An Analysis of The New Regulation on The Governance of Village-Owned Enterprises

Abstract

The enactment of Law No.11/2020 concerning Job Creation, followed by Government Regulation No.11/2011 on Village-Owned Enterprises introduces a new regulatory framework to the management of Village-Owned Enterprises (Badan Usaha Milik-"BUM Desa"). The regulation is expected to improve the management and productivity of BUM Desa. This paper aims to examine how this new regulation addresses some of the legal challenges and deficiencies identified under the previous regulations. The analysis draws from a combination of a normative research method, a survey and qualitative interviews with respondents from a small purposive sample of BUM Desa. Based on the analysis of the new regulation outlined, the paper concludes that the new regulation addresses a number of previous challenges and puts in place provisions that have the potential to further professionalize BUM Desa. However, the regulation risks placing requirements that may be too onerous on BUM Desa given that one of the main challenges for BUM Desa relates to their limited human resource capacity. Although the new regulation promotes good corporate governance practices and BUM Desa development, on the other hand, it could also be a burden that may hinder the development of BUM Desa themselves.