ARMA Update SOE Law Series - Series 2: New Era for Indonesian SOE Governance with BPI Danantara

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As part of Indonesia’s efforts to strengthen its State-Owned Enterprises (“SOE(s)”) and support the government's Asta Cita development agenda, Law No. 1 of 2025 concerning The Third Amendment To Law Number 19 Of 2003 On State-owned Enterprises (“SOE Law”) (“Law 1/2025”) formally establishes the Badan Pengelola Investasi Daya Anagata Nusantara (“BPI Danantara”), a government agency tasked with managing investment funds to drive economic growth, infrastructure development, and strategic investments in key sectors such as renewable energy, food production, mining down streaming, technology, artificial intelligence, and other strategic industries.

Under Law 1/2025, BPI Danantara is an Indonesian legal entity fully owned by the Government of Indonesia, exercising delegated authority from the President to oversee SOE management. Its mandate is to optimize investments and operations across SOEs and other funding sources, with direct accountability to the President. ¹

The establishment of BPI Danantara under Law 1/2025 marks a strategic evolution of the governance principles explored in Series 1. While the earlier series focused on empowering SOE leadership through clearer and more flexible decision-making, the existence of this institution brings these principles into practice on a systemic level. By centralizing investment oversight, it aims to ensure that the autonomy provided to individual SOEs under the Business Judgment Rule aligns with broader national objectives, driving more coordinated, strategic, and impactful growth.

1. Danantara as a Sovereign Wealth Fund and Its Relationship with Existing Institutions

   The creation of BPI Danantara, which partially functions as a state investment fund, raises questions about potential overlaps with the Indonesia Investment Authority (“INA”), established earlier under Government Regulation No. 74 of 2020 (“GR 74/2020”). Both entities are effectively Indonesian sovereign wealth funds (SWFs), wholly owned by the government and reporting directly to the President.

   Despite these similarities, their objectives and authorities differ:

   1. BPI Danantara focuses on enhancing SOE investments and operations, including managing SOE dividends and overseeing newly formed investment holding (“Investment Holding”) and operational holding (“Operational Holding”). ²
   2. INA aims to manage long-term government investments for sustainable development and act as a strategic partner for foreign investors. ³
   Their capital structures are also similar, both relying on state capital injections (penyertaan modal negara or “PMN”) and/or other sources. The PMN for both BPI Danantara and INA may come from cash funds, state-owned assets, or shares owned by the state in SOEs. ⁴ However, their scale is notably different. Under Law 1/2025, BPI Danantara has a minimum capital of IDR 1,000 trillion, ⁵ while INA, under GR 74/2020, is capitalized at IDR 75 trillion. ⁶

   A key distinction between the two entities lies in their respective contributions to the capitalization of government-formed SOE holdings. Under Law 1/2025, BPI Danantara will hold 99% (ninety nine percent) of the Series B shares in the Investment Holding and Operational Holding that will be established to execute the authorities of the Minister of SOEs (“MoSOE”) and BPI Danantara itself. In contrast, INA is positioned solely as a separate institution under the President, without any direct or indirect ownership interest in SOEs.

2. SOE Governance Structure after the Enactment of Law 1/2025

   For a visual representation of the new SOE management framework, please refer to the visual chart below:

   

   Investment Holding

   As a strategic instrument for optimizing the management of state-owned assets and investments, the MoSOE, together with BPI Danantara, will establish an Investment Holding, which is an SOE whose capital is wholly owned by the State and BPI Danantara. This company will be tasked with managing dividends and/or optimizing SOE assets, as well as other duties as assigned by the MoSOE and/or BPI Danantara. The Investment Holding will take the form of a limited liability company (Perseroan Terbatas), in which 1% of Series A shares, classified as dual-class (dwiwarna) shares, will be held by the State with special privileges, while 99% of Series B shares will be held by BPI Danantara.

   The Investment Holding’s mandate under Law 1/2025 includes investment management, asset optimization to enhance investment value, and other tasks assigned by the MoSOE or BPI Danantara. These tasks may be operationalized through a number of delegated authorities, including:

   1. preparing and proposing the business plan and budget of the Investment Holding;
   2. managing SOE dividend income;
   3. issuing debt securities and/or obtaining loans;
   4. optimizing asset utilization;
   5. providing loans and/or guarantees to Operational Holding, SOEs, or SOE subsidiaries;
   6. proposing management contracts to BPI Danantara for approval; and
   7. etc.
   According to the elucidation of the Law 1/2025, the establishment of the Investment Holding and the Operational Holding may be conducted either by establishing new SOEs or designating existing SOEs. However, as of now, the Government of Indonesia has not officially announced which entity will serve as the Investment Holding.

   Operational Holding

   In parallel, an Operational Holding will also be established, which is an SOE in the form of a limited liability company with a capital structure similar to the Investment Holding. However, its primary focus will be on managing the operations of SOEs and executing other tasks assigned by the MoSOE and BPI Danantara.

   The Operational Holding will be vested with similar authorities as the Investment Holding, with the exception that it will not have the authority to manage SOE dividends or optimize SOE assets.

   Notably, on 21 March 2025, the Government of Indonesia officially designated PT Biro Klasifikasi Indonesia as the Operational Holding company, with the enactment of Government Regulation No. 15 of 2025 concerning Additional State Capital Injection into the Share Capital of the SOE PT Biro Klasifikasi Indonesia for the Establishment of the Operational Holding (“GR 15/2025”).

   Under this regulation, the Government of Indonesia injected additional capital into PT Biro Klasifikasi Indonesia (Persero) by transferring all Series B and/or Series C shares owned by the State in 52 SOEs, including PT Pertamina, PT Perusahaan Listrik Negara (PLN), PT Mineral Industri Indonesia (MIND ID), PT Bank Rakyat Indonesia Tbk, and others. ⁷ Following this share transfer, the State’s control over these SOEs will henceforth rest solely on its ownership of Series A dwiwarna shares, represented by the MoSOE, with the associated rights as governed by each SOE’s articles of association.

3. Authority and Capitalization of BPI Danantara

   In fulfilling its mandate to manage SOEs, BPI Danantara holds the authority to: ⁸

   1. manage dividends from the Investment Holding, Operational Holding, and other SOEs;
   2. approve capital injections and/or reductions in SOEs derived from dividend management; and
   3. provide loans, receive loans, and pledge assets, subject to the approval of the President.

   Beyond its independent authority, BPI Danantara shares joint authority with the MoSOE to: ⁹

   1. establish the Investment Holding and Operational Holding;
   2. approve write-off proposals and/or cancellation of receivables of SOE assets submitted by the Investment Holding or Operational Holding; and
   3. endorse and consult with the relevant oversight body of the Indonesian House of Representatives (i.e., Commission VI of the DPR RI) on the Work Plan and Budget of the Investment Holding and Operational Holding Companies.
   Furthermore, BPI Danantara is allowed to make investments, either directly or indirectly, by cooperating with the Investment Holding, the Operational Holding, and third parties. Law 1/2025 explicitly affirms that any profits or losses generated by BPI Danantara are its own.

   Given the extensive of responsibilities and authority entrusted to BPI Danantara, along with its significant capitalization, all financial management and responsibilities of BPI Danantara are subject to oversight by the Audit Board of the Republic of Indonesia (Badan Pemeriksa Keuangan or BPK). ¹⁰

   1. Article 3E of SOE Law ↩
   2. Article 3E and Article 3F of SOE Law ↩
   3. Article 6 and General Elucidation of Government Regulation 74/2020 ↩
   4. Article 3G of SOE Law and Article 64 of GR 74/2020 ↩
   5. Article 3G(3) of SOE Law ↩
   6. Article 3 of Government Regulation 74/2020 ↩
   7. Article 1 of Government Regulation 15/2025 ↩
   8. Article 3F(2) of Law 1/2025 ↩
   9. Article 3F(2) jo. Article 3C of SOE Law ↩
   10. Article 3K of SOE Law ↩

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Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

Go to

1. Danantara as a Sovereign Wealth Fund and Its Relationship with Existing Institutions
2. SOE Governance Structure after the Enactment of Law 1/2025
3. Authority and Capitalization of BPI Danantara

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