Monday, June 29, 2026

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 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’s case is 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.  

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.


Saturday, June 27, 2026

Is Military Education Necessary in Indonesian Co-operative Development?

The deaths of four prospective managers of the Village Red-and-White Co-operative (Koperasi Desa Merah Putih / KDMP) during Basic Military Training (Latihan Dasar Kemiliteran / Latsarmil) as part of the Indonesian Development Pioneer Graduate Programme (Sarjana Penggerak Pembangunan Indonesia / SPPI) in June 2026 provoked widespread public debate. This essay critically analyses the relevance of military education within the context of Indonesian co-operative development, examining the matter from the perspectives of co-operative philosophy, modern management theory, policy history, and international comparative practice. The central argument advanced is that military education bears no essential functional relationship to the managerial competencies required of co-operative managers, and is indeed potentially counterproductive to the democratic values that constitute the very spirit of the co-operative movement. As an alternative, this essay recommends a competency-based training model grounded in managerial and social entrepreneurship skills that are directly relevant to real-world operational needs.

I. INTRODUCTION

In June 2026, four prospective managers of the Village Red-and-White Co-operative (KDMP) died whilst participating in Basic Military Training (Latsarmil) as a component of the Indonesian Development Pioneer Graduate Programme (SPPI). The four victims — Anisa Muyassaroh, Yonanda Muhammad Taufiq, Novia Rahmadhani Sihotang, and Muhammad Rifki Renaldi Gunawan — passed away at separate training locations, each attributed to differing medical causes ranging from heat stroke and cardiac arrest to complications arising from pre-existing conditions. This tragedy is not merely a collection of individual accidents; rather, it reflects a more fundamental question of public policy: is military education either relevant or necessary for those who will manage co-operatives?

This question is not solely a matter of safety. It touches upon the very essence of the co-operative as a democratic organisation grounded in civic participation, and equally upon the logic of public policy regarding the coherence between training methods and the objectives they are meant to serve. The government, through the Ministry of Defence, argued that Latsarmil was designed to instil discipline, integrity, and a spirit of leadership. Yet a wide range of stakeholders — including members of parliament, academics, and civil society coalitions — have questioned this justification.

This essay addresses two principal questions: first, is there a functional relationship between military education and the competencies required of an effective co-operative manager? Second, what model of education ought to be provided to prospective co-operative managers so as to be genuinely aligned with the mission of Indonesian co-operativism? In pursuit of answers, the essay examines the philosophical foundations of the co-operative, the arguments for and against Latsarmil, the historical experience of Indonesian co-operatives, and international practices in co-operative capacity development.
 
II. THE PHILOSOPHICAL FOUNDATIONS AND PRINCIPLES OF CO-OPERATIVES

Before assessing the relevance of military education, it is necessary first to understand the nature of the co-operative and the values upon which it is founded. The co-operative, in its original intellectual tradition, emerged as a response to the economic injustices wrought by the industrial revolution. Robert Owen in Britain, and subsequently the Rochdale Pioneers (1844), laid the foundations of the modern co-operative movement upon principles that include: voluntary and open membership; democratic member control; member economic participation; autonomy and independence; and concern for the community.

The International Co-operative Alliance (ICA), the global apex body of the co-operative movement, affirmed in its 1995 Manchester Declaration that a co-operative is 'an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise.' This definition underscores three cardinal values: autonomy, voluntariness, and democracy. All three are inherently at odds with military logic, which is predicated upon hierarchy, command, and unconditional obedience.

In Indonesia, this spirit was articulated by Mohammad Hatta — the Father of the Indonesian Co-operative — who regarded co-operatives as the 'main pillar of the national economy' and simultaneously as a vehicle for the economic education of ordinary citizens. Hatta wrote that the co-operative is not merely an economic institution but a school of economic democracy for the common people. In his view, co-operatives must grow from below, from the collective consciousness of the community, rather than being imposed from above through bureaucratic instruction — let alone through training that is military in character.

From a philosophical standpoint, therefore, military education is not simply irrelevant — it is actively capable of eroding the very values that every co-operative manager ought to embody: critical thinking, the courage to debate, deliberative leadership, and collective decision-making. Peter Davis, in his work on co-operative management, affirms that effective co-operative managers are those who facilitate rather than command; who listen to members rather than condition their compliance.
 
III. THE GOVERNMENT'S ARGUMENT AND ITS CRITICAL EVALUATION 
3.1 The Government's Case: Character Formation and Discipline

The government, particularly the Ministry of Defence, advanced several justifications for the Latsarmil programme. First, that basic military training effectively instils discipline, integrity, and loyalty — qualities deemed important for any organisational leader. Second, that the programme makes efficient use of the existing Auxiliary Component (Komponen Cadangan / Komcad) training infrastructure, thereby enabling 30,000 participants to be trained simultaneously. Third, the Head of the Presidential Staff Office, Dudung Abdurachman, stated that the physical training component had been calibrated to the condition of civilian participants and was not intended to produce military soldiers.

These arguments, whilst not entirely without basis, contain several fundamental weaknesses that warrant critical scrutiny.
 
3.2 Critical Evaluation: The Weaknesses of the Government's Case

First, the concept of 'discipline' is used equivocally. The discipline required of a co-operative manager is administrative in nature: precision in bookkeeping, consistency in financial reporting, and diligence in building relationships with members. This variety of discipline is in no way cultivated through drill exercises or field physical training. Research by Birchall and Simmons on co-operative leadership demonstrates that managerial competence in co-operatives is developed predominantly through learning-by-doing in organisational management, mentoring, and financial education — not physical exertion.

Second, operational efficiency is an insufficient justification. The fact that the government is utilising existing Komcad facilities does not render the method appropriate. Process efficiency cannot be divorced from outcome effectiveness. Should a method that is 'efficient' in operational terms fail to produce the competencies required — and moreover claim lives in the process — it fails on the more fundamental criteria of sound public policy. William Dunn's framework for policy analysis insists that policy evaluation must simultaneously consider effectiveness, efficiency, adequacy, equity, responsiveness, and appropriateness.

Third, the claim that the training had been 'adjusted' is contradicted by the empirical evidence. Four deaths within a single month of programme implementation constitute compelling evidence that the programme carried health risks that were not adequately managed for a civilian population with heterogeneous medical profiles. The health screening standards established for the Komcad — designed for civilians who are to form part of the national defence reserve — proved insufficient to screen the more varied health circumstances of SPPI participants.
 
IV. THE HISTORICAL DIMENSION: INDONESIAN CO-OPERATIVES AND STATE INTERVENTION

The debate surrounding Latsarmil cannot be disentangled from the long history of Indonesian co-operatives repeatedly falling victim to excessive state intervention. The failures of the co-operative movement during the Old Order and New Order eras offer lessons of direct relevance to present-day policy.

Under the Old Order, co-operatives were instrumentalised as tools of political mobilisation by those in power. They forfeited their autonomy and came to serve as vehicles for political interests rather than as independent economic organisations of the people. In the New Order era, this pattern continued in a different guise: the Village Unit Co-operative (Koperasi Unit Desa / KUD) became an extension of state bureaucracy. KUDs were not born of civic initiative but of government programme directives. Consequently, many existed only on paper, devoid of any meaningful economic activity, and ultimately collapsed under the weight of corruption and financial crisis at the close of the New Order — including the Agricultural Credit (Kredit Usaha Tani / KUT) scandal that ensnared thousands of co-operatives.

Hendri Saparini and her team of economists at INDEF noted that one of the structural causes of Indonesian co-operative failure was the 'destruction of social capital' resulting from the state's co-optation of co-operatives. When co-operatives do not grow from the trust and solidarity of their members, they lose their animating spirit and their resilience. This lesson is directly pertinent: the SPPI-KDMP programme, designed from the top down and employing military methods, risks repeating the same pattern — producing managers who are physically disciplined but lack a deep understanding of co-operative values and an organic connection with the communities they are meant to serve.

Global history offers equally instructive evidence. Co-operatives that have flourished — such as Mondragón in the Basque Country of Spain, agricultural co-operatives in Denmark, or Grameen Bank in Bangladesh — have never employed military education in the formation of their managers. Their success has instead been built upon substantial investment in technical education, managerial training, and the strengthening of collective values.
 
V. THE COMPETENCIES TRULY REQUIRED OF CO-OPERATIVE MANAGERS

If not military education, what does an effective co-operative manager genuinely need? A range of sources — from UGM public policy scholar Agustinus Subarsono, to ICA recommendations, to the co-operative management literature — point consistently to competencies that are technical and social in character, rather than physical.
 
5.1 Managerial and Financial Competencies

A co-operative manager must be capable of: drafting a realistic Annual Work Plan and Budget (Rencana Kerja dan Anggaran Pendapatan dan Belanja / RKAPB); performing basic bookkeeping and accounting; analysing financial statements; calculating and distributing the Net Surplus (Sisa Hasil Usaha / SHU) transparently; and managing cash flow to maintain the co-operative's liquidity. Without these competencies, a manager — however physically disciplined — will be incapable of performing his or her core function. Hendar Kusnadi, in his work on co-operative economics, emphasises that the success of a co-operative is determined in large measure by the quality of its financial governance.
 
5.2 Business Development Competencies

The Village Red-and-White Co-operative is designed as a multifunctional co-operative operating across savings and credit, the supply of staple foodstuffs, fertiliser, healthcare services, and more. To manage these activities, managers require: local market analysis and assessment of business potential; supply chain and inventory management; product development and marketing; and the negotiation of partnerships with state-owned enterprises, regional enterprises, and the private sector. These competencies call for education in business and social entrepreneurship, not military tactics training.

5.3 Participatory Leadership Competencies

A defining feature of the co-operative is collective ownership and democratic decision-making through the Annual General Meeting of Members (Rapat Anggota Tahunan / RAT). Co-operative managers must be capable of facilitating this deliberative process rather than leading by command. They require strong communication skills, empathy towards the diverse needs of members, and proficiency in conflict resolution. Hanel argues that effective co-operative managers are those who succeed in balancing a business orientation with a member orientation — an equilibrium that demands emotional and social intelligence, not physical endurance.
 
VI. POLICY RECOMMENDATIONS

On the basis of the foregoing analysis, this essay recommends a comprehensive reform of the KDMP manager training programme, replacing Latsarmil with a curriculum that is functionally relevant to the task at hand.

The first proposed module is Foundations of Co-operativism (2 weeks), covering the history and philosophy of co-operatives, the ICA Principles, case studies of successful co-operatives in Indonesia and internationally, and an understanding of the relevant regulatory framework (Law No. 25 of 1992 and subsequent legislation).

The second module is Co-operative Financial Management (3 weeks), encompassing basic accounting, the preparation of financial statements, cash flow management, SHU calculation, and financial audit and transparency. This training should be delivered with the support of qualified accountants and experienced co-operative practitioners.

The third module is Business Development and Social Entrepreneurship (3 weeks), covering local market analysis, the drafting of basic business plans, supply chain management, digital marketing strategies, and business partnership negotiation.

The fourth module is Participatory Leadership and Facilitation (1 week), providing training in chairing member meetings, managing internal conflict, and building effective communication with a range of stakeholders.

The fifth module is a Field Placement at a Model Co-operative (1 week), in which participants are attached to a well-functioning co-operative to learn directly from experienced practitioners.

This training model is not only more substantively relevant but considerably safer. It respects the diverse health conditions of participants and imposes no physical standards that bear no relation whatsoever to the work they will be expected to perform.
 
VII. CONCLUSION

The question of whether military education is necessary in Indonesian co-operative development was, in truth, answerable by logic and by history well before the tragedy of June 2026 unfolded. Yet the four deaths compel us to confront that answer with greater candour and greater urgency.

The answer is no. Military education is neither necessary nor relevant for prospective co-operative managers. Co-operative philosophy rests upon economic democracy, autonomy, and collective participation — values that stand in direct opposition to the hierarchical command logic of military education. The history of Indonesian co-operatives demonstrates that excessive, top-down state intervention has consistently been a poison to the co-operative movement rather than a catalyst for its growth. And in terms of competency, what co-operative managers require is managerial, financial, and participatory leadership capability — not the physical hardiness of a soldier.

The Latsarmil policy within the SPPI-KDMP programme is an instance of what Fischer terms a 'policy mismatch': a situation in which the policy instrument is misaligned with the objective it purports to serve. The cost of this misalignment is not merely budgetary inefficiency — it is measured in human lives.

The government must move swiftly to reform the SPPI-KDMP training curriculum: abolishing Latsarmil and replacing it with a comprehensive, competency-based managerial education programme that is genuinely relevant to the real challenges of Indonesian co-operative development. Only in this way can the Village Red-and-White Co-operative truly become a driver of people-centred economic development — rather than a programme born of instruction and concluded in grief.

REFERENCES

A. Books and Monographs

Birchall, J., & Simmons, R. (2004). What Motivates Members to Participate in the Governance of Consumer Co-operatives? Annals of Public and Cooperative Economics, 75(3), 465–495.

Davis, P. (2004). Human Resource Management in Co-operatives: Theory, Process and Practice. Geneva: International Labour Organization.

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B. Journal Articles and Research Reports

Ariyanto, D., & Wulandari, S. (2022). Analisis Kegagalan Koperasi Unit Desa pada Era Orde Baru: Perspektif Kelembagaan [Analysis of Village Unit Co-operative Failure in the New Order Era: An Institutional Perspective]. Jurnal Ekonomi dan Bisnis, 25(1), 45–62.

Nilsson, J. (1999). Co-operative Organisational Models as Reflections of the Business Environments. Finnish Journal of Business Economics, 4, 449–470.

Saparini, H., & Faizal, A. (2018). Reformasi Kebijakan Perkoperasian Indonesia: Menuju Koperasi yang Mandiri dan Kompetitif [Reforming Indonesian Co-operative Policy: Towards Autonomous and Competitive Co-operatives]. Research Report, INDEF, Jakarta.

Subarsono, A. G. (2005). Analisis Kebijakan Publik: Konsep, Teori dan Aplikasi [Public Policy Analysis: Concepts, Theory and Application]. Yogyakarta: Pustaka Pelajar.

Wijaya, A. (2019). Kepemimpinan Transformasional dalam Organisasi Koperasi: Studi Kasus Koperasi Pegawai Negeri di Jawa Tengah [Transformational Leadership in Co-operative Organisations: A Case Study of Civil Servant Co-operatives in Central Java]. Jurnal Manajemen dan Kewirausahaan, 21(2), 113–128.

C. Legislation and Official Documents

Ministry of Defence of the Republic of Indonesia. (2026). Official Statement Regarding the Incident Involving SPPI-KDMP Participants during the Latsarmil Programme. Jakarta: Ministry of Defence.

Republic of Indonesia. (1992). Law No. 25 of 1992 on Co-operatives. Jakarta: State Secretariat.

Republic of Indonesia. (2020). Law No. 11 of 2020 on Job Creation (Co-operatives Cluster). Jakarta: State Secretariat.

D. News Sources and Online Media

Kompas.com. (2026, 26 June). Empat Peserta SPPI Meninggal saat Latsarmil, Pemerintah Evaluasi Program [Four SPPI Participants Die during Latsarmil, Government Reviews Programme]. Retrieved from https://www.kompas.com

Tempo.co. (2026, 26 June). DPR Desak Pemerintah Evaluasi Latsarmil Calon Manajer Koperasi [Parliament Urges Government to Evaluate Latsarmil for Prospective Co-operative Managers]. Retrieved from https://www.tempo.co

CNN Indonesia. (2026, 25 June). Pakar UGM: Pendidikan Militer Tidak Relevan untuk Manajer Koperasi [UGM Expert: Military Education Irrelevant for Co-operative Managers]. Retrieved from https://www.cnnindonesia.com