Law No. 23 of 2014 on Regional Government does not clearly distinguish between Regional-Owned Enterprises (Badan Usaha Milik Daerah/BUMD) that are commercially oriented and those established to serve the public interest. Commercially oriented BUMDs are expected to generate financial returns, while those serving the public interest are primarily expected to fulfill the needs of the community. As a result, local governments often need to allocate funds to support BUMDs whose primary focus is public service rather than profit generation.
Beyond their distinct characteristics and financial challenges, BUMDs also face issues concerning corporate governance structures, as well as the roles and responsibilities of their directors and supervisory boards. Challenges related to management and organizational governance remain prevalent. Excessive intervention by local governments in the management of BUMDs can undermine their independence and, in turn, hinder their development. In addition, the inability of some BUMDs to provide effective services or generate adequate revenue can place further burdens on the enterprises.
Meanwhile, management policies that potentially cause losses to BUMDs may be classified as corruption under Indonesia's anti-corruption laws. This is linked to Law No. 17 of 2003 on State Finance, which places separated state or regional assets invested in BUMDs within the scope of state finances. This legal framework can make decision-making and policy implementation more cautious and, at times, less responsive.
“Directors and supervisory board members are often concerned that losses resulting from the performance of a BUMD could later be treated as a criminal act of corruption,” said Dr. Yudho Taruno Muryanto, S.H., M.Hum., during his open doctoral examination at Room III.1.1, Faculty of Law, Universitas Gadjah Mada (FH UGM), on Thursday (27/7). A lecturer at the Faculty of Law, Universitas Sebelas Maret (UNS), Yudho defended his dissertation entitled “The Responsibilities of Directors and Supervisory Boards in the Management of Regional-Owned Enterprises to Implement Good Corporate Governance Principles.”
Yudho Taruno Muryanto argued that the assets of BUMDs should ideally be separated from state finances. “This would allow managers to run the company more effectively, as the principles of good corporate governance could be implemented more fully,” he concluded. (Fardi)
