TEMPO.CO, Jakarta - The Corruption Eradication Commission exposes graft in state-owned enterprise digitalization projects. An SOEs ministerial regulation lays out the red carpet for rent-seekers.
THE scandals over the procurement of the gas station digitalization system at Pertamina and the electronic data capture (EDC) equipment at Bank Rakyat Indonesia (BRI) have highlighted the ramshackle management of state-owned companies. These crooked practices are not simply a matter of greed on the part of the perpetrators, but also the result of flawed government policy that allows rent-seeking practices to flourish in state-owned enterprises (SOEs).
The methods used in this corruption are almost the same: a multi-trillion-rupiah project is awarded through direct appointments between state-owned companies or their affiliates, ignoring the principle of open competition. In Pertamina, the Rp3.6 trillion-rupiah digitalization project was directly awarded to Telkom Indonesia. Telkom then appointed other vendors, including Pasifik Cipta Solusi, which also won the tender for the procurement of the EDC machines at BRI.
In the most recent case, Corruption Eradication Commission (KPK) investigators suspect there was collusion by two senior BRI officials, Deputy Chief Executive Officer (CEO) Budi Harto and Digital, Information Technology, and Operations Director Indra Utoyo to ensure that tenders were won by Pasifik Cipta Solusi and Bringin Inti Teknologi—two subsidiaries of BRI. They, together with BRI senior procurement official Dedi Sunardi; former Pasifik boss Elvizar and Bringin CEO Rudy S. Kartadidjaja have been named as suspects.
This manipulation in the procurement process was apparent from the way vendors were selected through only a limited project concept test mechanism. KPK investigators also suspect that BRI executives deliberately set the product specifications so that the tender could only be won by a product from a particular vendor, while other companies with similar technologies were not invited to participate. This practice can only happen in a system that from the outset is tolerant of conflicts of interest.
The root cause of the establishment of this type of system is SOEs Minister Regulation No. PER-2/MBU/3/2023. This regulation, signed off by Minister Erick Thohir, provides an opportunity for direct appointment if the supplier is a state-owned enterprise, a subsidiary, or an affiliated entity. Article 155 paragraph 2-f is the golden clause that stifles competition in SOE tenders. Under the pretext of efficiency, healthy competition is set aside. This is despite the fact that this practice brazenly violates Article 19 of Law No. 5/1999, the Anti-Monopoly Law, which bans regulations that establish exclusive markets.
The Business Competition Supervisory Commission (KPPU) criticized Erick’s regulation in October 2024. The commission stated that this regulation was discriminatory and that it was at odds with the principles of procurement accountability. But Erick has made no changes. In fact, the SOEs Ministry has become more insistent in its use of the efficiency pretext to maintain a system that actually fosters the growth of rent-seeking practices.
The Pertamina and BRI cases are only the tip of the iceberg. In a closed procurement system protected by this kind of elitist regulation, independent business entities are reduced to spectators. It is not impossible that collusion and corruption in procurement also happen in other state-owned enterprises. Eventually, this means that rather than becoming healthy and professional, they turn into state cartels comfortable embracing internal affiliations. The reforms of SOEs that many had hoped for turned into a decline in standards of management.
If the government really wants to turn SOEs into the driving force of the economy, the first thing it has to do is to pull up the red carpet for rent seekers and restore the principles of transparency and open competition to the procurement process. Without this, SOEs will simply become a huge opportunity for access for a small number of people—corporations of rent seekers.
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