Indonesia turns to Singapore's Temasek as model for investment

[JAKARTA] Indonesia is turning to Singapore's Temasek Holdings as a model to create a sovereign investment company to drive development in Southeast Asia's biggest economy.

The government is considering starting an investment holding company for four or five state-owned entities, which could then buy shares in Indonesian companies, Finance Minister Bambang Brodjonegoro said in an interview in Jakarta on Monday. If the fund is successful, it may over time invest in assets overseas, as Temasek did, he said.

"A super-holding of our SOEs, that could be a very good sovereign wealth fund for Indonesia," Mr Brodjonegoro said. "This process has to start."

President Joko Widodo took office at the end of 2014 with a mandate to spur economic growth through public spending to combat a slowdown in demand from China for the nation's commodities, such as coal and palm oil. He is seeking to fast- track infrastructure projects and has pledged to cut red tape to attract businesses.

Temasek was founded in 1974 to own and manage shares and assets held by Singapore's government, such as shipyards previously controlled by its former colonial power, the UK. It began investing in foreign equities in 2002 and had record assets of S$266 billion at the end of March last year.

"There are still a lot of big Indonesian companies not really owned by Indonesians, so this could be a good opportunity," Mr Brodjonegoro said. "They can invest, they have the financing capability, and later, maybe if the thing is already settled, with investing in Indonesia, they can of course go abroad."

State banks and energy firms may be possible targets for an investment holding company. Dwi Soetjipto, chief executive officer of PT Pertamina, said this week he wants to combine with gas company PT Perusahaan Gas Negara. State-Owned Enterprises Minister Rini Soemarno said in April that PT Danareksa Investment Management will be a holding company for government-owned financial firms.

Indonesia is also putting efforts into boosting tax revenue to fund its infrastructure drive, with a planned amnesty for declaring and repatriating hidden offshore funds seen as key to widening the tax base. Mr Brodjonegoro said he expects the planned tax amnesty bill to be passed by parliament this month.

"We need to have the amnesty to bring part of the money back to Indonesia," he said. "We need to improve our tax base." The economy will probably expand more than 5 per cent in the second quarter as public spending picks up and farming output improves, the minister said.

BLOOMBERG