The Fate of Infrastructure State-Owned Enterprises (BUMN) as the Backbone of State Development: Bankrupt, Dissolved and Struggling to Escape from Spiral Debts

Bankrupt, Dissolved and Struggling to Escape from Spiral Debts

Author: Kelvin Adytia Pratama S.H., M.H and Yemima Andria H. S.

The dissolution of PT Istaka Karya (Persero) by virtue of Government Regulation (GR) Number 13 of 2023 on the Dissolution of PT Istaka Karya (Persero) by the President of the Republic of Indonesia, Joko Widodo resulted in a longer list of red-plate companies that ultimately had to receive a “lethal injection” in Indonesia. Meanwhile, in the consideration of GR Number 13 of 2023, the basis for the company’s dissolution operating in the infrastructure or construction business sector is explained, namely that PT Istaka Karya is declared bankrupt as stated in the judge’s decision of the Commercial Court of the Central Jakarta District Court through Decision Number 26/Pdt.Pembatalan Perdamaian/2022/PN.Niaga.Jkt.Pst. dated 12 July 2022, hence the bankruptcy assets of this former State-Owned Enterprise (BUMN) are in a state of insolvency. Insolvency itself is a state of being unable to pay or the condition of the Company which has debts, or the debts exceed its total assets.

It cannot be denied that the main issue with the dissolution of BUMN is related to the losses suffered by the company over the years, and it ultimately led to the dissolution of BUMN. This will always be of concern to the wider community because as is generally known, the establishment of BUMN as set out in Article 1 of Law No.19/2003 on BUMN (“BUMN Law”) states that BUMN is a business entity whose capital is wholly or partially owned by the state through direct participation derived from separated state assets. Therefore, losses from BUMN are often associated with state losses.

Legal Consequences for Bankrupt and Dissolved BUMN

Under Article 1 number 1 of Law No.37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations (Bankruptcy and PKPU Law), bankruptcy is:

“general confiscation of all assets of the Bankrupt Debtor, the management and settlement of which is carried out by the Receiver under the supervision of the Supervisory Judge as regulated in this Law“.

Bankruptcy itself can be interpreted as a condition or situation of a person or legal entity that is no longer able to pay its obligations (in terms of its debts) to its creditors or is usually called “bankrupt”.

The legal consequences of bankruptcy of a BUMN can be felt by various parties. The consequence for the debtor will be a general confiscation of all its assets and loses the right to control and manage its assets included in the bankruptcy assets. The consequence for creditors is that debt compensation will be carried out as long as the creditors are in good faith regarding the transactions that existed before bankruptcy and there is a possibility that the creditor will ask for certainty from the receiver regarding the continuation of performance of reciprocal contracts, and effective suspension of execution of the debt collateral. 

PT Istaka karya in fact submitted a composition plan that was homologated in 2013, through Homologation Decision Number 23/PKPU/2012/PN Niaga Jakarta Pusat dated 22 January 2013. One of PT Istaka Karya’s efforts to maintain its business in the composition plan is by offering the company’s shares in debt conversion to its creditors as regulated in GR No.44 of 2018 on Changes in the State Share Ownership Structure Through the Issuance of New Shares in PT Istaka Karya (Persero). However, PT Istaka Karya’s bankruptcy in 2022 is an implication of the application for cancellation of the homologation decision filed by PT Riau Anambas Samudra after PT Istaka Karya was unable to fulfill its obligations that were due at the end of 2021. The Panel of Judges of the Central Jakarta District Court then granted the application for cancellation of the settlement agreement or homologation. 

On the other hand, the bankruptcy and dissolution of PT Istaka Karya leaves unresolved problems that must be settled by the government because there are many employees, partners or subcontractor vendors and other creditors of PT Istaka Karya whose rights have not yet been paid. From the research conducted by the author, there is a debt of around IDR1.08 trillion waiting to be paid by PT Istaka Karya with the company’s equity recorded at minus IDR570 billion. Meanwhile, the company’s total assets are only IDR514 billion.

Article 3 of GR No.13 of 2023 stipulates that the dissolution of PT Istaka Karya, including liquidation shall be completed no later than 5 (five) years from the time PT Istaka Karya is declared bankrupt. Article 143 paragraph (1) of Law No.40 of 2007 on Limited Liability Companies (Company Law) states that the dissolution of a company does not result in a company losing its status as a legal entity, unless the liquidation process has been completed and the liquidator’s accountability has been accepted by the GMS or court. Therefore, the author is of the view that there is still a role for the receiver and the government in dealing with the unpaid debts until PT Istaka Karya has completed its liquidation process.

One of the solutions put forward by the Minister of BUMN, Erick Thohir, is to auction off the debt collateral through the Asset Management Company (PPA). Then the funds from the auction will be used to pay MSME (UMKM) creditors on the list of creditors. Should there be still projects being carried out by the debtor, these projects can be supported by the government as an effort to maintain and/or increase the bankruptcy assets, especially the assets of the debtor, namely PT Istaka Karya. 

Lessons Learned from BUMN Bankruptcy and Challenges for BUMN Infrastructure

Article 51 of Law No.5 of 1999 on the Prohibition of Monopolistic Practices and Unfair Business Competition has given BUMN the authority to conduct monopolies related to the production and/or marketing of goods and/or services which control the lives of many people as well as branches of production which are important for the country. Moreover, Infrastructure BUMN can be said to be the backbone of the country’s development. However, in practice, BUMN, including Infrastructure BUMN, is still not effective in calculating projects, complicates synergy with the private sector , and experienced miscarriages and losses resulting in bankruptcy.

The government must learn valuable lessons from its experience in dealing with state-owned enterprises ending in bankruptcy. One of them is by focusing more on the strategic program for strengthening BUMN which consists of consolidation, privatisation, synergy and state support. In its development, this consolidation consists of holding, merger, acquisition and inbreng. Therefore, the government must be sensitive in seeing opportunities for consolidation of BUMN. 

One of them is related to holding, which is a scheme where a parent company that oversees several other companies in a group of companies acts as a shareholder in several subsidiaries with the aim of increasing company performance and enabling the creation of the company’s market value. The holding concept is considered to be a middle way for Indonesia to make state companies more efficient. 

An example of the application of holding in Indonesia is a holding BUMN in the mining sector. A number of companies in the mining sector are included in the Indonesian Mining Industry Holding BUMN or Mining Industry Indonesia (MIND ID). Its subsidiaries are PT Antam Tbk, PT Bukit Asam Tbk, PT Freeport Indonesia, PT Inalum (Persero), and PT Timah Tbk. Mining sector profits also jumped sharply, reaching 683 percent. In 2020, the profit was IDR2 trillion and will increase to IDR14 trillion in 2021.

The increase in profits in the mining sector is a positive impact of the BUMN transformation process. Several efforts have been made, such as restructuring and refocusing on the core business which is divided into 12 clusters. There have been cuts to the number of state-owned enterprises, which was previously 108 to 41 business entities to date. Based on this experience, one of the solutions considered appropriate to deal with BUMN ending in bankruptcy is for the government to continue to examine opportunities for the holding concept and/or mergers hence BUMN become more effective in running their companies. 

Holding Infrastructure BUMN 

Based on the Instruction of the Minister of BUMN No.INS-1/MBU/09/2020, 12 Portfolio BUMN clusters (plus Danareksa sub-cluster) have been formed including the Infrastructure Cluster, which houses six construction services companies (PT Hutama Karya (Persero) Tbk (HK), PT Waskita Karya (Persero) Tbk (Waskita), PT Wijaya Karya (Persero) Tbk (Wika), PT Pembangunan Perumahan (Persero) Tbk (PP), PT Adhi Karya (Persero) Tbk (Adhi) and Brantas); one toll road management company PT Jasa Marga (Persero) Tbk, two state-owned cement companies (PT Semen Indonesia (Persero) Tbk and Semen Baturaja), and one housing developer (Perum Perumnas);

It should be noted, cluster and holding are two different things. Placement in one cluster does not mean that the BUMN will be combined into one holding. Therefore, there needs to be a study by the government to apply the holding concept to Infrastructure BUMN. The basis for the holding among these companies is because many infrastructure BUMN experience overlap in the infrastructure business itself. After making this holding effective, there needs to be a strict audit from the government to look at the buildup of infrastructure BUMN debts, especially regarding poor governance, poor company management, and the choice of inefficient business models.  

Apart from that, the government must be “vigilant” in preparing BUMN whose company conditions are still stable and have a business scope similar to BUMN that have huge debts as a “replacement” for BUMN that have the potential to be declared bankrupt in the future. Of course, with very careful consideration and benefiting various parties.

Currently, infrastructure state-owned enterprises can no longer be said to be stimulators or pioneers and catalysts that inspire private companies to participate in developing business and increasing the quantity and quality of domestic products. Therefore, the final step that the government can take is to encourage the privatisation of BUMN in the infrastructure sector because it sees that private business actors are already widespread and of good quality. Moreover, it becomes a dilemma if in practice infrastructure projects are again subcontracted to private parties. This should mean that the country no longer has any urgency in developing infrastructure BUMN.


Kelvin Aditya Pratama

Kelvin Aditya Pratama

Junior Associate

Yemima Andria

Student Intern at A&CO Law Office



Picture of Kelvin Aditya Pratama
Kelvin Aditya Pratama
Junior Associate

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