ABSTRACT
This study explores the role of patronage in Indonesian State-Owned Enterprises (SOEs) by analyzing board appointments between 2004 and 2019 under two different presidential administrations—those of Susilo Bambang Yudhoyono and Joko Widodo. The study is based on a content analysis of board members and their political affiliations in fifteen of the largest Indonesian SOEs and in-depth, semi-structured interviews with a former minister, high-ranking officials in the government, political party members, CEOs, and SOE board members. The study identifies how key patrons influence board appointments and how the sitting president, a pivotal patron in the post-authoritarian context, strategically uses patronage for power consolidation and political stability. Given the financial significance and power of SOEs, placing loyalists on boards serves the interests of ruling political parties and elites. This also enables elites to produce even more patronage, which is beneficial for their personal political machinery. This intricate interplay sustains the presence of patronage in Indonesia’s democratic landscape.
Acknowledgements
I extend my heartfelt gratitude to the organizers of the paper development workshop at the Faculty of Social and Political Science, Universitas Gadjah Mada, and the Beyond Essentialism workshop (a collaboration between the University of Essex and the University of the Philippines) for their invaluable contributions to this paper's development. The author owes thanks to the editor and reviewers for their constructive feedback that enhanced the quality of the article.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes
8 The other presidents since Suharto (Bacharuddin Jusuf Habibie, Abdurrahman Wahid, and Megawati Sukarnoputri) held office for relatively short periods, and did not have extensive influence on patterns of board member composition.
9 New democracies are defined as countries that transitioned from a non-democratic to a democratic regime between the 1970s and early 2000s. See Diamond, Citation1996.
31 Szarzec, Totleben, and Piątek Citation2022. Shleifer and Vishny (Citation1994) note that in Greece, after the then-opposition party won an election, all SOE employees, including top executives, were dismissed.
35 Nonetheless, the selection of directors relies to some extent on the preference of the Minister of SOEs, but the directors’ nominees usually have to take a test before being appointed.
41 I use the term “oligarchy” for any minority group possessing sufficient power to suppress dissent (Cf. Leach Citation2005). This power can be operationalized in both structural and non-structural terms. “Structural dimension” refers to individuals who have legitimate authority to formulate and enforce decisions. “Non-structural dimension” encompasses individuals who, due to their high status within a group, can influence decisions informally. In line with Winters’ (Citation2013) perspective, I characterize oligarchs as individuals of substantial wealth and whose power is derived partly by their leadership in political parties, partly by their ownership of large corporations, and partly by being in the government, or having held military positions.
42 Nahdlatul Ulama and Muhammadiyah are Indonesia’s largest Islamic organizations. These two mass organizations have approximately 100 million members combined (Arifianto Citation2017). Therefore, these organizations are important political assets for winning elections (Hicks Citation2012).
43 Ministerial Regulation No Per-02/2015, issued by the Ministry of SOEs, governs the appointment of board members to SOEs. The regulation states that appointments are determined by the final assessment team, which comprises the president, vice-president, minister of finance, minister of SOEs, and state secretary minister.
45 Kleden Citation2009; Ufen Citation2010. Patrons occupy two positions in these categories. For instance, a patron can be a vice president and simultaneously be an oligarch. Only the position that indicates more detailed information about the extent of their power, resources, and interests is counted; in this case, it is the oligarch. Additionally, board members often have more than one affiliation. A board member can be affiliated with both a political party and a party leader or affiliated with both the president and an interest group. In this case, only their dominant affiliation is recorded.
54 Jusuf Kalla (born 1942) has served as vice-president twice, from 2004 until 2009 (under President Yudhoyono) and from 2014 until 2019 (under President Widodo). Aburizal Rizal Bakrie (born 1946) has been involved with Golkar for much of his political career, including a stint as party chair. During the Widodo administration he served as the Coordinating Minister for Economy as well as Minister of People’s welfare. In 2007, Forbes listed the Bakrie family as the richest in Indonesia, with a net worth of US$ 5.4 billion. In recent years, the family fortune has shrunk considerably, especially after the collapse of coal prices. See McBeth Citation2021.
59 Jakarta Post Citation2013. The Hambalang project was a major corruption case that involved President Yudhoyono’s Democratic Party. There were allegations of collusion on the arrangement of public bids, the selection of the winner, and inflation of the project’s cost.
62 In 2013, the Center for Financial Transaction Reports and Analysis (PPATK) reported the misuse by state-owned banks of corporate social responsibility funds prior to the 2014 elections (Adam, Citation2013). CSR funds were given to groups affiliated with certain political parties and politicians. The circumstances generally encourage the involvement of more businesspeople in the political arena and further promote alliances between businesses and parties (Fukuoka, Citation2012).
69 Kopecky and Spirova Citation2011. It is important to note that in the Czech context, controlling also refers to managing the distribution of state resources to political actors in the form of corruption.
Additional information
Funding
There was no external funding received for this study or for the publication of this article.
Notes on contributors
Indri Dwi Apriliyanti
Dr. Indri Dwi Apriliyanti, is assistant professor at Universitas Gadjah Mada who specializes in the governance dynamics of State-Owned Enterprises (SOEs), particularly the impact of politics and power on business decision-making. Her research also delves into corporate political activities across various firms aimed at influencing policy. She has authored numerous journal articles on these subjects, including in the Journal of Management Studies, the International Business Review, and Corporate Governance: An International Review.
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