When Business Risk Is Criminalised
One night, the chief executive of a state-owned enterprise sat alone in his office. The office lights had dimmed. The city outside the window sank into silence.
Before him lay an investment proposal. Its value was hundreds of millions of dollars. If successful, the project could create thousands of jobs and strengthen Indonesia’s position in the global market. But his hand paused before signing. Not because the project was bad. Not because the risk was too great. It paused because of one sentence that kept looping in his head: “What if this is considered a loss to the state?”
He knew, in business, not every decision ends in success. Even in the energy industry, global statistics show about 35 percent exploration success and 65 percent failure to discover commercial reserves. That is not a crime. It is the natural law of business. But in Indonesia, failure can become a criminal case.
In many countries, a newly appointed director would be prosecuted for fraud, kickbacks, or conflict of interest. If decisions are made professionally and rationally, failure is not corruption. Yet in this country, the spectre of “loss to the state” often halts innovation before it begins.
The director finally closed the proposal. An opportunity was lost. And that night, what was lost was not only a project; what was lost was the courage and economic innovation within Indonesia’s state-owned enterprises.
Elsewhere, a global investor is considering an energy project in Indonesia. The investor sees a large market potential. He sees promising resource reserves. But before investing, he must navigate a labyrinth of bureaucracy. He must deal with:
Ministry of Energy and Mineral Resources
Special Task Force for Upstream Oil and Gas Activities (SKK Migas)
Ministry of Environment and Forestry
Ministry of Agrarian Affairs and Spatial Planning and the National Land Agency
Ministry of Agriculture
Ministry of Transport
Ministry of Manpower
Ministry of Investment
Provincial Government
Regency or City Government
Each door has its own forms. Each desk its own signature. The investor then asks one simple question: “Why should I be the intermediary between ministries?” In many advanced countries, a company interacts with only a single regulator. Inter‑agency coordination is handled within the government, not placed on the investor’s shoulders. When licensing becomes too long, it is not only investment that is delayed; the future is delayed.
Today Indonesia is taking a major step in managing BUMN. The ecosystem of BUMN is being consolidated into a single holding company known as Danantara Indonesia. The goal is clear: to strengthen synergies, increase efficiency, and create a national company capable of competing on the global stage. The scale is enormous.
The total BUMN ecosystem includes more than 1,000 corporate entities. In one group alone, Pertamina has around 257 subsidiaries, nearly a quarter of the entire national BUMN portfolio.
But size does not always equate to strength. In a healthy ecosystem, large size must be matched by lean governance—swift decision‑making and a drive to innovate. Look at Norway. The country also has a large national oil company, Equinor. Yet its ecosystem is simple. Investors deal with only two main bodies: the Norwegian Petroleum Directorate and the Ministry of Petroleum and Energy. The process is clear, fast, and transparent. That is the difference. Not the size of the company, but the quality of its institutions.
Two books help us understand these issues. Why Nations Fail, by Daron Acemoglu and James A. Robinson (Crown Business, 2012). In this book, Acemoglu and Robinson put forward a thesis that challenges development economics. Why are some countries prosperous and others still poor? Their answer is simple but profound. Not culture. Not religion. Not natural resources. What determines outcomes are institutions. Institutions that foster innovation, provide legal certainty, and create opportunities for economic actors are the inclusive institutions. Countries with such institutions tend to prosper. Conversely, countries whose institutions are obstructive by bureaucracy, legal uncertainty, and fear of taking decisions will stagnate.
This idea does not only apply to countries. It also applies to corporations. If we borrow the framework of the book, we can ask another question: Why Corporations Fail. Companies fail not because of a lack of capital or technology. They fail when their institutions make decision‑making slow and innovation risky. When directors fear taking decisions because of unclear legal risk, the organisation loses its creative energy. And when decision‑making processes must pass through too many layers of bureaucracy, companies lose the agility to compete.
A great company