The Role of Regional-Owned Enterprises (BUMD) in Enhancing Local Own-Source Revenue

Abstract

Fiscal independence has become a primary imperative in the era of regional autonomy, where Local Own-Source Revenue (Pendapatan Asli Daerah/PAD) serves as a key indicator of a region’s capacity to finance development without excessive reliance on central government transfers. This study aims to analyze the strategic role of Regional-Owned Enterprises (Badan Usaha Milik Daerah/BUMD) in enhancing PAD in Riau Province, with particular emphasis on their financial contributions, managerial effectiveness, and institutional sustainability. The research employs a descriptive qualitative approach, utilizing in-depth interviews and direct observation as data collection techniques. Data were obtained from seven key informants, including government officials and executives of regional-owned enterprises. This methodological framework enables a comprehensive understanding of the institutional dynamics, governance practices, and operational challenges faced by BUMDs in fulfilling their fiscal and developmental mandates. The findings reveal that the contribution of BUMDs to PAD varies significantly. Among them, BRK Syariah emerges as the largest contributor, supported by stable financial performance and continuous innovation in Islamic financial products. Its relatively strong governance structure and adaptive business strategy have enabled it to generate consistent dividends for the regional government. In contrast, several other BUMDs continue to face structural challenges, including limited capital capacity, suboptimal corporate governance, and insufficient managerial professionalism. These constraints have hindered their ability to operate competitively and maximize profitability. Despite these challenges, the development potential of BUMDs remains substantial. Strengthening managerial capacity, implementing service digitalization, improving transparency and accountability mechanisms, and ensuring consistent policy support from the regional government are identified as strategic measures to enhance institutional performance. With appropriate reforms and strategic alignment, BUMDs can optimize their dual function as commercial entities and public service providers. This study concludes that BUMDs perform a strategic role not only as contributors to PAD but also as catalysts for inclusive and sustainable local economic development. A structured and systematic reinforcement of BUMD governance and operational capacity is therefore essential to foster stronger fiscal independence at the regional level.