Indonesian President Prabowo has recently pulled off a major move: cutting over 70% of the country's thousands of state-owned enterprises (SOEs) in one go, retaining fewer than one-third. By August this year, nearly 300 SOEs had already been dealt with, and many more are queued up for action.
He calls it "the largest corporate restructuring in global history," but in practice, it resembles an administrative-driven shock therapy—such an aggressive contraction of SOEs was last seen in Russia during the early 1990s.
The question arises: why is Indonesia taking such a drastic step? Prabowo, a military man by background, accumulated resources during Suharto’s era and, after losing twice to Jokowi, finally ascended to power in 2024. The international media often refers to him as "Indonesia’s Trump," yet the two differ fundamentally: Trump’s base lies in business circles, while Prabowo’s roots are in the military and family networks.
This reform ostensibly aims to eliminate inefficient SOEs, but it cannot avoid Indonesia’s deeply entrenched patronage politics. During Jokowi’s ten years in office, family members and loyalists were embedded throughout the SOE system, creating a vast web of interests. Prabowo once reconciled with Jokowi to secure his own rise, even inviting Jokowi’s eldest son to serve as Vice President. Now firmly seated in power, he is targeting SOEs—largely as a means to dismantle Jokowi’s family influence. Closures and mergers are merely tools; the real goal is reshuffling personnel and installing his own allies.
Yet this approach carries immense risks. Russia’s shock therapy in the 1990s resulted in oligarchs seizing state assets during chaos, plummeting living standards, and long-term economic stagnation. Could Indonesia repeat this fate? Three factors will determine that: whether asset disposals are transparent and not sold at fire-sale prices into the pockets of cronies; whether social fallout from mass layoffs can be contained; and whether the private sector can effectively absorb the vacuum left by retreating SOEs.
Just recently, Jakarta experienced large-scale unrest triggered by extreme economic polarization. Regardless of how grandly framed, Prabowo’s reform remains essentially a cyclical power redistribution rooted in Indonesia’s family politics. What one president dismantles, the next may restore; what one president appoints as loyalists, the next may purge entirely.
For a large emerging economy like Indonesia, what is truly needed is not radical numerical reduction, but foundational institutional building—property rights protection, fair competition, and rule of law. Without these pillars in place, even the most massive restructuring may only amount to another round of political favoritism and distribution games. Whether this high-stakes gamble can break free from historical cycles—only time will tell.
Original article: toutiao.com/article/1874642189745482/
Disclaimer: The views expressed in this article are those of the author alone.