Continuity and Complexity: A Study of Patronage Politics in State-owned Enterprises in Post-authoritarian Indonesia

Abstract

ABSTRACTThis 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.KEYWORDS: state-owned enterprisesboard appointmentspatronagenew democracypower consolidation AcknowledgementsI 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 statementNo potential conflict of interest was reported by the author.Notes1 Dettman and Gomez Citation2020.2 Keefer Citation2007; Kitschelt and Wilkinson Citation2007.3 Kopecky et al. Citation2016; Levitsky and Way Citation2012.4 Berenschot and Aspinall Citation2020.5 Hendrawan, Berenschot, and Aspinall Citation2021.6 Biezen and Kopecky Citation2014; Bruton et al. Citation2015; Daiser, Ysa, and Schmit, Citation2017.7 Aguilera et al. Citation2021; Hertog Citation2010; Libman, Stone, and Vinokurov Citation2022.8 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, Citation1996.10 Di Mascio Citation2014.11 Di Mascio Citation2014; Kopecky and Scherlis Citation2008.12 Panizza et al. Citation2019.13 Van Biezen and Kopecky Citation2007.14 Kopecky Citation2011.15 Kopecky Citation2011.16 Grzymała-Busse Citation2006.17 Kopecky and Spirova Citation2011.18 Meyer-Sahling and Jáger Citation2012.19 Kopecky Citation2011.20 Kopecky Citation2011.21 Genin, Tan, and Song Citation2021.22 Leutert and Vortherms Citation2021.23 Ralston et al. Citation2006.24 Leutert and Vortherms Citation2021.25 Genin, Tan, and Song Citation2021.26 Majumdar Citation1998.27 Kowalski, Büge, and Sztajerowska Citation2013.28 Gimpelson and Treisman Citation2002; Kitschelt et al. Citation1999; Robinson and Torvik Citation2009.29 Hertog Citation2010.30 Kopecky, Mair, and Spirova Citation2012.31 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.32 Astami et al. Citation2010; Kumparan Citation2018; Treverton, Levaux, and Wolf Citation1998.33 Ray and Ing Citation2016.34 Robison and Rosser Citation2003.35 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.36 Maxwell Citation2005.37 Corbin and Strauss Citation1990.38 Yasin and Nursadi Citation2021.39 Dahlström and Niklasson Citation2013.40 Ennser-Jedenastik Citation2014.41 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.44 Apriliyanti and Kristiansen Citation2019.45 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.46 Robison Citation1978.47 Mackie Citation1991; Muhaimin Citation1991.48 Fukuoka Citation2013.49 Kang Citation2003.50 Robinson and Hadiz Citation2004; Tabalujan Citation2001; Van der Eng Citation2004.51 Goldeng, Grunfeld, and Benito Citation2008.52 Blunt, Turner, and Lindroth Citation2012.53 Apriliyanti and Kristiansen Citation2019.54 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 Citation2021.55 Hadiz and Robison Citation2005.56 Slater and Simmons Citation2013.57 Aspinall Citation2013.58 Berenschot Citation2018.59 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.60 Tempo Citation2012.61 Bolleyer and Ruth Citation2018.62 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).63 Bersch, Lopez, and Taylor Citation2023.64 Chaisty, Cheeseman, and Power Citation2014; Neto Citation2006.65 Beresford Citation2015.66 Blanco and Grier Citation2009.67 Slater Citation2018.68 Kopecky and Mair 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.70 Di Mascio et al. Citation2010; Pridham Citation2016.Additional informationFundingThere was no external funding received for this study or for the publication of this article.Notes on contributorsIndri Dwi ApriliyantiDr. 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.