DANANTARA AND THE RESTRUCTURING OF INDONESIA’S STATE-OWNED ENTERPRISES
(From 1,074 Subsidiaries to Fewer Than 200 Companies: Corporate Consolidation, Financial Efficiency, Strategic Investment, and Indonesia’s Economic Transformation)
Author : R Try Noegroho by POINT Consultant
DANANTARA AND THE RESTRUCTURING OF INDONESIA’S STATE-OWNED ENTERPRISES
(From 1,074 Subsidiaries to Fewer Than 200 Companies: Corporate Consolidation, Financial Efficiency, Strategic Investment, and Indonesia’s Economic Transformation)
Author : R Try Noegroho by POINT Consultant
Kediri, 29 October 2026
ABSTRACT
Indonesia is embarking on a major restructuring of its state-owned enterprise (SOE) ecosystem through Danantara Indonesia, the national investment management institution tasked with improving the management and performance of state-owned corporate assets. According to the information supplied for this article, Danantara plans to streamline 1,074 subsidiary and sub-subsidiary entities into fewer than 200 companies. The transformation is intended to eliminate operational inefficiencies, consolidate overlapping businesses, close persistently unproductive companies, restructure financially distressed enterprises, and divest non-core assets.
The five-year transformation roadmap reportedly consists of four principal corporate actions: mergers and consolidation, liquidation, financial restructuring, and divestment. Alongside organisational restructuring, Danantara is pursuing changes in business models, operational integration, financial discipline, and strategic investment, including potential investments in digital infrastructure, data centres, and artificial intelligence.
This article examines the economic rationale, implementation framework, corporate governance implications, financial risks, and potential contribution of the programme to Indonesia’s industrialisation. It also discusses Danantara’s reported performance targets, investor concerns relating to MSCI market classification, and the potential role of strategic investment in helping Indonesia escape the middle-income trap.
The central argument is that reducing the number of corporate entities is only the beginning. Long-term success will depend on transparent governance, independently verified financial improvements, responsible asset management, productivity growth, and measurable benefits for the Indonesian economy and the public.
Keywords : Danantara, Indonesian State-Owned Enterprises, SOE Consolidation, Corporate Restructuring, Financial Efficiency, Divestment, Corporate Governance, Strategic Investment, Artificial Intelligence, Industrialisation, Middle-Income Trap.
EXECUTIVE SUMMARY
Danantara Indonesia’s reported plan to reduce 1,074 state-owned enterprise subsidiaries and sub-subsidiaries to fewer than 200 companies represents a significant effort to simplify Indonesia’s state-owned corporate structure.
The programme seeks to address problems associated with excessive corporate fragmentation, overlapping business activities, duplicated administrative costs, inefficient internal transactions, and companies that continuously consume financial resources without delivering adequate economic returns.
According to the supplied information, the transformation includes four principal strategies.
1. Mergers and consolidation: Combining companies with similar business activities to achieve economies of scale and improve coordination.
2. Liquidation: Permanently closing companies considered unproductive or no longer strategically necessary.
3. Financial restructuring: Restoring the financial health of viable but distressed enterprises.
4. Divestment: Selling or transferring businesses that do not belong to the core operations of their parent companies.
The reported programme also includes operational reforms at Pupuk Indonesia, Semen Indonesia, Pertamina, BRI, Bank Mandiri, and PLN.
Danantara is additionally preparing strategic investment initiatives in digital infrastructure, data centres, and artificial intelligence. These sectors could support productivity, industrial competitiveness, and technological development if investments are commercially disciplined and connected to Indonesia’s wider economic needs.
However, the programme presents important challenges. Corporate consolidation can create excessive market concentration, liquidation can affect workers and creditors, divestment can expose public assets to undervaluation, and financial restructuring can become costly if public support is not tied to measurable recovery.
Therefore, the ultimate measure of success should not be the number of companies eliminated. It should be the improvement in financial performance, operational productivity, service quality, investment returns, public accountability, and Indonesia’s long-term economic resilience.
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| Foto : Kepala BP BUMN sekaligus COO Danantara Indonesia Dony Oskaria. Source : Googling |
PART I — THE STRATEGIC RATIONALE
1. Introduction: Why Indonesia Needs SOE Transformation
State-owned enterprises occupy an important position in Indonesia’s economic development. They operate in strategic industries, support infrastructure investment, provide essential services, and contribute dividends to the state budget.
Their activities extend across energy, telecommunications, banking, construction, transportation, manufacturing, agriculture, healthcare, logistics, and other sectors.
This broad presence gives the government substantial economic capacity. Nevertheless, a large corporate portfolio can also become difficult to manage when subsidiaries and sub-subsidiaries accumulate without a clear strategic purpose.
Over time, companies may develop overlapping functions, duplicate administrative structures, maintain separate procurement systems, and conduct transactions with other companies within the same corporate group.
Such arrangements can increase costs without creating corresponding economic value.
The challenge is therefore to determine which corporate structures genuinely support business performance and which merely increase organisational complexity.
Danantara’s reported restructuring programme seeks to address this problem by reducing the number of entities and redesigning the relationship between strategic ownership, operational management, and financial accountability.
The central question is whether a simpler corporate structure can produce a more productive, competitive, and financially sustainable SOE sector.
The answer depends on implementation. Reducing legal entities can improve efficiency, but only if the reform also changes business processes, management incentives, capital allocation, and accountability.
2. Danantara and the Five-Year Transformation Roadmap
According to the supplied material, Dony Oskaria, identified as Head of the SOE supervisory body and Chief Operating Officer of Danantara Indonesia, outlined a five-year transformation roadmap.
The programme reportedly begins with the assessment of 1,074 corporate entities and assigns them to four principal categories of corporate action.
The roadmap reflects a portfolio-management approach. Rather than treating every subsidiary as a permanent part of the state-owned corporate structure, each entity is assessed according to its economic contribution, strategic relevance, financial condition, and relationship with the core business of its parent company.
A five-year horizon may allow sufficient time to complete legal mergers, settle liabilities, integrate information systems, reorganise workforces, and evaluate post-restructuring performance.
However, a long-term programme also requires clear milestones. Without measurable targets and transparent progress reports, restructuring can become a sequence of announcements rather than a demonstrable improvement in economic performance.
Danantara should therefore publish an implementation framework that identifies the entities involved, the intended corporate action, the expected benefits, the responsible management team, and the deadline for completion.
3. The Target: From 1,074 Entities to Fewer Than 200 Companies
The reported target is to reduce 1,074 subsidiary and sub-subsidiary entities to fewer than 200 companies.
This represents a major reduction in the number of legal entities within the state-owned corporate portfolio.
The potential advantages include:
- Lower administrative and compliance costs.
- Fewer overlapping management structures.
- More coordinated procurement and investment decisions.
- Better utilisation of assets and infrastructure.
- Improved transparency over financial performance.
- Reduced opportunities for unnecessary internal transactions.
- Greater clarity regarding responsibility and accountability.
Nevertheless, the number of companies is not, by itself, a reliable measure of efficiency.
A corporate group with fewer legal entities can still suffer from excessive bureaucracy, weak internal controls, poor investment decisions, and inefficient operations.
Conversely, certain subsidiaries may be necessary because they operate in different regulatory environments, manage distinct risks, or serve geographically dispersed customers.
The objective should therefore be optimal corporate structure rather than minimum corporate structure.
Every entity should have a clear economic or strategic justification. Entities without such justification should be merged, restructured, closed, or divested through a transparent decision-making process.
PART II — THE FOUR PILLARS OF RESTRUCTURING
4. Pillar One: Mergers and Corporate Consolidation
The supplied material identifies approximately 200 entities for consolidation based on similarities in their business activities.
Examples reportedly include:
- Twenty-three industrial estates to be consolidated under one entity.
- Five asset or investment management companies to be combined.
- Sixty hospitals to be placed under a single parent structure.
- Approximately 120 hotels to be managed under one corporate umbrella.
- Sixteen insurance companies to be reorganised into three specialised entities.
- Securities companies to be simplified into two entities.
The reported target is to complete the financial-services simplification by the end of 2026.
4.1 Economic benefits of consolidation
Mergers can produce economies of scale by combining procurement, technology systems, administrative services, treasury operations, marketing, and compliance functions.
A larger organisation may also have greater bargaining power with suppliers and better access to financing.
In industrial estates, consolidation could support common infrastructure planning, coordinated promotion, and more consistent service standards.
In hospitality, a shared operating platform may reduce duplication in reservations, marketing, procurement, and customer management.
In healthcare, centralised procurement and shared administrative services could lower costs while enabling hospitals to focus on clinical delivery.
4.2 Risks of excessive centralisation
Consolidation does not automatically guarantee better performance.
An organisation that becomes too centralised may respond slowly to local conditions. Regional managers may lose the authority needed to address customer needs, operational disruptions, or differences in market demand.
Healthcare is particularly sensitive because hospitals require professional clinical governance and local operational accountability.
Financial-services consolidation must also protect policyholders, investors, customers, and market competition.
Consequently, each merger should be supported by a detailed integration plan covering management responsibilities, technology, workforce arrangements, service continuity, and financial controls.
The success of consolidation should be measured through actual improvements in costs, service quality, productivity, and customer outcomes.
5. Pillar Two: Liquidation of Unproductive Companies
The supplied material states that 213 companies are designated for permanent closure.
These reportedly include 50 subsidiaries or sub-subsidiaries associated with Telkom and 124 entities under Pertamina.
Liquidation can be necessary when a company has no credible commercial future, duplicates an existing business, or continues to consume resources without delivering sufficient economic or strategic value.
Maintaining such entities indefinitely can create additional administrative expenses, legal obligations, and financial risks.
However, closure requires more than a declaration that a company is unproductive.
5.1 Distinguishing commercial losses from public-service obligations
Some SOEs perform functions that are important to society but are not commercially profitable under ordinary market conditions.
A company may support remote communities, maintain strategic infrastructure, or provide services at regulated prices.
Before deciding to liquidate an entity, Danantara should distinguish avoidable business losses from the costs of delivering public services.
If a public-service obligation remains necessary, the government should define the obligation and establish a transparent funding mechanism.
Otherwise, liquidation may simply transfer costs to another public institution or disrupt an essential service.
5.2 Legal and social responsibilities
A responsible closure process should identify:
- Outstanding debts and creditor claims.
- Employee rights and severance obligations.
- Pension commitments.
- Tax liabilities and contractual obligations.
- Pending litigation and regulatory requirements.
- Environmental responsibilities.
- Ownership and transfer of physical and digital assets.
- Continuity arrangements for essential services.
The process should also establish how the proceeds from asset disposal will be accounted for and how outstanding liabilities will be settled.
The objective is to stop avoidable losses without creating new financial or social problems.
6. Pillar Three: Financial Restructuring of Distressed SOEs
The supplied material identifies 15 SOEs for intensive financial restructuring, including Krakatau Steel, Kimia Farma, and Garuda Indonesia.
These businesses operate in different industries and therefore require different recovery strategies.
A steel producer faces issues involving industrial competitiveness, energy costs, production capacity, debt, and demand.
A pharmaceutical company must address product competitiveness, procurement, distribution, manufacturing efficiency, and regulatory compliance.
An airline must manage fleet utilisation, maintenance, fuel costs, routes, debt, and volatile demand.
A single restructuring model cannot adequately address all these challenges.
6.1 The foundations of a credible turnaround
Financial recovery should begin with a detailed assessment of the company’s balance sheet, cash flow, debt maturities, working capital, operating costs, asset utilisation, and market position.
Management should then prepare a recovery plan with measurable milestones.
Possible measures include:
- Renegotiating unsustainable debt obligations.
- Improving inventory and working-capital management.
- Closing persistently loss-making business lines.
- Optimising production capacity.
- Strengthening procurement controls.
- Selling non-essential assets.
- Improving revenue quality and customer retention.
- Revising management incentives.
- Strengthening internal audit and risk management.
6.2 Public capital must have clear conditions
Financial restructuring may require new capital or temporary support. However, public funding should not become an unlimited mechanism for absorbing corporate losses.
Any major capital injection should have a documented purpose, a realistic recovery timetable, measurable performance targets, and transparent reporting.
Where a company repeatedly fails to meet its objectives, the shareholder should reassess the strategy.
The ultimate objective is to restore a company’s ability to generate sustainable cash flow and deliver its intended economic or public-service function.
7. Pillar Four: Divestment of Non-Core Businesses
The supplied material identifies nearly 208 entities or business operations for potential divestment.
Examples include fibre-optic network assets and hotels owned by construction-oriented SOEs, as well as business units considered too small to justify continued ownership.
Divestment can allow a parent company to concentrate on its principal activities.
A construction company, for example, may be better positioned to focus on engineering, procurement, construction, and infrastructure delivery rather than managing unrelated hospitality or telecommunications businesses.
Selling non-core assets may also release capital for maintenance, debt reduction, or investment in higher-priority projects.
7.1 Protecting the value of public assets
The principal challenge is ensuring that divestment creates genuine value rather than transferring public assets at an inappropriate price.
A credible process should include independent valuation, competitive bidding where feasible, conflict-of-interest safeguards, and disclosure of the transaction’s principal terms.
The assessment should also consider strategic value.
Fibre-optic networks, for example, may provide important digital connectivity. Their value cannot be assessed solely through short-term financial returns if they also support national infrastructure and economic resilience.
Before selling such assets, Danantara should assess the implications for competition, service access, national connectivity, and future investment.
Divestment should be based on a clear strategic rationale, not simply on the desire to reduce the number of companies.
PART III — OPERATIONAL AND FINANCIAL REFORM
8. Reconciling the Restructuring Figures
The supplied material presents several important figures: 1,074 entities in the initial portfolio, approximately 200 for consolidation, 213 for liquidation, 15 for financial restructuring, and nearly 208 for divestment.
These four categories total approximately 636 entities.
The material also reports that 364 companies have already been streamlined or closed.
These figures should not automatically be added together because some categories may refer to different stages, overlapping groups, rounded estimates, or transactions already completed.
Nevertheless, a transparent reconciliation is essential.
Danantara should publish a portfolio dashboard distinguishing:
1. The original number of entities.
2. Entities reviewed and classified.
3. Mergers legally completed.
4. Companies operationally integrated.
5. Liquidations legally completed.
6. Divestments completed and proceeds received.
7. Financial restructurings still in progress.
8. Entities retained with documented strategic justification.
9. The final projected number of companies.
This distinction matters because a company that has been approved for closure is not necessarily legally dissolved, and a merger announcement does not necessarily mean that operational integration is complete.
Clear reporting would strengthen public confidence and enable independent evaluation of the programme.
9. Pupuk Indonesia: Reforming the Fertilizer Business Model
The supplied material describes a change in the subsidised fertilizer business model from a cost-plus arrangement to a mechanism linked more closely to market prices.
Under the arrangement described in the material, the former model included production costs plus a margin of 7 percent.
The reform is reportedly intended to reduce inefficiency and strengthen commercial discipline.
The material attributes several results to Pupuk Indonesia, including the development of eight new factories, lower costs, stronger margins, and an increase in net profit of more than 200 percent over six months.
These are significant claims that should be examined against the company’s financial disclosures and the precise comparison period.
9.1 Balancing commercial efficiency and food security
Fertilizer policy affects agricultural productivity, farmer income, food security, and public expenditure.
Commercial reform must therefore balance the financial health of producers with the affordability and availability of subsidised fertilizer.
A market-linked pricing mechanism may improve cost discipline, but its design must prevent excessive volatility or the transfer of disproportionate risk to farmers.
The government should maintain transparent subsidy accounting, clear distribution responsibilities, product-quality standards, and effective monitoring of availability.
The appropriate objective is a fertilizer system that is financially sustainable while continuing to support agricultural production.
10. Semen Indonesia: Profitability and Business-Model Transformation
The supplied material reports that Semen Indonesia achieved a 427 percent increase in net profit following business-model reform.
Such an increase may indicate substantial improvement, but the figure requires context.
The percentage change depends on the initial profit base and can be affected by one-off gains, asset disposals, commodity prices, changes in demand, and accounting adjustments.
A thorough evaluation should examine operating margins, capacity utilisation, production costs, debt, cash flow, market share, and capital expenditure.
The cement industry is also sensitive to construction activity, infrastructure investment, energy costs, logistics, and competitive pressure.
A sustainable turnaround should therefore be measured by recurring profitability and operating efficiency rather than a single period of unusually strong growth.
11. Pertamina: Integrating the Downstream Energy Business
The supplied material states that Pertamina is integrating three downstream businesses:
- Pertamina Patra Niaga.
- Pertamina International Shipping (PIS).
- Kilang Pertamina Internasional (KPI).
The stated objective is to create a more integrated downstream business and eliminate unnecessary internal transactions among subsidiaries.
Dony Oskaria is quoted in the supplied material as saying that Pertamina saved US$1 billion within six months following the integration.
This reported figure is substantial and warrants clear methodological disclosure.
11.1 Why integration may improve efficiency
The downstream petroleum chain includes refining, shipping, storage, distribution, and commercial sales.
When these functions operate through disconnected organisations, internal transactions can add administrative layers, complicate planning, and weaken accountability for total supply-chain costs.
An integrated structure may improve coordination between refinery output, vessel scheduling, inventory management, and distribution requirements.
It may also reduce duplicated services, unnecessary handling, and avoidable logistics expenses.
11.2 Verifying the reported savings
To establish the economic value of the reform, the reported US$1 billion saving should be accompanied by a transparent baseline and a breakdown of the calculation.
The report should distinguish cash savings from avoided costs, working-capital benefits, foreign-exchange effects, and accounting changes.
It should also clarify whether the savings are recurring or represent a one-time benefit.
Operational indicators should include refinery utilisation, shipping efficiency, distribution costs, fuel availability, inventory losses, safety performance, and supply reliability.
The ultimate objective is not merely to combine companies but to create a safer, more efficient, and more resilient energy supply chain.
12. BRI and Bank Mandiri: Strengthening Banking Performance
The supplied material reports that Bank Rakyat Indonesia (BRI) has reduced its cost of funds and improved the balance of its credit portfolio, alongside reforms at Bank Mandiri.
These are important areas of banking performance.
A lower cost of funds can improve interest margins, while a better-balanced credit portfolio can help distribute risk across customers and sectors.
However, sustainable banking performance also requires careful management of non-performing loans, capital adequacy, liquidity, cybersecurity, operational risk, and customer protection.
12.1 Commercial returns and financial inclusion
State-owned banks have both commercial responsibilities and important roles in supporting economic activity.
Their contribution should be assessed through profitability, asset quality, lending efficiency, access to finance, and the sustainability of credit to productive businesses.
Financial inclusion should not be pursued through weak lending standards. Similarly, profitability should not be achieved at the expense of responsible lending or underserved communities.
The objective is to build financial institutions that combine commercial discipline with reliable access to financial services.
13. PLN: Electricity Efficiency, Reliability, and Tariff Policy
The supplied material states that Danantara has begun a broad transformation at PLN, covering generation efficiency, transmission and distribution reliability, and electricity tariff arrangements.
Electricity is a foundational input for industrialisation, digital infrastructure, manufacturing, households, and public services.
Inefficiency in the power sector can increase production costs across the entire economy.
13.1 Generation efficiency
Power generation reform should focus on plant availability, fuel efficiency, maintenance, dispatch optimisation, and the financial sustainability of generation assets.
Investment decisions should also consider the changing energy mix, environmental requirements, and the need to maintain reliable electricity supplies.
13.2 Transmission and distribution
Transmission and distribution improvements can reduce technical losses, shorten outage durations, and improve the reliability of electricity delivery.
Relevant indicators include system losses, outage frequency, outage duration, connection times, and the speed of infrastructure repairs.
13.3 Tariffs and affordability
Electricity tariff reform requires careful treatment because tariffs affect household expenditure, industrial competitiveness, inflation, and the finances of PLN.
Any changes should be transparent, consistent with applicable regulations, and supported by clear explanations of costs and subsidies.
Vulnerable households and economically important services may require targeted protection.
A successful electricity reform should improve financial sustainability without compromising affordability or supply reliability.
PART IV — STRATEGIC INVESTMENT AND CAPITAL MARKETS
14. Danantara Investment Management: Digital Infrastructure, Data Centres, and AI
The supplied material states that Danantara Investment Management (DIM) is preparing announcements concerning strategic investments in digital infrastructure, data centres, and artificial intelligence.
These sectors could become important drivers of productivity and economic transformation.
Digital infrastructure supports communications, cloud services, financial technology, industrial automation, government services, and the development of domestic digital businesses.
Data centres provide the computing and storage capacity required by modern digital applications.
Artificial intelligence can improve manufacturing, logistics, healthcare administration, agriculture, financial services, and public-sector operations.
However, these opportunities involve substantial investment requirements and execution risks.
14.1 Data centres require more than buildings and servers
Data centres depend on reliable electricity, high-capacity telecommunications, cooling systems, cybersecurity, skilled personnel, and long-term customer demand.
Their economic value depends on utilisation rates, energy efficiency, operating costs, and the ability to attract customers.
Investing in capacity without adequate demand can produce underutilised assets and weak financial returns.
14.2 Artificial intelligence requires domestic capabilities
AI development is not simply a matter of purchasing computing equipment.
It requires skilled workers, research partnerships, reliable data, effective governance, and adoption by businesses and public institutions.
Indonesia could benefit from investment in technical education, applied research, local software companies, and partnerships between universities and industry.
14.3 Investment discipline
Every major strategic investment should be assessed against:
- Expected financial returns.
- Market demand and competitive conditions.
- Capital requirements and financing risks.
- Technology and cybersecurity risks.
- Electricity and infrastructure availability.
- Environmental implications.
- Potential for domestic employment and skills development.
- Technology transfer and local supplier participation.
- Long-term operating costs and exit options.
Investment announcements should also be distinguished from financial commitments, construction progress, operational capacity, and realised returns.
Danantara’s credibility will depend on the quality of its investment decisions and the transparency of its performance reporting.
15. MSCI and Indonesian Capital-Market Sentiment
The supplied material reports that Danantara has encouraged investors not to become overly influenced by short-term negative market sentiment, including discussion of a possible MSCI consultation concerning Indonesia’s classification as a standalone market.
Danantara Chief Investment Officer Pandu Sjahrir is quoted as stating that a possible classification change would not, by itself, demonstrate that the underlying quality of Indonesian companies had deteriorated.
This distinction is important.
Index classification and company fundamentals are related but separate matters.
Index providers assess market characteristics such as accessibility, investability, liquidity, market size, and the practical ability of international investors to participate.
A change in classification can influence benchmark-linked investment flows even when the operating performance of individual companies remains unchanged.
Conversely, a company with strong operating performance can still face risks relating to governance, valuation, disclosure, liquidity, or ownership structure.
15.1 What investors should evaluate
Investors should examine each company individually, considering:
- Revenue growth and earnings quality.
- Operating cash flow.
- Debt and financial resilience.
- Competitive position.
- Valuation relative to expected earnings.
- Free float and trading liquidity.
- Corporate governance.
- Related-party transactions.
- Disclosure quality.
- Exposure to currency, interest-rate, and commodity risks.
MSCI-related sentiment should therefore be treated as one factor in investment analysis rather than a complete assessment of a company's value.
The same principle applies to Danantara itself: confidence in a state-owned investment platform depends on transparent governance, credible financial reporting, and disciplined capital allocation.
16. Peter Howitt and Indonesia’s Middle-Income Trap
The supplied material attributes to Nobel laureate economist Peter Howitt the view that Danantara could play an important role in unlocking Indonesia’s economic potential, supporting industrialisation, and helping the country avoid the middle-income trap.
The argument concerns the role of productive investment and institutional capacity in sustaining economic growth.
The middle-income trap describes the difficulty some economies face when the growth strategies that initially raised incomes become insufficient to support further convergence with high-income economies.
Low-cost labour, capital accumulation, infrastructure expansion, and the transfer of existing technologies can generate significant early gains. Sustained development, however, requires increasingly productive firms, skilled workers, innovation, and movement into higher-value economic activities.
16.1 The role of strategic investment
A professional investment institution can help mobilise long-term capital and coordinate investments in infrastructure, industry, and technology.
It can also encourage better asset management and improve the allocation of capital across a large portfolio of state-owned companies.
However, an investment institution cannot independently solve every structural economic problem.
Escaping the middle-income trap also requires high-quality education, effective research institutions, predictable regulations, competition, a skilled workforce, and access to finance for productive private businesses.
16.2 Industrialisation must generate productivity gains
Industrialisation is not merely the construction of factories.
It involves improving production technology, developing local suppliers, increasing worker skills, expanding exports, and creating products with greater value added.
Danantara’s contribution should be assessed by whether its investments help businesses become more productive and internationally competitive.
Projects that simply transfer ownership among state entities may change the corporate structure without creating comparable gains in national productivity.
The broader objective should be to develop an economy that generates more value from its workforce, natural resources, technology, and capital.
PART V — GOVERNANCE, RISKS, AND RECOMMENDATIONS
17. Corporate Governance and Public Accountability
A large state-owned investment portfolio requires clear separation between government policymaking, ownership oversight, and corporate management.
The government establishes public objectives and legal frameworks. The owner allocates capital and monitors performance. Company management makes operational decisions within approved mandates.
When these responsibilities become blurred, commercial decisions may be influenced by conflicting objectives, while public-service obligations may lack transparent funding.
17.1 Essential governance safeguards
Danantara should strengthen the following arrangements:
- Independent oversight. Boards and supervisory bodies should possess relevant financial, industrial, legal, and risk-management expertise.
- Transparent appointments. Selection criteria should prioritise competence, integrity, and relevant experience.
- Independent audit. Financial statements and material restructuring claims should be subject to appropriate independent verification.
- Related-party transaction controls. Transactions involving affiliated entities should be documented and reviewed under clear policies.
- Transparent procurement. Material contracts and asset sales should use competitive processes wherever practicable.
- Conflict-of-interest safeguards. Decision-makers should disclose relevant interests and recuse themselves where necessary.
- Whistle-blower protection. Employees and other stakeholders should be able to report misconduct without retaliation.
- Public reporting. Financial results, restructuring progress, material risks, and major investment decisions should be disclosed in accordance with applicable law.
These safeguards are particularly important during large-scale restructuring, when numerous assets, contracts, and corporate relationships are changing simultaneously.
18. Workforce Transition and Social Responsibility
Corporate restructuring can affect employees, management teams, suppliers, customers, and communities.
Mergers may eliminate duplicated administrative positions, while closures can result in job losses or changes in employment arrangements.
At the same time, a more efficient portfolio may create demand for skills in technology, engineering, finance, data analysis, project management, and risk control.
The workforce transition should therefore be planned rather than treated as a secondary consequence.
Recommended measures include clear communication, fair employment procedures, retraining, redeployment where feasible, and compliance with applicable labour laws.
The programme should also account for differences between sectors.
A small inactive subsidiary has different social implications from a company responsible for electricity distribution, hospital services, telecommunications, or fuel supply.
Continuity plans should be prepared whenever restructuring could affect essential services.
Social responsibility does not mean preserving every company indefinitely. It means managing necessary change fairly, transparently, and with proper attention to its consequences.
19. Risk Matrix: Principal Challenges and Mitigation
19.1 Execution risk
- Challenge: Companies are legally merged, but their systems, employees, and operating procedures remain fragmented.
- Recommended response: Establish detailed integration plans, accountable executives, deadlines, and independent progress reviews.
19.2 Financial-reporting risk
- Challenge: Projected savings are presented as achieved savings, or temporary gains are mistaken for recurring improvements.
- Recommended response: Establish audited baselines and disclose the methodology used to calculate financial benefits.
19.3 Asset-valuation risk
- Challenge: Public assets are transferred or sold below their economic value.
- Recommended response: Use independent valuations, competitive bidding, documented approvals, and appropriate public disclosure.
19.4 Market-concentration risk
- Challenge: Consolidation reduces competition or weakens service quality.
- Recommended response: Conduct sector-specific competition assessments and monitor pricing, access, and customer outcomes.
19.5 Public-service risk
- Challenge: Liquidation or restructuring disrupts essential services.
- Recommended response: Prepare transition arrangements and maintain operational continuity throughout implementation.
19.6 Workforce risk
- Challenge: Uncertainty reduces employee morale and causes the loss of critical skills.
- Recommended response: Communicate early, provide retraining and redeployment options, and apply fair employment procedures.
19.7 Strategic-investment risk
- Challenge: Capital is committed to high-profile projects without sufficient demand or credible risk-adjusted returns.
- Recommended response: Apply independent investment reviews, scenario analysis, milestone-based funding, and post-investment evaluation.
19.8 Governance risk
- Challenge: Corporate transactions create conflicts of interest or opportunities for misconduct.
- Recommended response: Strengthen internal controls, audit trails, beneficial-ownership disclosure, procurement integrity, and external oversight.
20. A Five-Phase Implementation Framework
- Phase One: Portfolio Verification
Danantara should establish a single, verified register of all entities within the restructuring programme.
The register should identify each company’s ultimate parent, ownership structure, business activity, financial position, liabilities, employees, licences, contracts, and strategic role.
The starting figure of 1,074 entities should be reconciled with legal records and consolidated financial statements.
- Phase Two: Strategic Classification
Every entity should receive a documented decision: merge, liquidate, restructure, divest, or retain.
The decision should explain the economic rationale and identify any public-service obligations, competition concerns, regulatory restrictions, or national-security considerations.
- Phase Three: Transaction Design
Before a transaction is completed, the relevant parties should prepare legal, financial, tax, operational, technology, and workforce plans.
Divestments should use appropriate valuation procedures. Mergers should establish the future operating model before legal integration is treated as complete.
- Phase Four: Execution and Monitoring
Implementation should be managed against published milestones.
Progress reports should identify completed actions, delays, unexpected costs, changes in scope, and corrective measures.
The programme should also protect creditors, employees, customers, policyholders, and essential services.
- Phase Five: Independent Evaluation
Performance should be assessed after six, twelve, and twenty-four months, where appropriate to the transaction.
Evaluations should compare actual outcomes with the original baseline and disclose material differences.
The purpose is to establish whether restructuring created lasting economic value rather than merely reducing the number of legal entities.
21. Recommended Performance Indicators
A credible transformation programme should publish indicators across several dimensions.
Portfolio management
- Number of entities reviewed and classified.
- Number of mergers legally completed.
- Number of businesses operationally integrated.
- Number of liquidations completed.
- Divestment proceeds received.
- Number of entities retained with a documented strategic rationale.
Financial performance
- Recurring operating-cost savings.
- Operating cash flow.
- Debt-service capacity.
- Return on invested capital.
- Working-capital efficiency.
- Dividend contributions to the state.
Operational efficiency
- Productivity per employee.
- Capacity utilisation.
- Procurement efficiency.
- Service availability.
- Delivery times.
- Customer satisfaction.
Investment performance
- Projects completed against schedule.
- Actual returns compared with investment forecasts.
- Private capital mobilised.
- Technology transfer.
- Local supplier development.
- Export contribution.
Governance
- Resolution of audit findings.
- Timeliness of financial disclosure.
- Compliance with related-party transaction rules.
- Procurement transparency.
- Effectiveness of internal controls.
Public value
- Service affordability.
- Regional access to essential services.
- Workforce transition outcomes.
- Environmental performance.
- Transparency in funding public-service obligations.
These indicators would make it easier to distinguish genuine operating improvements from accounting changes, asset-sale proceeds, or temporary market conditions.
22. The Rp360 Trillion Net-Profit Target
The supplied material states that Danantara’s management is targeting consolidated SOE net profit of Rp360 trillion for the year, described as more than US$20 billion.
This is a major financial target and should be assessed against the size and composition of the portfolio.
Consolidated profit can be affected by commodity prices, exchange rates, one-off gains, asset disposals, changes in accounting treatment, and the inclusion or exclusion of subsidiaries.
For this reason, the headline figure should be accompanied by an explanation of the reporting perimeter and the contribution of major business groups.
A comprehensive assessment should also examine operating cash flow, capital expenditure, leverage, return on equity, return on invested capital, and dividends.
Profit is important, but it does not provide a complete picture of financial health.
A company can report accounting profit while generating weak cash flow or accumulating excessive debt. Equally, a business making long-term investments may report temporarily lower profit while strengthening future productive capacity.
Dividend policy should therefore balance the state’s revenue needs with the capital required for maintenance, resilience, and future growth.
23. Implications for the State Budget and National Development
A more efficient SOE portfolio could strengthen public finances through improved dividends, lower avoidable losses, better asset utilisation, and reduced demands for repeated capital injections.
However, restructuring also creates costs.
These may include severance payments, legal integration, information-system migration, debt settlement, environmental remediation, and other transaction expenses.
Fiscal reporting should distinguish realised savings from projected savings and should identify where restructuring costs are recorded.
It should also clarify whether material costs are borne by individual companies, the state budget, or new borrowing.
Transparent accounting is essential to ensure that an apparent improvement in one part of the public sector does not conceal additional costs elsewhere.
Beyond fiscal returns, the wider national-development test is whether the restructured SOEs provide more reliable infrastructure, efficient logistics, affordable services, energy security, and stronger industrial competitiveness.
The public value of state-owned businesses includes both financial contributions and the quality of the services they deliver.
24. International Lessons for State-Owned Enterprise Reform
International experience demonstrates that the management of state-owned enterprises requires more than a change in corporate ownership structures.
Effective systems generally depend on professional oversight, clear commercial mandates, transparent public-service obligations, disciplined capital allocation, and credible performance evaluation.
Different countries use different holding-company arrangements and public investment models. No single structure guarantees success.
The important questions concern institutional design.
Which companies should operate commercially? Which companies perform explicit public-service functions? How should public obligations be funded? What standards should govern board appointments? How should capital be allocated? What happens when a company repeatedly fails to meet its objectives?
Danantara’s framework should answer these questions clearly.
A professional ownership model should be able to close an unviable company when necessary, support a viable business through a credible recovery plan, and refuse a proposed investment that fails to meet appropriate standards.
25. Critical Questions Requiring Public Answers
For the programme to maintain public confidence, several questions should be addressed through transparent reporting.
1). What is the complete and reconciled list of the 1,074 entities?
2). How are the 364 companies reportedly streamlined or closed classified?
3). How do the four restructuring categories reconcile with the target of fewer than 200 companies?
4). What independent evidence supports the reported savings and profit increases?
5). Which benefits represent recurring cash savings, and which are temporary or accounting-related?
6). How will asset sales be protected against undervaluation and conflicts of interest?
7). Which companies perform public-service obligations, and how are those obligations funded?
8). What safeguards protect workers, creditors, policyholders, customers, and communities?
9). What investment standards govern digital infrastructure, data centres, and AI projects?
10). How will the public assess progress toward the Rp360 trillion net-profit target?
Providing clear answers would improve accountability and allow investors, policymakers, employees, and the public to evaluate the programme on the basis of evidence.
PART VI — OUTLOOK AND CONCLUSION
26. Outlook: From Corporate Simplification to Productivity Growth
Danantara’s reported restructuring programme could provide a foundation for more coordinated capital allocation, stronger financial discipline, and improved management of Indonesia’s state-owned assets.
The opportunity extends beyond administrative cost reductions.
A well-managed portfolio could support infrastructure development, industrial modernisation, technological adoption, and more productive use of public capital.
Digital infrastructure, data centres, and AI may create additional opportunities, provided investments are commercially disciplined and supported by adequate electricity, connectivity, human capital, and domestic demand.
Similarly, industrialisation can contribute to higher incomes when businesses improve productivity, develop advanced capabilities, and compete successfully in domestic and international markets.
However, these outcomes cannot be guaranteed by organisational restructuring alone.
They require consistent implementation, reliable institutions, transparent reporting, effective competition, and a willingness to correct mistakes.
Danantara should therefore be evaluated not only by what it consolidates, closes, or sells, but also by what the remaining businesses can produce, how effectively they use capital, and how much economic value they create.
27. Conclusion: The Real Test of Danantara’s Transformation
Danantara Indonesia’s reported plan to reduce 1,074 state-owned enterprise subsidiaries and sub-subsidiaries to fewer than 200 companies represents a far-reaching effort to reorganise Indonesia’s state-owned corporate sector.
The four principal strategies merger, liquidation, financial restructuring, and divestment address different sources of inefficiency and financial weakness.
The reported reforms at Pupuk Indonesia, Semen Indonesia, Pertamina, BRI, Bank Mandiri, and PLN indicate that the programme is intended to change operating models and financial management as well as legal structures.
The planned investments in digital infrastructure, data centres, and artificial intelligence also suggest an ambition to connect corporate reform with Indonesia’s longer-term economic transformation.
Nevertheless, the programme’s success depends on several conditions.
- First, portfolio figures must be reconciled and progress must be reported transparently.
- Second, financial improvements must be measured against reliable baselines and independently verified.
- Third, mergers must produce operational benefits rather than merely administrative consolidation.
- Fourth, liquidations must respect legal obligations and protect essential services.
- Fifth, divestments must preserve public value through independent valuation and fair processes.
- Sixth, strategic investments must demonstrate credible demand, sound risk management, and measurable economic benefits.
Finally, corporate governance must ensure that public assets are managed professionally and that commercial performance is not separated from accountability to the public.
If these conditions are met, the restructuring could help improve financial resilience, strengthen investment discipline, and support Indonesia’s industrial development.
If the programme focuses mainly on reducing company numbers or announcing ambitious profit targets, however, organisational complexity may simply be replaced by a different set of structural problems.
The decisive measure of success is therefore not how few companies remain, but how effectively the restructured portfolio serves Indonesia’s economic interests.
A smaller state-owned enterprise portfolio should ultimately become a more productive, transparent, competitive, and accountable one.
That is the standard against which Danantara’s transformation should be judged.
ARTICLE RESUME
Danantara’s SOE Restructuring: Efficiency, Investment, and Indonesia’s Economic Future
Danantara Indonesia’s reported five-year transformation programme aims to reduce 1,074 state-owned enterprise subsidiaries and sub-subsidiaries to fewer than 200 companies. The programme seeks to eliminate overlapping businesses, reduce inefficiency, close unproductive entities, restore financially distressed companies, and divest businesses outside the core operations of their parent companies.
The restructuring strategy consists of four principal actions: mergers and consolidation, liquidation, financial restructuring, and divestment. The supplied material identifies examples involving industrial estates, hospitals, hotels, insurance companies, securities firms, and subsidiaries associated with Telkom and Pertamina.
Operational reforms are also reported at Pupuk Indonesia, Semen Indonesia, Pertamina, BRI, Bank Mandiri, and PLN. Danantara’s management attributes substantial financial improvements to certain business-model changes, including reported savings in Pertamina’s downstream operations. These figures require transparent methodologies and independent verification before they can be treated as established evidence of recurring benefits.
Danantara Investment Management is reportedly preparing strategic investments in digital infrastructure, data centres, and artificial intelligence. These sectors could support productivity and industrialisation if investments are based on sound commercial analysis, reliable infrastructure, skilled workers, and credible long-term demand.
The article also examines MSCI-related capital-market sentiment and the reported view of Nobel laureate Peter Howitt concerning Danantara’s potential role in supporting economic growth and helping Indonesia avoid the middle-income trap.
The central conclusion is that reducing the number of companies is not sufficient to guarantee success. Danantara must demonstrate measurable improvements in productivity, financial performance, governance, service quality, investment returns, and public accountability.
The ultimate objective should be to transform Indonesia’s state-owned enterprises into a more efficient and competitive portfolio that contributes sustainably to national development.
AUTHOR :
R Try Noegroho by POINT Consultant
Kediri, 29 October 2026
SOURCE NOTE :
This article is based on the Indonesian-language briefing material supplied for preparation on 29 October 2026, including information attributed to IDXChannel concerning Danantara’s restructuring plans, management statements, reported corporate performance, strategic investment intentions, MSCI-related commentary, and Peter Howitt’s reported assessment.
The reported figures and quotations have been presented as claims contained in the supplied material. They should be cross-checked against the original publications, official Danantara disclosures, and audited financial statements before formal publication or use as independently verified financial data.
Catatan penting untuk publikasi: Angka penghematan Pertamina sebesar US$1 miliar, kenaikan laba Pupuk Indonesia dan Semen Indonesia, serta target laba konsolidasi Rp360 triliun ditulis sebagai klaim berdasarkan materi yang Anda berikan, bukan sebagai angka yang telah saya audit secara independen.
President Prabowo Subianto has requested the Badan Pengelola Investasi Daya Anagata Nusantara (BPI Danantara) to accelerate the flow of investment into strategic sectors including the management of natural resources with the goal of creating high-quality employment opportunities. The contribution of State-Owned Enterprises (SOEs) to state revenue is currently considered far from optimal; given that the total assets of these SOEs reach US$ 1,000 trillion, they should theoretically be capable of contributing at least US$ 50 billion. Danantara COO Dony Oskaria stated that the organization will conduct a fundamental business review of all SOEs. Subsequently, each SOE will be placed into an evaluation matrix to map out necessary improvement measures.
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