SOE Holdings
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When a Japanese man meets someone, anthropologist Chie Nakane explains in his book, Japanese Society: A Practical Guide to Understanding the Japanese Mindset and Culture (1973), he tends to claim to be from B Publishing Group or S Company, and not: "I\'m the print manager" or "clerk." Therefore, what the person learns is the relationship between someone and a particular institution or group.
In Japanese, Nakane refers to this phenomenon as ba. Even though ba literally means a location, in its normal use it means "something that is placed in line with a particular purpose." Therefore, conceptually, Nakane defines ba in English as a frame, which means the specific context of someone in a social grouping. This is different from an attribute. The latter, without mentioning the equivalent of the Japanese word, is defined by Nakane as a social grouping where membership is based on lineage or caste. In line with its English meaning (nature, relevance), Nakane sees the social grouping based on its attribute as universal. Meanwhile, the frame, or ba, is more applicable in Japan.
To sharpen that concept, Nakane introduces the word uchi,which means “my house”, otaku,which means “your house,” and kaisha,which means “group consciousness.” All of this serves more to reveal the frame, or ba, in the social grouping system in Japan, rather than as an attribute. In a broad sense, the meaning of uchi is “my workplace,” “my organization,” or “my school” from where someone originates. The same applies to otaku. And all are expressed through kaisha, the consciousness of a group that is not based on a contract, but on emotion and pride.
The awareness of kaisha is rooted in the concept of ie. In Japanese, ie means “household,” but it refers more to a family system rooted in the guideline of moral behavior derived from the feudal past. Up here, the dynamics of the Japanese community are tracked. Why? Because Nakane emphasizes that ie as a kinship institution is not a system where the eldest son lives together with his wife and parents, nor a structure of authority where the head of the family holds power, but ie is a place of the corporate residential group, and in the context of agricultural and other businesses, ie is a managing body.
As an executing body, ie consists of household members that form their own social group unit. In other words, ie is a social group based on an established frame, or ba,which frequently takes the shape of an organization’s management. Importantly, Nakane emphasizes that the human relationship within the ie kinship institution is considered more important than others. A daughter-in-law from another social unit is considered more important than the family\'s own sisters or daughters that are married and have gone to another ie. The same applies to the family\'s brothers and sons.
This is the dynamic meaning of the social relations described by ie in Japan: the willingness to open up for new members. The frame of new member recruitment weakens the blood ties. However, the blood ties quickly shift to people-to-people relations in common groups based on employment, where, Nakane emphasizes, the major aspects of social and economic life are rooted. Here we find the importance of the group unit in Japanese community based on ba as the frame.
In short, the dynamic nature of the recruitment of members of ie, as an ancient Japanese kinship institution, can accommodate modern industrialization. The emergence of modern industrial units in this country easily adapts to the Japanese traditional social relations. Through the expression of kaisha, Japanese industrial enterprises immediately become the substitution of Japanese traditional social groups. Therefore, kaisha is the uchi (my workplace) and otaku (my enterprise), which defines "the whole social existence of someone and has authority over all aspects of his life; he is deeply involved emotionally in the association."
History of culture and politics – economy of SOEs
In the context of history, what is known as state-owned enterprises (SOEs) today is culturally something "foreign." This is mainly due to the fact that SOEs originate from plantation corporations (which later were widened to mining) created by the Netherlands in the form of modern economic organizations in the late 19th century. The criticism of Indonesian economist M Sadli leveled at the dualistic economic concept of the Dutch scholar JH Boeke is justified. In his article “Reflection on Boeke’s Theory of Dualistic Economies” (1971), Sadli expressed his logical and theoretical surprise at Boeke\'s view that the dualistic economy that distinguished the modern Western economic system from the traditional Indonesian economic system was permanent.
Nevertheless, Boeke was "correct" in one respect. The emergence of Western capital embodied in the giant plantation enterprises since 1870 in Indonesia was not the continuity of the Indonesian tradition and economic system. Because, as quoted by Sadli, Boeke said that behind the roaring development of the giant corporations there was a modern capitalistic system that was not at all identical with the traditional Indonesian economic system and spirit.
Therefore, to Boeke, the presence of these enterprises reflected the clash of an immigrant social system with the indigenous social system. The social clash was driven by farmers throughout the middle and late 19th century, reflecting a cultural clash. All of this reinforced the view that the method of organizing and capitalizing in the giant Western corporations was culturally foreign. Compared to the ie concept in the Japanese social structure, the clashes indicated that the Indonesian traditional treasures -- aside from other structural factors -- did not adequately accommodate the presence of the modern socioeconomic system in Indonesia in the 19th century.
Until the middle of 1957, the cultural alienation of these corporations continued. Because, as recorded by economist Bruce Glassburner in Indonesian Economy 1950-1953 (1971), there was no sign of any elements in Indonesian society that took over the function of the companies, and "there was no sign in which new sources appeared to take over the function." This nearly meant that -- except the for the Electricity and Gas Bureau inaugurated by President Soekarno on Oct. 27, 1945 and Bank Negara Indonesia (BNI) established in 1946 – Indonesia’s independence proclaimed in August 1945 and confirmed by the Round Table Conference in The Haque in 1949 lacked a material basis. In other words, Indonesia was merely politically independent, without any control over its economic wealth.
Ironically, the Netherlands still benefited just after Indonesian independence. The notes of Australian economist Howard Dick in ”Formation of the Nation-State, 1930s-1966” (2002), show that the Dutch giant corporations did not only recover, but also gained 0.8 billion guilders in 1954-1957. Therefore, it was not surprising that they tended to invest 1.5 billion guilders in 1950-1958 to expand their businesses in Indonesia. Therefore, from 1870 to mid-1957, the social system clash disclosed by Boeke continued in essence.
The path of Indonesia’s political economy abruptly changed at the end of 1957 and at the beginning of 1968 through the nationalization of foreign companies. This political action was historical and, on top of that, decisive, because, starting in 1970, Indonesia could control its own economic wealth. As described by Ahmad Habir in State Enterprises: Reform and Policy Issues (1990), through that action the state seized more than 600 Dutch companies, 300 of which were plantation companies and more than 100 that were engaged in exports and mining. The rest were trade, finance communication, gas and electricity and construction companies. Viewing the extent of economic activity covered by the nationalized companies, Indonesia, in essence, succeeded in achieving economic independence in 1958 -- complementing the previously attained political independence.
The Dutch companies and other foreign firms being nationalized are what we today know as BUMN, or state-owned enterprises (SOEs).
SOE holdings
Viewed from this perspective, the presence of SOEs in Indonesia is distinctive, because it is primarily a product of political action. This distinctive character gave SOEs their legal umbrella after the nationalization: Government Regulation No. 23/1958, confirmed by Law No. 86/1958. This is different from the early experience of the United States, where political disagreement and suspicion colored the emergence of corporations. In fact, as Eric Hilt put it in Early American Corporations and the State (2017), there was a draft law that directed companies to be quasi-public and thus become state instruments to pursue economic growth. Here we see that in the capitalist champion state itself, in its early days, the growth and development of companies was not devoid of political and legislative obstacles.
This phenomenon was clearly different from the situation in Indonesia. However, despite political and legal support, the nature and position of BUMI remains attributive in the notion of Nakane outlined above. As mentioned, the attribute is social grouping with universal enforcement. Besides being based on common descent and caste, attribute grouping is "descriptive." Nakane, for example, called landlords and tenants in the social classification of attributes. Because of its "descriptive" nature, there is no contextual explanation as to how the two interact productively.
This is, among other things, the description of Indonesian SOEs post-1958 up to 1998. The fact that, throughout that period, SOEs were scattered under the ministries or technical ministries, increasingly showed that the character of grouping was attributive in nature. Therefore, state-owned plantation companies under the Agriculture Ministry do not have relations, for example, with state-owned industrial firms under the Industry Ministry. Fellow SOEs engaged in the same fields did not touch each other either.
A decisive development took place in 1998, when President Soeharto ordered Tanri Abeng to form the Ministry of State-Owned Enterprises, a milestone on the way to consolidating state assets under one umbrella. However, even though Tanri Abeng had a follow-up program in the post-consolidation era, the political conditions did not allow him, as Minister of State-Owned Enterprises, to implement it. The change of regime in 1999 stopped Tanri Abeng\'s efforts.
However, this consolidation has provided a powerful imprint for the transformation of SOEs from an attribute to ba, or frames. It means that, without the consolidation of SOEs into a ministry, transformation was hard to bring about. This, therefore, means the transition of SOEs from attributive characteristics, which in our interpretation refers to social groupings without productive or emotional relations, to ba or frames, which are more contextual and productive, was greatly assisted by the existence of the Ministry of State-owned Enterprises. And this transition was important. "In group identification," wrote Nakane, "a frame such as \'company\' or \'association\' is of primary importance."
It is in this context that the formation of SOE holdings -- as is happening under the current state-owned enterprises minister, Rini Soemarno, -- must be seen, namely the process of transforming SOEs that were previously separated from each other into functional and contextual conglomerates that, in the Nakane context, maintain and even strengthen the institutions. And from an economic point of view, this transformation creates a much stronger capital consolidation -- compared to units that are separate from each other. However, in the context of "economic anthropology," the process of transforming SOEs into holdings can be felt as a social formation based on ba.
As Japanese society adapts to the modern industrial age through this type of social grouping, the creation of SOE holdings taking place at present constitutes an effort to advance the development of the corporate world.
Fachry Ali
Co-founder of Business Ethics Study and Development Institute (LSPEU) Indonesia
