Indonesia recognizes the right to private ownership and establishment and relies on the private sector (albeit often heavily protected), as the principal engine of economic growth. At the same time, State-owned Enterprises (SOEs) play a dominant role in many sectors, including oil and gas retail and distribution, electric power generation and transmission, civil aviation, banking, and fertilizer production and wholesale distribution.
In the past three years Indonesia promoted competition in some sectors and has decreased the privileges awarded to SOEs. The Parliament formed the State Ministry for SOEs in 1998; privatization is an important part of its mandate, but political opposition has effectively hindered attempts to privatize. Some provincial governments have improved management and transparency of provincially owned firms (BUMD's) to stem losses and prepare them for privatization.