Definition of BUMN: Characteristics, Types, Objectives, Functions, and Roles

Timesofummah.com – Indonesia has decided to carry out the Pancasila economic system. That is, a mixed economic system will be applied. This aims to reduce the economic monopoly by certain groups.

To overcome this, the state runs a business unit as an effort to balance the economy by participating in managing some of the country’s wealth. Why do SOEs need to exist and how big is their role in supporting the Pancasila economic system? Come on, let’s see together.

Definition of BUMN

Definition of BUMN Characteristics, Types, Objectives, Functions, and Roles

BUMN is one of the three main actors in the state economy besides cooperatives and private businesses. Formerly a state-owned company called the State Company (PN). Meanwhile, BUMN stands for State-Owned Enterprises.

As the name implies, BUMN can be interpreted as a company owned by the state and its business is run by the state. Whether the company is wholly, largely or partly owned. What is meant by the state as manager is the government.

Basically, BUMN was established to create a prosperous society in various fields. Thus, it is hoped that the needs of the people on all fronts can be met.

Various needs which are fulfilled by BUMN include health, transportation, construction, energy, mining and minerals, agriculture, fisheries, plantations, finance, and others.

The fulfillment of these needs is then managed professionally and commercialized to the public. From these efforts, SOEs benefit.

SOEs in the form of PT and owning at least 51% shares are called Persero or Limited Liability Companies and this institution is intended to pursue profits.

Meanwhile, if the entire capital is owned by BUMN, then it is called Perum or public company. Based on their objectives, some SOEs are for profit and some are non-profit.

SOE history

From a historical point of view, the first company that resembled a BUMN had existed since the Dutch East Indies government, namely Vereenigde Oost-Indische Compagnie (VOC). The trading company has been operating in the archipelago since 1602.

Then in 1940-1950, the corporate sector was still underdeveloped and business activities were still dominated by foreign traders and a small group of entrepreneurs. This causes there are still many sectors related to the necessities of life that cannot be managed properly.

Thus, it is necessary to have parties who can manage these needs according to their respective goals. This is stated in the Constitution! 945 Article 33 of the 1945 Constitution which states that:

  1. Economic activities and systems are structured on the principle of kinship.
  2. Important and urgent production that is used for the benefit of the state and concerns the livelihood of many people will be managed and controlled by the state.
  3. Earth, water, and the wealth contained therein are controlled and managed by the state. The management is aimed at the prosperity of the people.
  4. National economic activities are carried out based on economic democracy. The principles used include fair efficiency, togetherness, sustainability, environmental insight, independence, and by maintaining a balance of progress and national economic unity.

On the basis of all of this, the state thinks that it is necessary to have a company that acts as a corporation that can be relied upon in maintaining ownership of national assets. Subsequently, a business entity or corporation was formed as a result of the nationalization of former Dutch-owned companies. These companies are controlled by the state.

As a result, SOEs have different characteristics compared to other business entities. SOEs are mentioned as business entities that have government clothes, but still have the flexibility and initiative as private companies.

This position makes SOEs have their own advantages, but if given restrictions, SOEs have the potential to monopolize and hinder the development of private companies. If this is the case, the national economy will be disrupted.

The characteristics of SOEs

To identify a state-owned company or not,  needs to recognize the characteristics of a state-owned company. Well, this time we will know the characteristics of BUMN. What are the characteristics of the BUMN?

1. Power is held by the government

In its operations, SOEs are supervised, controlled, and controlled by the state. The government plays a big role so that the processed state assets can be utilized as much as possible for the prosperity of the people. In addition, to minimize deviant actions.

2. Serving the Public Interest and Public Service

The fields managed by BUMN are fields that are in the public interest and services for the lives of many people. Call it the fields of energy, communication, health, construction, water, agriculture, fisheries, forestry, and so on.

3. As a Source of State Revenue

In addition to taxes, SOEs are a fairly large source of state revenue. The business units run by BUMN are engaged in fields that are urgently needed by the people. The commercialized goods and services generate profits. From these profits, SOEs can provide additional income for the state.

4. All risks are borne by the government

In its implementation, SOEs are supervised, controlled, and controlled by the state, so the rights and obligations of SOEs are also regulated by the state. No exception the risks caused by the business activities of SOEs, are also borne by the government. For example, if a BUMN goes bankrupt, then the state is responsible for the bankruptcy.

5. Providing Products Needed by the Community

The state is present in business units in sectors that initially have not been done much by the private sector and that concern the needs of many people. If the state does not take part in providing these goods or services, it will be difficult for the people to obtain them.

From there, the role of the state is needed, namely to complete the needs that are difficult to meet by private companies.

6. Shares Can Be Owned by the Public

BUMN shares can not only be owned by the state. SOEs allow some of their shares to be owned by other parties, including the general public. Of course, share ownership by other parties does not exceed 50%.

Types of BUMN

SOEs are divided into two types, namely State-Owned Enterprises and Public Companies. The following is an explanation of the two types of SOEs.

1. Limited Liability Company (Persero)

Persero is a state-owned enterprise whose majority of the shares (at least 51%) are owned by the state. The company has legal entity status and has the flexibility to work with private parties. The majority of SOEs in Indonesia are in the form of Persero.

The purpose of establishing a Limited Liability Company (Persero) is as follows:

  1. Provide goods or services of high quality and have strong competitiveness.
  2. To seek profit or profit as much as possible. By getting the maximum profit, it will increase the value of the company.

Examples of BUMN that are included in the type of Persero are PT Kimia Farma Tbk., PT Pertamina, PT Kereta Api Indonesia, PT Garuda Indonesia, Jamsostek, PT Telekomunikasi Indonesia, PT Tambang Timah, PT Aneka Tambang, PT PLN, PT. PDAM, and others.

2. Public Company (Perum)

Perum is a state-owned company whose entire capital belongs to the state and is not divided into shares. The establishment of Perum to provide goods and services that are useful to the public with the principles of proper corporate management and affordable prices.

Examples of SOEs that are included in Perum are Perum Bulog, Perum Damri, Perum Percetakan Uang Republik Indonesia (Peruri), Perum Pegadaian, Perum Balai Pustaka, Perum National Housing (Perumnas), Perum Jasa Tirta, and others.

SOE Goals

SOEs are not established without a purpose. As stated in Law No. 19 of 2003 concerning SOEs, the objectives of establishing SOEs are as follows:

  1. In general, they contribute to the movement of the national economy. In particular, SOEs provide additional income for the state. Therefore, a healthy SOE is one that benefits the state, not burdening the state with its operations or debts.
  2. Pursuing profit in order to increase state income.
  3. Provide services in the procurement of goods or services of high quality and needed by many people.
  4. Become a pioneer in business activities that have not been done by private parties and cooperatives. With the existence of SOEs, it is hoped that the areas that have not been worked on can be managed properly.
  5. In addition, a healthy BUMN is not a company that has a monopoly on trade, but also provides opportunities for the private sector to work in certain fields. With a note that the private company meets the requirements that have been set.
  6. Participate pro-actively in providing guidance, service, and assistance to entrepreneurs from economically weak groups, cooperatives, and the community. Usually these goals are summarized in corporate social responsibility (CSR) programs.

Functions and Roles of BUMN

Because of the uniqueness of BUMN compared to other types of business, BUMN has a special function and role in the national economy. The following are the functions and roles of BUMN:

1. As a medium for the government

SOEs function to make national economic policies. This policy will of course result in many things. This is where the role of SOEs is to become the media in implementing these policies.

2. As a land to create new jobs

It is undeniable that the existence of state-owned companies can be used as new jobs. This can reduce unemployment and can improve people’s economic welfare.

3. As a source of state income

With the profits obtained from the business activities they run, SOEs can provide income to the state.

4. Providers of goods and services

In order for the availability of goods and services in Indonesia to be stable, companies that are able to provide goods and services are needed for the needs of the community. This is where state-owned companies come to provide goods and services needed by the community.

5. Prevention of business monopoly by capitalists

Sometimes some entrepreneurs carry out a market monopoly by hoarding goods, playing with commodity prices, to limiting products in order to gain personal or group benefits. The role of BUMN in this case is to provide a new alternative to the people so that they are not trapped in the monopoly of the capitalists.

6. Managing Indonesia’s Natural Resources (SDA) wisely and correctly

Natural Resources (SDA) that are not managed properly and correctly will only cause damage and losses to the country. Because of this problem, the state established a state-owned company.

With the existence of a state-owned company, the utilization of natural resources can be optimized as well as possible without having to experience excessive exploration. The role of BUMN is expected to be a “brake” so that the use of natural resources is not excessive in environmental and economic studies. Because excessive use of natural resources often has a negative impact on the environment.

7. Trustees for the development of MSMEs, cooperatives, and the community

In addition to providing benefits to the state, SOEs must also be able to provide assistance to MSMEs, cooperatives, and the community. In this case, the assistance in question is to provide guidance to MSMEs, cooperatives, and the community so that their businesses can grow.

8. Stimulator or pioneer

The emergence of new business opportunities that can create new jobs and inspire private companies to participate in cultivating the new land.

9. Catalyst

In increasing the quantity and quality of domestic products, state-owned companies are needed. With state-owned companies, the needs of exporting Indonesian products can reach a wider market.

SOE Partnership Program

The role of BUMN in providing goods and services can be felt by the general public. These various facilities can be briefly summarized as follows:

1. Transportation

Land: PT Kereta Api Indonesia (KAI) and Perum Djawatan Motor Transport of the Republic of Indonesia (DAMRI), PT Industri Kereta Api (Inka).

Air: PT Angkasa Pura, PT Garuda Indonesia, PT Dirgantara Indonesia.

Marine: PT Pelayaran Nasional Indonesia (Pelni), PT Pelabuhan Indonesia (Pelindo), PT Penataran Navy (PAL)

2. Telecommunications

PT Telkom Indonesia, PT. Industry Telecommunications.

3. Energy and Drinking Water

PT Pertamina Indonesia, PT State Electricity Company (PLN), PT State Gas Company (PGN), PT Drinking Water Trading Company (PDAM).

4. Banking

Bank Mandiri, National Bank of Indonesia (BNI), Bank Rakyat Indonesia (BRI), State Savings Bank (BTN).

5. Health and Pharmacy

PT Kimia Farma, PT Bio Farma, PT Indofarma.

6. Food

Perum Bulog, PT Sang Hyang Seri, PT Perikanan Nusantara, PT Pertani

Apart from the BUMN companies mentioned, there are many other BUMNs that play a role in the national economy. Based on the latest data, there are a total of 109 SOEs in Indonesia.

Meanwhile, according to data in April 2020, there were 800 children and grandchildren of state-owned companies. After an evaluation was conducted, the structure was deemed too fat and resulted in many jobs being deemed less effective and efficient.

This does not increase state finances, but instead has the potential to become a burden on the state. Thus, the Ministry of SOEs plans to streamline these companies, one of which is by merging one company with another.

Let’s go back to the SOE partnership program, With such a large role, SOEs are not only considered beneficial in economic welfare, however, with the existence of SOEs, the community can get other benefits.

Among the coaching programs there are those that are implemented in a series of CSR. The benefits that can be obtained and felt directly by the community are in the form of developing MSMEs and developing cooperatives.

SOEs and MSME Relations

The role of BUMN in improving human resources is very helpful for the existence of micro and small businesses and cooperatives in facing the challenges of economic globalization and free trade.

This role also answers the challenge of the government which has agreed to participate in the General Agreement on Tariffs and Trade (GATT), the Asean Free Trade Area (AFTA) and Trade Agreement, and the Asia Pacific Economic Cooperation (APEC).

The program implemented by BUMN also invites micro and small businesses to partner. In addition, the community can also experience the Community Development program. Therefore, every BUMN Trustee is required to have several criteria so that it is appropriate to become a coach. The following are the requirements to become a builder BUMN.

  1. Establish a Partnership and Community Development Program.
  2. Develop a structured and systematic Standard Operating Procedure (SOP) for the implementation of the Partnership and Community Development Program. The SOP is stated in the Decree of the Board of Directors.
  3. Prepare a work plan and budget for the Partnership and Community Development Program.
  4. Carry out evaluation and selection to determine prospective fostered partners who are worthy of being fostered.
  5. Prepare and distribute Partnership Program funds to fostered partners and Community Development to the community.
  6. Carry out a series of coaching and monitoring of fostered partners so that the coaching carried out produces results as expected.
  7. Arrange the administration of coaching activities.
  8. Prepare books for partnership and community development programs.
  9. Conduct accountability reports on the Partnership and Community Development Programs that have been implemented. Both quarterly and annual reports to the relevant ministers and a copy to the Coordinator of the State Owned Enterprises.

About robert fernandez

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