between state-owned entities.
The government has recognised that many SOEs and their subsidiaries have been inefficient. Not all SOEs should be maintained. In cases where an SOE’s performance continues to suffer losses, closing the business is a preferred option. Furthermore, the strategic importance of an SOE’s role must be a determining factor in its future.
The primary goal of SOE restructuring is to strengthen efficiency through operational optimisation and the elimination of unnecessary costs to increase productivity. Additionally, restructuring is expected to strengthen financial performance by reducing debt burdens and increasing company profits.
Another objective of SOE consolidation is to implement good governance by encouraging transparency and accountability in decision-making. Through restructuring, it is hoped that SOEs will become more resilient in adapting to external environmental changes, market threats, and various opportunities.
It is well known that SOEs serve as the backbone of the Indonesian economy. With SOE assets reaching thousands of trillions of rupiah, their role is not limited to being state-owned companies, but also as contributors to state revenue through dividends and taxes.
The problem is that the overly bloated SOE structure, with hundreds of subsidiaries and sub-subsidiaries overlapping, often triggers chronic inefficiency. In the context of global and domestic economic uncertainty, the step towards SOE consolidation is no longer merely an option, but an absolute necessity to strengthen national competitiveness.
The past habit of SOEs attempting to ‘do everything’ can no longer be continued. It is easy to imagine the consequences if each SOE develops subsidiaries outside its core business. A cement company might have a subsidiary in the hotel industry, a plantation company might venture into logistics, and almost every large SOE has its own construction or information technology business arm.
This fragmented business model creates unhealthy competition within the SOE family (intra-SOE competition) rather than focusing on competing against private or foreign competitors.
Through targeted SOE consolidation, the government aims to group SOEs into logical clusters focusing on their respective core businesses. When companies with similar business lines are united under a single holding umbrella, it will not only increase bargaining power but also make consolidated SOEs more efficient and better able to focus on product innovation.
Learning from experience, consolidated SOE entities with larger asset scales will undoubtedly find it easier to access cheap funding in both global and domestic capital markets. Joint procurement, standardised IT systems, and integrated supply chains are certain to significantly cut overlapping costs. Thus, instead of spending energy competing for the same domestic market, consolidated entities can allocate their resources toward research, development, and international market expansion.
While theoretically sound, executing proper SOE consolidation is not as easy as it sounds. There are two obstacles that will slow the pace of SOE consolidation.
First, the risk of corporate culture clashes. Many studies have proven that every SOE possesses a corporate culture ‘DNA’ shaped by its history, leadership style, and business portfolio.
Uniting SOEs that are accustomed to moving quickly in the commercial sector with SOEs that have rigid bureaucracies due to long-standing public service functions often triggers internal resistance. Sectoral ego, from top management to trade unions, often emerges due to fears of losing identity, reduction in facilities, or shifts in authority.
Second, the greatest issue that will undoubtedly arise in the SOE consolidation process is the risk of employee resistance. Experience has taught us that the issue that always arises in every merger or consolidation action is staff downsizing. The duplication of positions…