The Ethics and Boundaries of Artificial Intelligence: When Technology Demands Human Wisdom

Not long ago, the American public found itself discussing what initially appeared to be a minor editorial oversight but soon evolved into a far more profound debate about the role of artificial intelligence in public life. During the submission of an amendment associated with the United States Congress, linked to Representative Anna Paulina Luna, observers noticed the phrase "Claude responded:" embedded within one of the supporting documents. The expression is a familiar marker produced by Anthropic's AI assistant, Claude, when generating responses. Although it was later clarified that the AI had merely assisted in producing a summary rather than drafting the legislative text itself, the incident quickly attracted widespread attention. Public discussion shifted away from the politician herself towards a much broader question: how much intellectual responsibility should human beings delegate to statistical machines capable of producing convincing written language?

The incident demonstrated that the real controversy was never the existence of artificial intelligence itself but rather the manner in which people choose to employ it. A seemingly insignificant editorial oversight became symbolic of a much larger transformation. Artificial intelligence has quietly entered domains that were once regarded as the exclusive territory of human judgement. Governments, universities, corporations, research institutions, and even ordinary households increasingly rely upon systems capable of writing reports, translating languages, summarising lengthy documents, and generating sophisticated ideas within seconds. Yet every technological advance carries a corresponding ethical obligation. As Stuart Russell argues in Human Compatible (2019, Viking), the greatest challenge surrounding artificial intelligence is not building machines that become increasingly intelligent, but ensuring that their objectives remain consistently aligned with human values.

Artificial intelligence, despite its remarkable capabilities, is fundamentally different from human intelligence. It does not possess consciousness, moral awareness, or genuine understanding of right and wrong. Instead, AI operates by recognising statistical relationships derived from enormous quantities of data. It predicts probable outcomes, identifies recurring patterns, and constructs responses according to mathematical probabilities rather than ethical reflection. Consequently, artificial intelligence cannot itself be described as virtuous or malicious. Every moral consequence arising from its use ultimately rests with the individuals who design, deploy, and rely upon it. Melanie Mitchell, in Artificial Intelligence: A Guide for Thinking Humans (2019, Farrar, Straus and Giroux), explains that although modern AI frequently appears astonishingly intelligent within specialised tasks, it lacks the common-sense understanding and contextual reasoning that characterise genuine human cognition.

Viewed from this perspective, it becomes easier to understand why very few governments seek to prohibit artificial intelligence entirely. Across the world, policymakers recognise that AI offers extraordinary opportunities for scientific research, healthcare, education, manufacturing, transportation, and public administration. Rather than banning the technology, most nations concentrate on regulating how it is applied. Artificial intelligence resembles electricity in this respect: electricity can illuminate homes or cause devastating harm depending upon how people choose to employ it. Likewise, AI derives its ethical character from the intentions behind its use rather than from the technology itself. Henry Kissinger, Eric Schmidt, and Daniel Huttenlocher argue in The Age of AI (2021, Little, Brown and Company) that artificial intelligence represents a transformational innovation demanding entirely new approaches to governance, economics, diplomacy, and ethical decision-making.

One of the most important ethical principles surrounding artificial intelligence is intellectual honesty. Contemporary AI systems are capable of producing essays, research summaries, and professional reports of remarkably high quality, creating a temptation for some individuals to present AI-generated material as their own original work. Within educational institutions, such behaviour represents far more than a breach of academic regulations; it undermines the fundamental purpose of education itself. Genuine learning is not merely about obtaining correct answers but about cultivating analytical thinking, independent judgement, and intellectual maturity. When students surrender the entire thinking process to artificial intelligence, they may complete assignments more quickly, yet simultaneously sacrifice the opportunity to strengthen their own reasoning abilities. Neil Postman warned in Technopoly (1992, Vintage Books) that technologically advanced societies often become dangerously inclined to surrender human judgement to machines without recognising the gradual erosion of critical thinking.

Another central ethical concern involves the protection of personal and confidential data. Many individuals unknowingly submit business reports, customer information, financial records, medical documents, and other sensitive materials to publicly accessible AI platforms. Such practices inevitably raise questions regarding privacy, data security, and institutional responsibility. For this reason, numerous multinational corporations and government agencies prohibit employees from entering confidential information into public generative AI services. Shoshana Zuboff, in The Age of Surveillance Capitalism (2019, PublicAffairs), argues that personal data has become one of the most valuable economic resources of the modern era. The more information individuals disclose, the greater the possibility that such data may be exploited in ways that were never originally anticipated.

An equally significant ethical challenge concerns the rapid spread of misinformation. Generative AI now possesses the capability to produce realistic articles, convincing photographs, synthetic voices, and highly persuasive videos that closely resemble authentic material. While these innovations create exciting opportunities within education, entertainment, and creative industries, they simultaneously provide powerful tools for propaganda, deception, fraud, and political manipulation. The growing phenomenon of deepfakes illustrates how increasingly difficult it has become for ordinary citizens to distinguish between reality and digital fabrication. Kate Crawford argues in Atlas of AI (2021, Yale University Press) that artificial intelligence should never be viewed as a politically neutral technology, because its development and deployment remain deeply intertwined with structures of economic power, governmental authority, and commercial interests.

Within public administration, ethical expectations surrounding artificial intelligence are considerably higher than those applied in everyday personal use. Decisions affecting millions of citizens cannot responsibly depend upon algorithmic recommendations alone. AI may efficiently summarise legislation, analyse statistical information, identify legal precedents, or organise extensive documentation, but ultimate responsibility for public policy must remain with accountable human decision-makers. The Anna Paulina Luna incident serves as an instructive reminder that even the smallest indication of AI involvement in official governmental documentation may generate legitimate public questions concerning transparency, oversight, and democratic accountability. Brian Christian emphasises in The Alignment Problem (2020, W. W. Norton & Company) that the central challenge is not enabling AI to make increasingly sophisticated decisions but ensuring that human beings retain full moral responsibility for every decision ultimately adopted.

Another important ethical issue concerns algorithmic bias. Artificial intelligence does not invent its understanding independently; it learns from data generated by human societies. If those datasets contain historical prejudice, discrimination, social inequality, or cultural imbalance, AI systems may unintentionally reproduce and even reinforce such patterns. Consequently, artificial intelligence cannot automatically be regarded as objective simply because it relies upon mathematics. Safiya Umoja Noble demonstrates in Algorithms of Oppression (2018, New York University Press) that search engines and algorithmic systems can perpetuate harmful stereotypes whenever they are trained upon biased or incomplete information. Continuous human oversight therefore remains essential to prevent AI from amplifying injustices that already exist within society.

Discussions surrounding artificial intelligence cannot be reduced to a simple catalogue of prohibited actions. The more important challenge lies in cultivating the wisdom required to determine when technology should assist human decision-making and when human judgement must remain entirely indispensable. Artificial intelligence undoubtedly represents one of humanity's greatest technological achievements, yet its extraordinary capabilities never diminish the enduring importance of integrity, accountability, compassion, and critical thought. As long as people remain firmly responsible for defining the purposes and boundaries of AI, the technology will continue to serve as an invaluable instrument for human progress. However, should society begin surrendering moral judgement itself to machines without thoughtful supervision, the resulting crisis will no longer concern artificial intelligence but rather the gradual decline of human wisdom. Max Tegmark expresses a similar conclusion in Life 3.0 (2017, Alfred A. Knopf), arguing that the future of artificial intelligence will ultimately depend not upon the sophistication of algorithms but upon the wisdom with which humanity chooses to govern them.

The rapid advancement of artificial intelligence has also introduced an increasingly complex question concerning accountability. Unlike conventional machines that merely execute straightforward instructions, modern AI systems frequently generate outputs that cannot always be predicted with absolute certainty because their responses emerge from sophisticated statistical learning processes. If an AI system delivers an incorrect medical recommendation, produces misleading financial analysis, or assists in preparing flawed legal advice, determining responsibility becomes considerably more complicated. Should accountability rest with the software developer, the organisation deploying the technology, the individual user, or the institution that authorised its implementation? Luciano Floridi argues in The Ethics of Artificial Intelligence (2022, Oxford University Press) that moral and legal responsibility must always remain with human beings, since artificial intelligence neither possesses consciousness nor the ethical agency required to bear responsibility for its actions.

This question of responsibility becomes particularly significant within the healthcare sector. Hospitals and medical institutions increasingly employ artificial intelligence to interpret diagnostic imaging, estimate disease risks, prioritise patients according to urgency, and support clinical decision-making. These capabilities undoubtedly improve efficiency and enable healthcare professionals to process vast quantities of medical information far more rapidly than before. Nevertheless, no responsible physician should surrender clinical judgement entirely to an algorithm. AI may identify statistical patterns with remarkable accuracy, yet it cannot appreciate the emotional condition of a frightened patient, understand complex family circumstances, or recognise the deeply personal values that often influence medical decisions. Eric Topol argues in Deep Medicine (2019, Basic Books) that the future of healthcare lies not in replacing physicians with machines, but in allowing artificial intelligence to perform routine analytical tasks so that doctors can devote greater attention to empathy, communication, and compassionate care.

Education presents another field in which artificial intelligence offers both extraordinary opportunities and significant ethical challenges. Students now possess immediate access to sophisticated explanations, essay drafts, mathematical solutions, and research assistance through AI-powered systems. Such accessibility undoubtedly broadens educational opportunities and encourages independent exploration. However, it also creates a powerful temptation to substitute genuine intellectual effort with automated responses. When learners rely upon AI to complete every assignment without engaging with the underlying ideas, they risk weakening the very skills that education is intended to cultivate, including reasoning, creativity, analysis, and independent judgement. Ethan Mollick, in Co-Intelligence: Living and Working with AI (2024, Portfolio), argues that artificial intelligence should function as a collaborative learning partner rather than as a replacement for human thinking.

Artificial intelligence has likewise reignited longstanding debates concerning copyright and intellectual property. Modern generative AI systems are capable of producing paintings, music, poetry, novels, software code, and journalistic articles that often appear strikingly original. Yet these systems acquire their capabilities by learning from enormous collections of human-created works. Consequently, artists, authors, musicians, photographers, and publishers increasingly question whether AI-generated material truly represents original creativity or whether it simply recombines existing intellectual contributions in new forms. These concerns have prompted legal disputes across several jurisdictions regarding ownership, licensing, and fair compensation. James Boyle anticipated many of these issues in The Public Domain (2008, Yale University Press), arguing that technological innovation continually challenges society to redefine intellectual property laws in ways that both encourage creativity and safeguard the legitimate rights of creators.

Within the commercial world, artificial intelligence has fundamentally transformed organisational decision-making. Businesses increasingly rely upon AI to forecast consumer behaviour, optimise supply chains, analyse financial trends, personalise marketing strategies, and improve operational efficiency. Such capabilities provide organisations with valuable competitive advantages. Nevertheless, commercial success cannot depend exclusively upon algorithmic recommendations. Business decisions frequently require an understanding of social trends, cultural expectations, ethical considerations, and rapidly changing economic circumstances that extend beyond numerical analysis alone. Thomas H. Davenport and Nitin Mittal explain in All-in on AI (2023, Harvard Business Review Press) that the organisations most likely to thrive in the age of artificial intelligence are those that combine computational intelligence with experienced human judgement rather than attempting to replace one with the other.

Journalism has likewise experienced profound changes through the adoption of artificial intelligence. Automated systems are now capable of producing financial reports, sports summaries, weather forecasts, and data-driven news articles within seconds. From an operational perspective, these developments significantly enhance newsroom productivity and reduce routine workloads. However, authentic journalism involves far more than assembling grammatically correct sentences. It requires rigorous verification, careful contextualisation, investigative reporting, ethical decision-making, and an unwavering commitment to public truth. Bill Kovach and Tom Rosenstiel reaffirm in The Elements of Journalism (2021, Crown) that the central obligation of journalism is disciplined verification rather than the rapid production of content. Artificial intelligence may assist reporters, but it cannot replace the professional responsibility required to establish public trust.

The legal profession has also begun integrating artificial intelligence into everyday practice. Lawyers increasingly utilise AI to search legal precedents, analyse contracts, organise case documentation, and identify relevant judicial decisions far more efficiently than traditional methods permit. These developments substantially reduce administrative burdens and improve research productivity. Yet legal practice extends well beyond document analysis. Judicial decisions frequently require nuanced interpretation of evidence, ethical reasoning, social context, and principles of justice that cannot be reduced to statistical prediction. Richard Susskind argues in Tomorrow's Lawyers (2017, Oxford University Press) that while artificial intelligence will undoubtedly reshape legal services, it cannot eliminate the indispensable role of human wisdom in interpreting the law fairly and responsibly.

Another essential ethical principle concerns transparency. Individuals have a legitimate right to know whether the text they are reading, the image they are viewing, the voice they are hearing, or the video they are watching has been created entirely by a human being, generated through artificial intelligence, or produced through collaboration between both. Such openness is fundamental to maintaining public confidence in digital information. If citizens lose the ability to distinguish authentic material from algorithmically generated content, confidence in communication itself may gradually deteriorate. The growing prevalence of highly convincing deepfake videos demonstrates precisely why transparency has become an increasingly urgent ethical requirement. For this reason, many experts advocate clear labelling practices for AI-generated content in order to reduce confusion and preserve public trust.

Closely connected with transparency is the equally important principle of verification. One of the most widely recognised limitations of generative artificial intelligence is its tendency to produce information that appears entirely convincing despite being factually incorrect—a phenomenon commonly described as AI "hallucination". These systems may confidently fabricate quotations, invent scholarly references, misattribute historical events, or produce entirely fictitious legal citations while maintaining an appearance of authority. Consequently, every significant AI-generated output should be carefully checked against reliable primary sources before being accepted or disseminated. Brian Christian observes in The Alignment Problem (2020, W. W. Norton & Company) that people must resist the temptation to abandon critical thinking merely because artificial intelligence communicates with remarkable fluency and confidence.

Every discussion concerning the ethical use of artificial intelligence returns to one fundamental principle: technology itself possesses neither morality nor intention. Artificial intelligence may process extraordinary quantities of information with astonishing speed, yet it cannot comprehend justice, compassion, integrity, dignity, or moral responsibility in the manner that human beings can. The true measure of successful AI adoption therefore lies not in the sophistication of algorithms but in society's determination to preserve those uniquely human values that no machine can genuinely replicate. Nick Bostrom expresses a closely related perspective in Superintelligence (2014, Oxford University Press), arguing that the defining challenge of this century is not simply constructing increasingly intelligent machines, but ensuring that humanity retains the wisdom, responsibility, and ethical judgement necessary to guide them wisely.

The continuing development of artificial intelligence is transforming not only the way people work but also the way humanity understands its own identity. For centuries, the capacity to think, reason, and create was regarded as the defining characteristic separating human beings from every other form of life. Today, AI systems are capable of composing essays, writing poetry, translating languages, generating computer code, and even producing artistic works of remarkable sophistication. These achievements have prompted some observers to question whether human intelligence is gradually losing its uniqueness. Yet such concerns overlook an essential distinction. Intelligence alone has never been the sole measure of human worth. Yuval Noah Harari argues in Homo Deus: A Brief History of Tomorrow (2017, Harper) that the greatest challenge of the coming decades will not be competing with machines in processing information, but discovering the uniquely human qualities that algorithms cannot replicate.

Among those uniquely human qualities, wisdom remains perhaps the most significant. Artificial intelligence may analyse enormous quantities of information within seconds and identify patterns beyond the reach of ordinary human cognition. Nevertheless, wisdom cannot be reduced to computational efficiency. It emerges from lived experience, emotional understanding, moral reflection, cultural awareness, and the capacity to appreciate the consequences of decisions upon real human lives. A judge weighing mercy alongside justice, a physician comforting a seriously ill patient, or a teacher recognising the hidden struggles of a discouraged student demonstrates forms of judgement that extend far beyond statistical analysis. Artificial intelligence may become increasingly intelligent, but genuine wisdom remains rooted in the complexities of human experience.

The remarkable fluency with which AI generates written language also places greater responsibility upon modern society to cultivate advanced digital literacy. In previous generations, well-structured writing was often regarded as a reliable indicator of expertise and credibility. Today, however, artificial intelligence can effortlessly produce polished prose that appears authoritative despite containing factual inaccuracies or entirely fabricated information. Consequently, the ability to verify evidence, compare multiple sources, evaluate credibility, and question persuasive narratives has become far more valuable than simply acquiring information. Carl T. Bergstrom and Jevin D. West emphasise in Calling Bullshit: The Art of Skepticism in a Data-Driven World (2020, Random House) that critical thinking has become one of the essential survival skills in an age increasingly dominated by data, algorithms, and persuasive digital communication.

Artificial intelligence is likewise reshaping the global economy by transforming the nature of employment itself. Routine administrative work, repetitive data processing, and predictable operational tasks are increasingly being automated through intelligent systems capable of performing them more rapidly and consistently than human workers. At the same time, demand continues to grow for professions requiring creativity, emotional intelligence, complex problem-solving, leadership, and interpersonal communication. Rather than signalling the disappearance of work altogether, AI is accelerating the transition towards occupations that rely more heavily upon distinctly human capabilities. Erik Brynjolfsson and Andrew McAfee explain in The Second Machine Age (2014, W. W. Norton & Company) that technological revolutions consistently eliminate certain forms of employment while simultaneously creating entirely new opportunities for those prepared to adapt through continuous learning.

These economic developments naturally raise another important ethical question: should artificial intelligence ever be permitted to make fully autonomous decisions in situations carrying profound consequences for human lives? Some advocates argue that algorithms may outperform people by remaining immune to fatigue, emotional bias, or inconsistency. Although such observations possess considerable merit, consistency alone cannot serve as the ultimate measure of ethical decision-making. Circumstances frequently arise in which compassion, contextual understanding, forgiveness, or moral judgement outweigh statistical optimisation. For this reason, many governments and professional organisations increasingly endorse the principle of human in the loop, ensuring that human beings retain ultimate authority over consequential decisions while artificial intelligence functions as an advisory instrument rather than an autonomous decision-maker.

Ethical considerations surrounding artificial intelligence also extend into the personal conduct of everyday users. Employing AI to improve grammar, generate ideas, organise research, or summarise complex documents generally represents a responsible and productive application of the technology. By contrast, using AI to fabricate evidence, impersonate individuals, spread malicious disinformation, conduct financial fraud, manipulate public opinion, or produce defamatory material constitutes a serious misuse of its capabilities. Artificial intelligence amplifies human capacity in much the same way that previous technological innovations expanded physical labour or communication. Whether that expanded capacity ultimately benefits or harms society depends entirely upon the moral character and intentions of those operating the technology.

The controversy surrounding Anna Paulina Luna therefore offers lessons extending far beyond the presence of a single overlooked phrase within an official document. More importantly, it illustrates that contemporary society has become increasingly attentive to the role artificial intelligence plays in governmental decision-making. Citizens rightly expect transparency whenever public institutions incorporate AI into legislative processes, administrative procedures, or policy development. They deserve to understand how AI has been employed, what safeguards exist to verify its outputs, and who ultimately bears responsibility should mistakes occur. Public confidence in democratic institutions depends not merely upon technological sophistication but upon openness, accountability, and the willingness of public officials to explain how important decisions are reached.

Recognising these challenges, governments, international organisations, research institutions, and technology companies have begun establishing comprehensive ethical frameworks for artificial intelligence. Although individual regulations differ across jurisdictions, they consistently emphasise principles such as fairness, transparency, accountability, safety, privacy, human rights, and non-discrimination. The objective is not to obstruct technological innovation but to ensure that scientific progress continues to serve humanity without undermining social trust or fundamental freedoms. Effective regulation therefore seeks an appropriate balance between encouraging innovation and protecting the public interest, acknowledging that responsible governance remains essential whenever transformative technologies emerge.

History repeatedly demonstrates that every revolutionary technology introduces both extraordinary opportunities and previously unimaginable risks. The steam engine reshaped industry, electricity transformed civilisation, aviation revolutionised transportation, and the internet fundamentally altered communication. Artificial intelligence now represents the latest chapter in this long narrative of technological transformation. Like every major innovation before it, AI possesses the capacity to improve living standards, expand scientific discovery, and increase economic prosperity. Yet history also reminds us that technological progress alone does not guarantee social progress. The benefits of innovation depend ultimately upon the ethical principles guiding its development and application.

The discussion presented throughout this essay therefore leads to a conclusion that is both simple and profoundly significant. Artificial intelligence should neither be regarded as humanity's greatest enemy nor celebrated as an infallible solution to every problem facing modern civilisation. It is an extraordinarily powerful instrument whose impact will always reflect the values, intentions, and wisdom of those who employ it. The Anna Paulina Luna episode demonstrated that even a seemingly trivial oversight involving AI can provoke important global conversations concerning transparency, responsibility, and ethical governance. Ultimately, the future of artificial intelligence will not be determined by the sophistication of algorithms alone, but by humanity's enduring commitment to integrity, accountability, critical thinking, and moral judgement. So long as these principles remain firmly embedded within society, artificial intelligence will continue to serve as a remarkable partner in human progress rather than becoming a substitute for the wisdom that only human beings can provide.

References

Bergstrom, Carl T., and Jevin D. West. Calling Bullshit: The Art of Skepticism in a Data-Driven World. New York: Random House, 2020.

Bostrom, Nick. Superintelligence: Paths, Dangers, Strategies. Oxford: Oxford University Press, 2014.

Boyle, James. The Public Domain: Enclosing the Commons of the Mind. New Haven: Yale University Press, 2008.

Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W. W. Norton & Company, 2014.

Christian, Brian. The Alignment Problem: Machine Learning and Human Values. New York: W. W. Norton & Company, 2020.

Crawford, Kate. Atlas of AI: Power, Politics, and the Planetary Costs of Artificial Intelligence. New Haven: Yale University Press, 2021.

Davenport, Thomas H., and Nitin Mittal. All-in on AI: How Smart Companies Win Big with Artificial Intelligence. Boston: Harvard Business Review Press, 2023.

Floridi, Luciano. The Ethics of Artificial Intelligence: Principles, Challenges, and Opportunities. Oxford: Oxford University Press, 2022.

Harari, Yuval Noah. Homo Deus: A Brief History of Tomorrow. London: Harvill Secker, 2017.

Kissinger, Henry, Eric Schmidt, and Daniel Huttenlocher. The Age of AI: And Our Human Future. London: John Murray Publishers, 2021.

Kovach, Bill, and Tom Rosenstiel. The Elements of Journalism: What Newspeople Should Know and the Public Should Expect. New York: Crown, 2021.

Mitchell, Melanie. Artificial Intelligence: A Guide for Thinking Humans. New York: Farrar, Straus and Giroux, 2019.

Mollick, Ethan. Co-Intelligence: Living and Working with AI. New York: Portfolio, 2024.

Postman, Neil. Technopoly: The Surrender of Culture to Technology. New York: Vintage Books, 1992.

Russell, Stuart. Human Compatible: Artificial Intelligence and the Problem of Control. New York: Viking, 2019.

Susskind, Richard. Tomorrow's Lawyers: An Introduction to Your Future. 2nd ed. Oxford: Oxford University Press, 2017.

Tegmark, Max. Life 3.0: Being Human in the Age of Artificial Intelligence. New York: Alfred A. Knopf, 2017.

Topol, Eric. Deep Medicine: How Artificial Intelligence Can Make Healthcare Human Again. New York: Basic Books, 2019.

Zuboff, Shoshana. The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power. New York: PublicAffairs, 2019.

Bahasa

Political Patronage and the Governance of Indonesia State-owned Enterprises

State-Owned Enterprises (SOEs) constitute one of the principal pillars of Indonesia's national economy, born of a constitutional mandate to control the branches of production that are vital to the state and that govern the livelihoods of the people. Yet in practice, SOEs have frequently been transformed into arenas for the distribution of political patronage, in which the position of commissioner — which ought to serve as an independent and professional supervisory post — has been deployed as an instrument of reward towards loyalists, party cadres, and campaign teams. This essay critically analyses the phenomenon of patronage in the appointment of SOE commissioners in Indonesia, tracing the historical roots and legal foundations of SOEs, the operative mechanisms of patronage, its consequences for corporate governance and company performance, case studies of SOE failure attributable to patronage, and alternative merit-based reform frameworks. Drawing upon a public policy analytical approach and patron-client theory, this essay argues that political patronage within SOEs is not merely an administrative problem but a structural malaise that threatens economic democracy and national competitiveness.

The appointment of Ginka Febriyanti Ginting as Commissioner of Pertamina Retail has widely been perceived as a clear case of political patronage within Indonesia’s state‑owned enterprises. Her background is not primarily rooted in the energy or retail sectors, but rather in political activism: she was known as the chair of BISON, a volunteer organisation that openly supported Prabowo Subianto and Gibran Rakabuming Raka during the 2024 presidential election, and was also involved in political mobilisation during the Banten gubernatorial race. The fact that her appointment followed soon after the new administration took office has led many observers to conclude that this was less about professional merit and more about rewarding political loyalty.

At the time of her appointment, Ginka was only twenty‑seven or twenty‑eight years old, with an academic background in accounting and management from Universitas Esa Unggul. While such qualifications are relevant in a general sense, her professional experience in the energy industry was limited. This has fuelled public scepticism that the decisive factor was not competence but proximity to power. The controversy deepened when her name was linked to reports of paid demonstrations in 2025, reinforcing the impression that her role as commissioner was part of a broader pattern of patronage and political consolidation.

The appointment of Mufli Budi Ananda, formerly the personal assistant of celebrity Raffi Ahmad, as Commissioner of PT Krakatau Posco is widely regarded as a case of political patronage in a state‑owned enterprise. His professional background does not align with the strategic role he now occupies, and his close association with Raffi—himself a Special Presidential Envoy under Prabowo Subianto’s administration—suggests that political proximity rather than merit was decisive.

Why this is seen as patronage

Mufli was known primarily as Raffi Ahmad’s assistant, accompanying him in both professional and personal activities. His academic record shows a diploma in electrical engineering and incomplete studies in industrial engineering, but there is little evidence of substantial experience in the steel or energy industries. Despite this, he was appointed commissioner of Krakatau Posco, a joint venture between Krakatau Steel and South Korea’s POSCO, one of Indonesia’s most strategic industrial enterprises. The absence of a clear professional track record in the sector raises questions about the rationale behind his appointment.

The link to Raffi Ahmad is crucial here. Raffi is not only a celebrity but also holds an official political role as Special Envoy for Youth and Creative Workers in the Prabowo–Gibran government. His proximity to the ruling administration, combined with Mufli’s personal loyalty to him, strongly suggests that the appointment was a reward for political or personal connections rather than a decision based on corporate governance standards.

Implications for BUMN governance

Such appointments reinforce the perception that BUMN commissioner posts are used as instruments of political patronage. Instead of being filled by professionals with sectoral expertise, they are often awarded to individuals with ties to political figures, celebrities, or campaign networks. This undermines the credibility of BUMN governance, risks weakening corporate performance, and fuels public cynicism about the integrity of state‑owned enterprises.

In Mufli’s case, the controversy is amplified by the symbolic nature of his background: from celebrity assistant to commissioner of a major steel company. It highlights how political networks can override professional considerations, turning BUMN into arenas of reward distribution rather than engines of economic efficiency.

In short, Mufli Budi Ananda’s appointment exemplifies the pattern of political patronage in BUMN, where loyalty and proximity to power outweigh competence.

The implications for governance are significant. State‑owned enterprises are expected to operate under principles of transparency, professionalism, and good corporate governance. Yet when key positions are filled by political volunteers, the public perceives a shift in function: from corporations driven by performance to instruments serving the interests of those in power. This undermines trust in BUMN as professional institutions and strengthens the belief that they remain arenas for political reward rather than engines of economic development.

Thus, Ginka dan Mufli’s cases are not merely the story of a young figure entering a boardroom; it symbolises the persistence of patronage in Indonesia’s state‑owned enterprises. It illustrates how political and economic spheres remain intertwined, with loyalty in the campaign trail opening doors to strategic corporate positions.  

Several Indonesian celebrities have indeed been appointed as commissioners in state‑owned enterprises, and these cases are frequently regarded as examples of political patronage, since they highlight political proximity or public popularity rather than professional competence.

One of the most prominent examples is Giring Ganesha, former vocalist of the band Nidji and also Chairman of the Indonesian Solidarity Party (PSI). He was appointed commissioner at PT Garuda Maintenance Facility Aero Asia (GMFI), a subsidiary of Garuda Indonesia, after actively supporting the Prabowo–Gibran ticket in the 2024 presidential election. His appointment drew attention because Giring is better known as a politician and musician than as a professional in the aviation sector.

Another case is Yovie Widianto, musician and founder of the groups Kahitna and Yovie & Nuno. In June 2025, he was appointed commissioner at PT Pupuk Indonesia (Persero). Yovie had also served as a special presidential staff member since October 2024, so his position in the BUMN was seen as part of a political patronage network linking the arts with the corridors of power.

In addition, Taufik Hidayat, former badminton player and Olympic gold medallist in Athens 2004, was appointed commissioner at PT PLN Energi Primer Indonesia (PLN EPI). He has also been politically active, joining the Gerindra Party and even standing as a legislative candidate. His appointment reinforced the impression that commissioner posts in BUMN are often awarded as recognition of political loyalty or public popularity.

The phenomenon of celebrities becoming commissioners in BUMN illustrates a recurring pattern of patronage: strategic posts in state‑owned enterprises are used as instruments of political reward, whether for volunteers, party figures, or public personalities who support the ruling regime. This has drawn criticism because it risks undermining the principles of good corporate governance, reducing professionalism, and strengthening the public perception that BUMN function more as political instruments than as purely economic entities.

The impact of appointing celebrities as commissioners in Indonesia’s state‑owned enterprises is multifaceted and often controversial. From a governance perspective, the presence of public figures whose main credentials lie in popularity rather than professional expertise can weaken the principle of meritocracy. Commissioner posts are meant to be occupied by individuals with sector‑specific knowledge and managerial experience; when appointments are made on the basis of patronage or fame, the quality of oversight and strategic direction is at risk of decline.

Such appointments also reinforce the public perception that BUMN are being used as instruments of political patronage. Instead of being seen as professional institutions, they appear to serve as arenas for political reward, where loyalty or campaign support is exchanged for prestigious posts. This erodes public trust in BUMN as credible corporate entities and fuels cynicism about their role in economic development.

In terms of performance, the mismatch between business needs and the capacities of celebrity commissioners can hinder effective decision‑making. Without relevant experience in sectors such as energy, aviation, or heavy industry, these figures may struggle to contribute meaningfully to board deliberations. This undermines the supervisory function of the board and threatens adherence to principles of good corporate governance.

There is, however, a symbolic dimension worth noting. Appointing celebrities can be presented as an attempt to make BUMN more relatable to the wider public, signalling openness to figures beyond the technocratic elite. Yet the symbolic benefit is often outweighed by the risks of political patronage and diminished professionalism.

In essence, the main consequences of celebrity appointments to BUMN commissioner posts are weakened governance, heightened perceptions of political patronage, and potential declines in corporate performance. The phenomenon illustrates how popularity and political proximity can override competence, turning state‑owned enterprises into political instruments rather than engines of economic efficiency.

BETWEEN CONSTITUTIONAL MANDATE AND THE DISTORTION OF POWER

I. INTRODUCTION

A nation born of the spirit of economic independence and social justice inevitably places great expectations upon the institutions it constructs. In Indonesia, those expectations have been borne, in no small measure, by State-Owned Enterprises. Since the proclamation of independence, SOEs were envisioned as the long arm of the state in managing vital resources, ensuring the provision of public services, and serving as locomotives of national development. They were never conceived as ordinary business entities; rather, they were ideological instruments bound directly to the constitution itself.

Yet beneath the grandeur of their constitutional function, Indonesia's SOEs today confront a deeply troubling paradox. Rather than standing as bastions of professionalism and efficiency, SOEs have frequently become arenas for the distribution of power. Research by Transparency International Indonesia (2025) reveals a disquieting finding: of 562 commissioner seats across all SOEs, some 165 positions — or 29.3 per cent — are occupied by politicians, comprising both party cadres and campaign volunteers. This figure is not merely a statistic; it is a reflection of the manner in which the state treats its SOEs — not as business institutions, but as arenas of political reciprocity.

In political science, this phenomenon is known as patronage: a mechanism of political exchange whereby state authority distributes material benefits — positions, contracts, or access — to supporters in compensation for their loyalty. James Scott (1972), in his seminal work on patron-client relations in South-East Asia, defines patronage as an asymmetrical relationship of mutual exchange, in which the patron provides resources and protection to the client, whilst the client furnishes support and loyalty. In the context of Indonesia's SOEs, this pattern operates with considerable transparency and systematicity.

This essay is structured to accomplish five objectives: first, to trace the historical roots and legal foundations of SOEs in Indonesia; second, to analyse the mechanisms of patronage in the appointment of SOE commissioners; third, to examine the impact of patronage upon corporate governance and SOE performance; fourth, to discuss case studies of SOE failure precipitated by patronage; and fifth, to formulate merit-based reform alternatives that may be drawn from the experience of other nations.

 

II. THE HISTORICAL BACKGROUND OF STATE-OWNED ENTERPRISES IN INDONESIA

 

A. Colonial Roots and Nationalisation

The origins of SOEs in Indonesia cannot be separated from the history of colonialism. Under Dutch rule, various government-owned enterprises (staatsondernemingen) managed strategic resources such as plantations, mining operations, and transportation networks. Following independence, the Indonesian government assumed control of these assets through a gradual process of nationalisation that unfolded primarily during the 1950s and early 1960s. This nationalisation was grounded in the spirit of economic self-reliance and a rejection of foreign capital dominance, which was regarded as a continuation of colonialism in a new guise.

Merle Ricklefs (2008), in A History of Modern Indonesia Since c. 1200, observes that the nationalisation of Dutch enterprises during the Sukarno era constituted a simultaneous political and economic step aimed at constructing national identity. SOEs at that time were perceived as symbols of sovereignty — evidence that the Indonesian nation was capable of managing its own national wealth. It was this ideology that was subsequently enshrined in Article 33 of the 1945 Constitution.

 

B. The New Order Era: SOEs as Engines of Development and Early Patronage

Under Suharto's administration, SOEs expanded rapidly in number and scope, yet simultaneously began to display the early seeds of patronage. Harold Crouch (1988), in The Army and Politics in Indonesia, describes how Suharto constructed patronage networks involving the military, the bureaucracy, and the business community through state institutions, including SOEs. Strategic positions within SOEs were frequently filled by retired military officers and technocrats loyal to Suharto, rendering SOEs instruments for the consolidation of New Order power.

Nonetheless, during this period SOEs also succeeded in serving as drivers of infrastructure development and basic industry. Pertamina's success in managing oil revenues during the 1970s — though ultimately shaken by the debt crisis of 1975 — illustrates the ambivalence characteristic of Indonesian SOEs: on the one hand, possessing the potential to function as an economic force; on the other, remaining vulnerable to the abuse of power.

 

C. The Reform Era and the Continuity of Patronage

The collapse of the New Order in 1998 brought great hopes for reform in SOE governance. The establishment of the Ministry of State-Owned Enterprises in 2001 was intended to professionalise the management of state companies. However, as analysed by Vedi Hadiz and Richard Robison (2004) in Reorganising Power in Indonesia: The Politics of Oligarchy in an Age of Markets, reform produced a reorganisation of elites rather than a decomposition of power. The old oligarchs adapted to the new democratic environment, and patronage found fresh channels through the proliferating political parties of the post-Reform era.

In the post-Reform multi-party context, SOEs became sources of rent contested by ruling coalitions. The practice of patronage in the appointment of commissioners, previously concentrated in Suharto's hands, became distributed amongst the coalition parties — rendering it more complex, though no less systematic.

III. LEGAL FOUNDATIONS AND THE PURPOSE OF STATE-OWNED ENTERPRISES

 

A. Article 33 of the 1945 Constitution: The Constitutional Foundation

The highest legal foundation for the existence of SOEs in Indonesia is Article 33 of the Constitution of the Republic of Indonesia of 1945. This article stipulates that the economy shall be organised as a collective endeavour based upon the principle of kinship; that branches of production of importance to the state and which affect the livelihood of the people shall be controlled by the state; and that the land, the waters, and the natural resources contained therein shall be controlled by the state and utilised for the greatest prosperity of the people.

Sri Edi Swasono (2010), the economist widely regarded as the custodian of the spirit of Article 33, asserts that the term 'controlled' in this article carries a meaning far broader than mere formal ownership. State control encompasses regulation, arrangement, administration, management, and supervision — all directed towards the greatest prosperity of the people. SOEs are one of the principal instruments through which this state control is realised in practical terms.

 

B. Law No. 19 of 2003 on State-Owned Enterprises

The principal technical regulation governing SOEs is Law Number 19 of 2003 on State-Owned Enterprises. This law defines an SOE as a business entity whose capital is wholly or largely owned by the state through direct equity participation derived from separated state assets. The law divides SOEs into two forms: the Limited Liability Company (Persero), which is profit-oriented, and the Public Corporation (Perum), which is more oriented towards the provision of public services.

With respect to governance, Article 28 of Law No. 19/2003 stipulates that commissioners are appointed and dismissed by the General Meeting of Shareholders (RUPS). Given that the majority shareholder of SOEs is the state, represented by the Ministry of SOEs and/or the Ministry of Finance, the de facto power of appointing commissioners rests in the hands of the government. This legal framework, which confers broad discretionary authority upon the executive without competitive selection mechanisms, constitutes the structural loophole through which political patronage flourishes.

 

C. Good Corporate Governance and Supplementary Regulations

The government has, in truth, endeavoured to address this governance problem through various subsidiary regulations. Minister of SOEs Regulation No. PER-01/MBU/2011 on the Implementation of Good Corporate Governance (GCG) in SOEs obliges state companies to apply the principles of transparency, accountability, responsibility, independence, and fairness. Furthermore, Minister of SOEs Regulation No. PER-03/MBU/02/2015 governs the criteria and procedures for the appointment of SOE commissioners.

However, as critiqued by Mardiasmo (2018) in Akuntansi Sektor Publik (Public Sector Accounting), sound regulation on paper does not necessarily correspond to sound implementation in practice. So long as the mechanism for appointing commissioners remains a matter of executive discretion without robust independent selection, GCG regulation will amount to little more than lip service.

 

D. The Purpose of State-Owned Enterprises

Normatively, Article 2 of Law No. 19/2003 establishes the purposes of SOE establishment, which include: making a contribution to the development of the national economy in general and to state revenues in particular; pursuing profit; rendering public benefit through the provision of goods and/or services of high quality adequate to meet the needs of the people; pioneering business activities not yet feasible for the private sector and cooperatives to undertake; and actively providing guidance and assistance to economically weak business actors, cooperatives, and the community.

Accordingly, SOEs in Indonesia carry a dual mandate: as business entities that must generate profit, and simultaneously as development agents serving the public interest. It is precisely this dual mandate that renders SOE governance complex — and that makes the infiltration of political interests so profoundly damaging.

IV. THE ANATOMY OF POLITICAL PATRONAGE IN SOE COMMISSIONER APPOINTMENTS

A. Current Data and Facts

Research by Transparency International Indonesia published in 2025 provides a comprehensive map of patronage in SOE commissioner positions. Of a total of 562 commissioner posts across all SOEs, some 165 seats — or 29.3 per cent — are filled by politicians. The composition comprises 104 party cadres and 61 political volunteers. In terms of party representation, Gerindra dominates with 48.6 per cent of the total politicians occupying commissioner seats, followed by Demokrat (9.2%), Golkar (8.3%), and PDI-P, PAN, and PSI at 5.5 per cent each.

More troubling still, only 14.9 per cent of SOE commissioners hold a purely professional background. This figure indicates that, within the ecosystem of Indonesian SOE commissioners, professionalism is the minority whilst political affiliation is the majority — an inversion of what ought to obtain in a state committed to good governance.

 

B. The Operative Mechanisms of Patronage

How does this patronage operate in concrete terms? John Sidel (1999), in Capital, Coercion, and Crime: Bossism in the Philippines, identifies a pattern directly relevant to the Indonesian context: political patronage operates through networks of loyalty constructed before political contestation and consolidated after victory. In the context of Indonesian SOEs, this pattern may be identified as follows.

First, the pre-electoral phase: political parties and candidates build networks of support involving volunteers, cadres, and community figures. This support is not freely given — it constitutes a social and political investment that anticipates a return. Second, the post-electoral phase: once victory has been secured, the victors bear a moral and political obligation to 'reward' those who have contributed. Commissioner positions in SOEs, with their attractive salaries and privileges and without heavy operational responsibilities, become one of the most popular mechanisms of reward.

Third, the appointment process: appointments are made through the relevant ministry or upon the direct recommendation of the president or senior party officials, without rigorous competence-based selection mechanisms. Coalition parties propose the names of cadres or sympathisers, and the government accommodates these proposals as part of coalition seat-sharing arrangements. This is a patron-client system operating within the formal framework of democracy.

 

C. Continuity Across Administrations

It is important to note that this practice is not the product of any single regime; it is a cross-administration phenomenon that attests to its deep institutional embeddedness. Since the era of Susilo Bambang Yudhoyono, the tendency to place political loyalists in commissioner positions was already apparent. During the administration of Joko Widodo, the practice continued with the appointment of public figures and campaign team members. Under Prabowo Subianto's administration, the pattern has become still more pronounced, with figures directly involved in the campaign or in the structure of supporting parties — reflected in Gerindra's dominance at 48.6 per cent of all politicians holding commissioner seats.

Richard Winters (1996), in Power and Wealth in Asia, argues that patronage is an inherent feature of political systems in which power is concentrated and the distribution of resources depends upon access to the centre of power. So long as these structural conditions remain unchanged, patronage will persist irrespective of changes in administration.

V. THE IMPACT OF PATRONAGE UPON SOE GOVERNANCE AND PERFORMANCE

 

A. Conflicts of Interest and the Weakening of Supervisory Function

The principal function of commissioners is to supervise the conduct of the company and to provide counsel to the board of directors. This function demands independence, objectivity, and technical competence. When commissioner positions are filled by politicians holding party affiliations and agendas, that independence is structurally threatened. Conflicts of interest arise because commissioners who are party cadres tend to prioritise the interests of the party or elite that appointed them above those of the company.

Wahyudi Kumorotomo (2015), in Desentralisasi dan Tata Kelola Pemerintahan di Indonesia (Decentralisation and Governmental Governance in Indonesia), observes that conflicts of interest in SOE management are frequently unrecognised by stakeholders themselves, because the system has become normalised. Commissioners who ought to supervise the company independently instead act as extensions of the political elite, rendering the control function hollow.

 

B. The Degradation of Professionalism and a Culture of Rent-Seeking

When competence is no longer the primary prerequisite for occupying a commissioner's seat, the degradation of governance quality becomes an unavoidable consequence. Robert Klitgaard (1988), in Controlling Corruption, identifies a deceptively simple yet powerful formula: Corruption = Monopoly + Discretion – Accountability. Patronage within SOEs embodies all three elements: a government monopoly over commissioner appointments, broad discretion unsupported by competitive selection, and weak accountability owing to the absence of rigorous performance-based evaluation mechanisms.

As a consequence, the position of commissioner is transformed into a symbol of patronage — a 'political gift' that demands no performance. A culture of rent-seeking thrives: commissioners receive salaries and bonuses irrespective of company performance. President Prabowo Subianto himself has highlighted this irony — many SOEs post losses, yet their commissioners continue to receive bonuses. This is the most visible manifestation of how patronage corrodes the relationship between reward and performance.

 

C. Long-Term Consequences: Oligarchy and the Erosion of Economic Democracy

At a more fundamental level, political patronage within SOEs contributes to the reinforcement of economic-political oligarchy. Jeffrey Winters (2011), in Oligarchy, defines oligarchy as the defence of material wealth by those who possess it in large quantities. In the Indonesian context, SOE patronage networks tighten the bonds between the political elite and the economic elite, creating a closed circle in which access to state resources is determined by proximity to power rather than by merit.

This corrodes the foundations of economic democracy. When SOEs that ought to serve as instruments of equitable distribution instead operate as arenas of patronage distribution, economic inequality is reinforced rather than reduced. The broader public loses the opportunity to benefit equitably from the economic returns of SOEs, because SOEs are not working for them but for elite networks.

VI. CASE STUDIES: SOE FAILURE IN THE SHADOW OF PATRONAGE

 

A. Garuda Indonesia: An Identity Crisis Amid Political Patronage

Garuda Indonesia is amongst the most dramatic cases illustrating how political patronage can devastate a company that genuinely possesses great potential. For many years, the national flag carrier suffered consecutive losses despite receiving capital injections from the state. The appointment of commissioners and directors laden with political interests caused Garuda to lose its business direction — strategic decisions were driven more by loyalty and proximity to the elite than by professionalism.

The Garuda aircraft procurement case, which resulted in corruption charges, stands as concrete evidence of the weakness of commissioner oversight. When the board of commissioners lacks adequate technical competence and is not independent of political pressure, supervision of strategic business decisions becomes a mere formality. Garuda became entangled in enormous debts and came close to bankruptcy, requiring a state rescue operation that consumed substantial public funds.

 

B. PT Krakatau Steel: A Strategic Industry Ensnared by Patronage

PT Krakatau Steel, the steel producer that ought to serve as the backbone of national manufacturing industry, has suffered repeated losses despite government support. The placement of political figures in the ranks of commissioners and directors has impeded the company from restructuring consistently. Political patronage slows the process of efficiency because every business decision must take into account the interests of parties who consider themselves entitled to influence within the company.

Agus Pramusinto and Erwan Agus Purwanto (eds., 2009), in Reformasi Birokrasi, Kepemimpinan, dan Pelayanan Publik (Bureaucratic Reform, Leadership, and Public Services), note that reform efforts in industrial SOEs such as Krakatau Steel are frequently impeded not by technical factors but by political resistance from parties with a vested interest in maintaining the patronage status quo.

 

C. PT Asuransi Jiwasraya: The Collapse of Oversight, the Collapse of Trust

The case of PT Asuransi Jiwasraya is the most dramatic in the history of SOE failure attributable to weak oversight. This state-owned insurance company collapsed as a result of problematic investment practices that were inadequately supervised by its commissioners and directors. State losses reached trillions of rupiah, and hundreds of thousands of policyholders lost their savings.

Most alarming is the fact that the commissioner positions filled by individuals with political backgrounds failed entirely to discharge their supervisory function. Pratikno and Cornelis Lay (2018), in various writings on state governance, emphasise that oversight failures in SOEs almost invariably have their roots in the placement of incompetent and non-independent commissioners. The Jiwasraya case constitutes empirical confirmation of this argument.

VII. INTERNATIONAL COMPARISONS: MERIT-BASED SELECTION IN PRACTICE

 

A. Singapore: Meritocracy as the DNA of Governance

Singapore offers the sharpest contrast to Indonesia. State-owned companies such as Temasek Holdings employ commissioner appointment mechanisms grounded in technical competence, professional track record, and integrity. Appointments are made through the Public Service Commission according to transparent and measurable criteria. The result: Temasek has become one of the most successful sovereign wealth funds in the world, with a global portfolio valued at hundreds of billions of dollars.

Peter Ho (2012), former Chairman of the Public Service Commission of Singapore, has explained in various addresses that Singapore's success in managing state companies rests upon a single principle: the right person for the right job, not the right party member for the right job. Meritocracy is not merely a slogan but a system that has been institutionalised at every level of public administration.

 

B. The United Kingdom: Independence as the Cornerstone of Selection

In the United Kingdom, the selection process for commissioners of public companies is conducted by the Office of the Commissioner for Public Appointments, which operates independently of the government. Selection criteria encompass technical competence, managerial experience, and commitment to good governance. As a result, public companies such as the BBC and Network Rail possess boards of supervisors that are relatively free from direct political intervention, though not entirely insulated from political dynamics.

The British example teaches that the independence of the selection commission is the key. So long as the mechanism for appointing SOE commissioners rests in the hands of the incumbent government without a check from an independent institution, patronage will continue to represent an irresistible temptation.

 

C. Sweden: Transparency and Public Accountability

Sweden is renowned for its exceptionally high standards of transparency and accountability in the management of state enterprises. The Swedish government publishes comprehensive annual reports on the performance of state companies, including the profiles and track records of every member of the supervisory board. The public may access this information with ease, creating effective social pressure against patronage practices.

Fukuyama (2014), in Political Order and Political Decay, argues that the Scandinavian countries succeeded in building clean governance precisely because they managed to transform the cultural norm of patronage into a cultural norm of professionalism through a prolonged and consistent process. This transformation demands strong political will and sustained pressure from civil society.

VIII. TOWARDS REFORM: ALTERNATIVE MERIT-BASED COMMISSIONER SELECTION

A. The Establishment of an Independent Selection Commission

The most urgent step is to establish an SOE commissioner selection commission that is independent of political intervention. This commission should ideally comprise representatives of government, academia, professionals from the relevant industry, and civil society. This mechanism is analogous to the Judicial Commission for the selection of judges — an institution explicitly designed to insulate the selection process from political pressure.

Drawing upon the framework developed by the OECD (2015) in its Guidelines on Corporate Governance of State-Owned Enterprises, the selection commission must establish the core competencies required before advertising vacancies, conduct objective assessments of candidates, and publish the results and reasoning behind appointments to the public.

B. A Substantive and Transparent Fit and Proper Test

The fit and proper test currently in existence is frequently a mere formality. The reform required is to render this test genuinely substantive: candidates for commissioner positions must demonstrate an in-depth understanding of the relevant industry sector, a verifiable record of integrity, and a concrete vision for improving SOE performance. The results of the test must be published transparently so that the public may participate in oversight.

 

C. Strengthening Accountability Mechanisms and Performance Evaluation

Reform must not stop at the appointment process; it must extend to continuous evaluation mechanisms. SOE commissioners should be assessed periodically on the basis of company performance and their contribution to the supervisory function. Commissioner bonuses must be tied directly to company performance — if an SOE posts a loss, commissioners are not entitled to receive a bonus. This principle, which appears simple, would constitute a powerful incentive for commissioners to genuinely discharge their supervisory duties.

 

D. Strengthening the Role of Parliament and Civil Society

Parliament needs to be accorded a more significant role in overseeing SOE commissioner appointments, for instance through open confirmation hearings similar to those applied to certain state officials. Moreover, civil society organisations such as Transparency International Indonesia and Indonesia Corruption Watch should be systematically involved in monitoring the selection process and the performance of commissioners. Sustained public pressure remains one of the most effective factors in driving governance reform.

IX. CONCLUSION: FOR WHOM DO STATE-OWNED ENTERPRISES EXIST?

The question that hangs over this entire discussion is, in the end, the most fundamental of all: for whom do state-owned enterprises exist? If the answer is 'for all Indonesians', then SOEs must be managed to the highest standards of professionalism, supervised by competent and independent commissioners, and evaluated based on their contribution to public welfare. If the answer is 'for those in power and their supporters', then patronage is a logical consequence.

The 2025 data from Transparency International Indonesia reveal that the answer practised in reality is closer to the second option. Nearly one-third of SOE commissioner seats are occupied by politicians, whilst only 14.9 per cent hold a purely professional background. This represents a serious distortion between the constitutional mandate of SOEs and the reality of their practice.

Patronage within SOEs is not merely a matter of administration or technical governance. It is a symptom of a deeper malady: the failure to separate the logic of political power from the logic of state business management. As long as SOEs are treated as political gifts, they can never become what they ought to be: instruments of popular prosperity as mandated by Article 33 of the 1945 Constitution.

The reform required is not merely a change in technical regulations but a fundamental transformation in the manner in which the political elite perceive and treat SOEs. This is a long struggle, demanding consistent pressure from civil society, the media, and academia, as well as — most decisively — the political will of leaders courageous enough to relinquish one of the most alluring instruments of patronage in the service of a greater purpose: state-owned enterprises that genuinely work for the people.

Will state-owned enterprise governance be better under President Prabowo?

Encouraging Signals

President Prabowo has himself publicly criticised the poor governance of SOEs — including the irony of commissioners receiving bonuses whilst their companies post losses. This at least demonstrates an awareness of the problem. He has also championed sweeping budget efficiency programmes across all state institutions, which indirectly exerts pressure upon SOEs to become more accountable. The establishment of Danantara as an SOE superholding company was likewise intended to simplify management structures and centralise oversight.

Cause for Concern

On the other hand, the data point decidedly in the opposite direction. The dominance of Gerindra — Prabowo's own party — stands at 48.6 per cent of all politicians occupying SOE commissioner seats, the highest proportion of any party in the post-Reform era. This suggests that reformist rhetoric and patronage practice are proceeding in tandem rather than supplanting one another.

Danantara itself has attracted serious criticism: its centralised structure risks reducing transparency and public oversight rather than enhancing it. Several analysts have concluded that Danantara reflects a concentration of economic power in the hands of the executive more than any genuine reform of governance.

A Structural Pattern Difficult to Break

What must be understood is that this problem is not simply a matter of presidential intent. SOE patronage is a system, not merely the bad habit of individuals. So long as the mechanism for appointing commissioners remains in the hands of the executive without independent selection; so long as coalition parties require 'rewards' in return for political support; and so long as there are no meaningful sanctions for non-performing commissioners — this pattern will continue to repeat itself, regardless of who occupies the presidency.

A Realistic Conclusion

Grounds for hope exist, but their foundations remain fragile. Rhetorical reform unaccompanied by structural reform — that is, without an independent selection commission, a substantive fit and proper test, and binding commissioner performance evaluations — is likely to produce little more than patronage in a new guise, rather than genuinely improved SOE governance.

The history of successive Indonesian administrations demonstrates that optimism invariably greets each incoming president, yet patronage consistently finds ways to persist and adapt.

BIBLIOGRAPHY

Crouch, Harold. (1988). The Army and Politics in Indonesia. Ithaca & London: Cornell University Press.

Fukuyama, Francis. (2014). Political Order and Political Decay: From the Industrial Revolution to the Globalisation of Democracy. New York: Farrar, Straus and Giroux.

Hadiz, Vedi R. & Robison, Richard. (2004). Reorganising Power in Indonesia: The Politics of Oligarchy in an Age of Markets. London & New York: RoutledgeCurzon.

Klitgaard, Robert. (1988). Controlling Corruption. Berkeley & Los Angeles: University of California Press.

Kumorotomo, Wahyudi. (2015). Desentralisasi dan Tata Kelola Pemerintahan di Indonesia [Decentralisation and Governmental Governance in Indonesia]. Yogyakarta: Gadjah Mada University Press.

Mardiasmo. (2018). Akuntansi Sektor Publik [Public Sector Accounting] (Updated Edition). Yogyakarta: Penerbit Andi.

OECD. (2015). OECD Guidelines on Corporate Governance of State-Owned Enterprises (2015 Edition). Paris: OECD Publishing.

Pramusinto, Agus & Purwanto, Erwan Agus (eds.). (2009). Reformasi Birokrasi, Kepemimpinan, dan Pelayanan Publik [Bureaucratic Reform, Leadership, and Public Services]. Yogyakarta: Gava Media & MAP UGM.

Ricklefs, Merle C. (2008). A History of Modern Indonesia Since c. 1200 (4th ed.). Hampshire: Palgrave Macmillan.

Scott, James C. (1972). Patron-Client Politics and Political Change in South-East Asia. American Political Science Review, 66(1), 91–113.

Sidel, John T. (1999). Capital, Coercion, and Crime: Bossism in the Philippines. Stanford: Stanford University Press.

Sri Edi Swasono. (2010). Indonesia dan Doktrin Kesejahteraan Sosial [Indonesia and the Doctrine of Social Welfare]. Jakarta: Perkumpulan Prakarsa.

Transparency International Indonesia. (2025). Laporan Patronase Politik di BUMN: Pemetaan Komisaris Berlatar Belakang Politik [Report on Political Patronage in SOEs: Mapping Politically Affiliated Commissioners]. Jakarta: Transparency International Indonesia.

Winters, Jeffrey A. (2011). Oligarchy. New York: Cambridge University Press.

Winters, Richard. (1996). Power and Wealth in Asia. New York: Anchor Press.

Legislative Sources:

Constitution of the Republic of Indonesia of 1945, in particular Article 33.

Law of the Republic of Indonesia Number 19 of 2003 on State-Owned Enterprises.

Regulation of the Minister of State-Owned Enterprises No. PER-01/MBU/2011 on the Implementation of Good Corporate Governance (GCG) in State-Owned Enterprises.

Regulation of the Minister of State-Owned Enterprises No. PER-03/MBU/02/2015 on the Requirements, Procedures for Appointment, and Dismissal of Members of the Board of Directors of State-Owned Enterprises.

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