Indonesia's Corporate Scandal Playbook for SOEs

Discussions of corporate scandals in Indonesia are frequently intertwined with corruption, a phenomenon deeply embedded within the country's political and economic institutions. Between 2016 and 2021, the Indonesia Corruption Watch, a leading Indonesian civil society organization that monitors and investigates public corruption, recorded 119 corruption cases involving state-owned enterprises (SOEs). Currently, the Attorney General’s Office and the Corruption Eradication Commission are investigating over 50 corruption cases involving SOEs.

Indonesia has a long history of SOE corruption scandals that can be traced back to the New Order regime (i.e., Soeharto's 32-year period of military-led authoritarian rule (1966–1998), characterized by centralized control and close state-business ties.), during which crony capitalism led to massive, systemic corruption within SOEs, with the regime’s inner circles allegedly gaining rent and manipulating SOEs for their political/personal benefit. The 1997 Asian Financial Crisis severely hit Indonesia and ended the New Order regime, after which Indonesia began neoliberal reforms, marked by democratization, decentralization, and institutional liberalization, known as reformasi. Anglo-American-inspired global corporate governance norms were forcibly transplanted by the IMF during the transitional period. 

After nearly 30 years of reformasi, many scholars argue that, during the last decade, Indonesia’s democracy was in retreat and authoritarian practices revived. While the institutional architecture has formally changed, the underlying logic of political capture has adapted. In the SOE context, capture operated through indirect and multilayered mechanisms under the veneer of liberal democracy. The idea of state-led developmentalism returned as a means of exploiting SOEs, whether for legitimate policy channeling or pragmatic (if not predatory) political interests. This trajectory became apparent following the recent amendment to the SOE Law (2025), which introduced a new governance model that strengthened the State's control over the direction and oversight of SOEs.

Our article examines landmark corruption cases involving SOEs to identify the deeper governance challenges underlying these scandals, and we argue that these cases reveal recurring patterns of political influence that lead to weak system controls and integrity failures within SOEs.

Policy Channeling, Conflicting Norms and Business Judgment Rule Problems

Two salient cases involving Karen Agustiawan (the President Director of Pertamina, an oil and gas SOE), namely, the BMG Block case (2020) and the LNG procurement case (2025), shaped debates about the tension between corporate autonomy and political oversight in SOEs. Agustiawan claimed that the criminalized business decisions were based on the government’s instructions under the national energy policy. In addition, the cases highlight a persistent conflict between commercial risk-taking and anti-corruption enforcement, stemming from disharmony among corporate, state administration, and criminal law regimes, as well as the unsystematic application of the business judgment rule adopted in Indonesia.

In the BMG Block case, Agustiawan was prosecuted for approving Pertamina’s acquisition of a participating interest in an Australian oil field that later generated losses. The Supreme Court ultimately acquitted her, finding that the decision was made in good faith, with expert advice and corporate approvals, constituting a legitimate business judgment rather than corruption. The case became one of the few instances in which the Indonesian judiciary expressly relied on the business judgment rule to shield an SOE executive from criminal liability.

By contrast, in the LNG procurement case, the Supreme Court reached the opposite conclusion. Despite the project’s link to national energy security objectives, the Court found that Pertamina failed to conduct adequate risk assessments and obtain necessary corporate approvals before entering into long-term LNG supply agreements. Thus, Agustiawan was convicted and imprisoned.

Weak Internal Control and Integrity Failures

Governance failures in addressing integrity issues were evident in bribery cases involving executives at Garuda (an aviation SOE) and at HK (a construction SOE). These cases reveal multilayered structural problems within SOEs and widespread misconduct across sectors, involving regional, national, and international (private and political/state) actors.

The Garuda case (2022) involves kickbacks received by Garuda’s President Director in connection with a series of aircraft procurement deals with major international aerospace companies, including Airbus, ATR, and Bombardier. Similarly, the HK case (2015) shows that governance failures are not confined to board-level decision-makers. HK’s regional executives bribed the Head of Regional Government to secure construction projects, disguised as fictitious contractor debt.

Stakeholder Activism

The Tin Mining Corruption case (2025) highlights the growing role of stakeholder activism—particularly the use of social media, a phenomenon known as hashtag capitalism—in shaping accountability and governance outcomes in Indonesian SOEs. Harvey Moeis, a private mining entrepreneur, was found to have orchestrated a scheme in which illegal miners in Timah’s (a tin-mining SOE) concession area paid disguised "CSR contributions" that were funneled through a shell company and diverted to Moeis and his associates. Moeis’s close ties to Timah’s directors facilitated the scheme. Despite the scale of the fraud, the first-instance court handed down a comparatively lenient sentence of 6.5 years' imprisonment, sparking public outrage—amplified by Moeis's public image as a flaunter of wealth—that spread across social media. Following the initial lenient sentence, public backlash prompted the President to order an appeal, which the Jakarta High Court granted by more than tripling the prison term and doubling the restitution order. The case illustrates how online pressure can translate directly into judicial recalibration.

Future Outlook

Drawing on these cases and broader SOE regulatory developments, we argue that governance failures stem from two interconnected structural problems: political capture and legal uncertainty. Political influence continues to shape SOE decision-making through board appointments, policy directives, patronage networks, and informal channels, operating through direct and indirect mechanisms. At the same time, uncertainty surrounding the legal status of SOE assets, the scope of anti-corruption enforcement, and the business judgment rule’s application has blurred the boundary between legitimate business decisions and criminal conduct.

Recent regulatory reforms, including the 2025 SOE Law, have sought to provide greater legal certainty. However, certain provisions have sparked controversy, and the effectiveness of these reforms remains to be seen. Beyond normative adjustments, the key to addressing SOE governance problems lies in reducing political intervention and strengthening board independence to reconstitute an integrity culture. It all depends on political will.

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Royhan Akbar is an Assistant Professor at the Faculty of Law, Universitas Gadjah Mada, Indonesia. 

This post draws on the forthcoming chapter, "SOE Scandals in Indonesia: Corporate Governance under Political Arrest," in Corporate Scandals in Asia: Legal and Policy Implications (Luh Luh Lan, Ernest Kim & Joon Hyug Chung eds., Cambridge University Press, 2027), which was presented at the Conference "Corporate Scandals in Asia and Beyond: Legal and Policy Implications", held in Singapore and hosted by NUS in collaboration with ECGI. Visit the event page to explore more conference-related blogs.

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