For decades, the dominant idea in corporate governance was that governments should regulate markets, while shareholders should own companies.
Indonesia’s Danantara represents a different model: the state is not merely the regulator of business, but an active shareholder. That makes Danantara more than an institutional reform. It is an experiment in what might be called the return of the shareholder state.
Indonesia is not alone. Across Asia, governments are once again using state ownership and control to pursue economic, strategic, and industrial objectives. Danantara offers a useful test of what this new generation of state ownership should look like.
Created on 24 February 2025, Danantara was established to consolidate and manage Indonesia’s state-owned enterprises (SOEs) and their assets. With assets approaching US$1 trillion, it is now one of the world’s largest state-ownership platforms.
The immediate question is whether Danantara can make Indonesia’s SOEs more profitable and efficient. But that question is incomplete.
A private shareholder can ordinarily assess a company by asking a relatively simple question: Has my investment generated an adequate return? A state shareholder faces a harder question: return for whom, and for what purpose?
Governments own companies not only to earn profits, but also to build infrastructure, develop strategic industries, preserve national resilience, and advance broader economic objectives.
The difficulty begins when those public purposes are pursued through corporations, because the state must still reconcile them with the disciplines of corporate governance and capital allocation.
Danantara therefore faces a fundamental choice. Is it primarily an investment institution, expected to maximize financial returns, or is it an instrument through which the state pursues broader economic goals?
If it is the latter, those goals cannot remain implicit. They must be defined clearly enough to determine how companies are governed, how performance is measured, and who is accountable when commercial and public objectives diverge.
That choice will determine what kind of shareholder state Indonesia is building: one that merely owns more, or one that knows why it owns.
Beyond profitability
The temptation is to judge Danantara by the same standards applied to a private investment fund: profitability, investment returns, and stock price appreciation. But financial returns are not the same thing as economic returns.
Consider a state-owned infrastructure company. An investment may produce a modest financial return while generating substantial economic benefits through lower logistics costs, greater connectivity or the development of an industrial region.
Conversely, a profitable SOE may create little broader value if its profits depend primarily on regulatory protection or a privileged market position. This does not mean that financial discipline should be abandoned. Rather, it means that Indonesia needs to distinguish between the return on an investment and the return to the economy.
That distinction is especially important because Danantara sits at the center of a large portfolio of enterprises that already perform essential functions in Indonesia’s economy.
The challenge is therefore to develop a framework in which commercial discipline and public objectives can coexist without allowing one to become an excuse for ignoring the other.
Singapore’s model
Singapore offers a model of professional state ownership.
Temasek was incorporated in 1974 to own and manage the government’s commercial assets. Over time, it developed into a professional investment company with a commercial mandate, separating ownership from the day-to-day management.
That separation provides an important political shield. When the government is both owner and policymaker, political objectives can easily become corporate instructions.
A company may be asked to preserve employment, undertake an uneconomic investment or support industrial policy. The governance problem arises when such objectives are imposed without clarity about who is responsible or how their costs should be assessed.
A professional state shareholder can help create that clarity. This does not mean that Indonesia should copy Temasek. Singapore’s institutional history, size and political system are very different from Indonesia’s.
Nor is Temasek free from debates over the appropriate relationship between the state and its companies. But the broader lesson is valuable: state ownership does not necessarily require state management.
For Danantara, the test will be whether it can develop sufficient institutional independence to make commercial decisions while remaining accountable for the public assets entrusted to it.
China’s different model
China illustrates a different model of state ownership.
There, state ownership and control are more closely integrated with industrial and strategic policy. SOEs are not merely portfolio investments. They are instruments for pursuing national objectives in areas ranging from infrastructure and energy to technology and strategic manufacturing.
But it also creates a different governance challenge. When corporate and government objectives are deliberately intertwined, it becomes harder to determine whether a company has failed commercially or succeeded strategically.
An SOE can lose money while fulfilling a policy objective. Conversely, it can generate profits while failing to advance the strategic purpose for which it was established.
Indonesia should therefore be cautious about importing either model wholesale.
The question is not whether Danantara should become “Indonesia’s Temasek” or adopt a Chinese-style system of state capitalism. The more important question is what institutional model fits Indonesia’s own purposes.
Danantara’s real test
This is why the debate over Danantara should move beyond the question of whether the fund will make money.
The harder question is whether Indonesia can articulate what its SOEs are actually for.
If their purpose is primarily commercial, Danantara should be judged accordingly. Boards should have clear commercial mandates, managers should be given meaningful autonomy, and poorly performing companies should face restructuring, administration, or liquidation.
If the state expects its enterprises to pursue broader objectives, those objectives should be identified explicitly rather than hidden behind vague notions of national interest.
This is ultimately a question of accountability.
A state shareholder has an unusual position in corporate governance. Unlike an ordinary investor, it can change laws, regulate competitors, and influence the economic environment in which its own companies operate. That makes institutional separation particularly important.
The state cannot simultaneously be shareholder, regulator and policymaker and then evaluate its companies as though it were simply another investor. Danantara therefore needs more than good investment professionals. It needs a clear theory of state ownership and control.
Danantara needs to answer three questions. First, which companies should the state own? Second, what should those companies be expected to achieve? Third, who should decide when commercial objectives conflict with broader public objectives?
The answers will determine whether Danantara becomes a mechanism for improving Indonesia’s SOEs or simply a larger vehicle through which the state exercises economic power.
The stakes extend beyond Indonesia. Across Asia, governments are once again using state ownership to pursue industrial policy, strategic competition, supply-chain security and national resilience.
The shareholder state is returning. The important question is therefore no longer whether governments will own and control companies. It is whether they can learn to own them well.
For Indonesia, Danantara provides an opportunity to build its own model. Singapore shows that state ownership can be combined with professional investment discipline; China shows that ownership can be integrated with industrial strategy.
Indonesia need not choose between them. Its task is to define clearly why the state owns companies, what they are expected to achieve, and how those objectives will be governed. Danantara should ultimately be judged not by how large its balance sheet becomes, but by whether state ownership creates lasting value for the Indonesian economy.
Luther Lie is a corporate lawyer with experience in New York, Indonesia, London and Singapore, a graduate of Harvard Law School who has been admitted to the New York Bar. He recently wrote on the corporate governance implications of the return of state ownership for the Columbia Law School.
