What happened?

The Indonesia Competition Commission (Komisi Pengawas Persaingan Usaha, KPPU) published a press release on 5 November 2024 (KPPU Press Release No.94/KPP-PR/XI/2024) highlighting concerns over procurement policies within Indonesia’s State-Owned Enterprises (SOEs). KPPU declared that the current policy and practice may lead to unfair business competition.

KPPU raised concerns about Article 155(2)(j) of SOE Minister Regulation No.PER-2/MBU/3/2023 on Guidelines for Governance and Significant Corporate Activities of SOEs (SOE Regulation). Article 155(2)(j) of the SOE Regulation allows for direct appointment of goods/services providers in SOEs under certain conditions. Specifically, direct appointments are stated to be permissible if the provider is a SOE, a SOE subsidiary, or a company affiliated with a SOE, as long as the quality, price and purpose align with procurement needs.

What did KPPU recommend?

Following the issuance of the SOE Regulation, KPPU submitted a report to the SOE Minister in October 2024 in which KPPU recommended that:

1. direct appointments in SOEs prioritise fair competition;
2. Article 155(2)(j) of the Regulation should be removed; and
3. the Government should always seek KPPU’s advice before implementing SOE synergy initiatives.

These recommendations are aimed at ensuring that the SOE procurement process upholds the principle of competitive neutrality and maintains fair business competition.

However, we understand that following the publication of the referenced press release, the Government has not yet responded to KPPU regarding its recommendations.

Key takeaways

KPPU has raised concerns about the SOE procurement policy, specifically the contents of Article 155(2)(j) of the SOE Regulation, which limits direct appointments in the procurement process to SOE entities and excludes non-SOE businesses, undermining competitive neutrality. To addressthis unfair limitation, KPPU has recommended aligning SOE procurement principles with fair competition principles, removing the restrictive provision, and consulting on future SOE synergy policies to ensure transparency and efficiency.

According to the referenced KPPU press release, this is not the first time KPPU has pulled up the Government for an SOE procurement initiative that favoured only SOEs, SOE subsidiaries and SOE affiliates, resulting in unfair competition.

KPPU’s main goal in identifying uncompetitive practices adopted by Government ministries is to foster a more competitive procurement environment and to prevent the development of monopolistic and unfair business competition practices. Let’s see if KPPU succeeds in its goal in this case.