Indonesia approves Bill to set up investment firm managing 1,000 trillion rupiah in assets
The fund, called Danantara, aims to support President Prabowo’s 8% growth goal, and will operate under his direct oversight
[JAKARTA] Indonesia’s parliament on Tuesday (Feb 4) approved a Bill paving the way for Danantara, a newly established state-owned investment agency, to commence operations.
The investment agency Daya Anagata Nusantara, known as Danantara, will be responsible for attracting both domestic and international investments, while managing state assets worth 1,000 trillion rupiah (S$83.2 billion).
It will oversee dividends from state-owned enterprises and wield broad authority over capital injections and restructuring, according to the Bill.
Danantara will be able to make investments, both directly and indirectly, through partnerships with investment holdings, operational holdings and third parties. Any profits or losses incurred from these investments will be fully attributed to the agency.
The agency will operate under the direct oversight of President Prabowo Subianto, with supervision from key ministers, including the minister of state-owned enterprises and the minister of finance.
This initiative supports Prabowo’s goal of achieving 8 per cent economic growth and is expected to draw comparisons to major sovereign wealth funds globally.
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The regulation’s passage was led by Prabowo’s party, Gerindra, and secured majority approval in parliament, where the ruling coalition holds a dominant presence.
The regulation will take effect 30 days after its enactment, with Prabowo expected to issue a decree to outline the technical guidelines for its implementation.
Big money
The new agency is set to receive an initial capital of 1,000 trillion rupiah, based on the consolidated capital of state-owned enterprises, which reached 1,135 trillion rupiah in 2023, the Bill indicated.
This capital will be generated from government-owned stakes in Indonesia’s largest lenders – Bank Mandiri, Bank Rakyat Indonesia and Bank Negara Indonesia – along with shares in utility company Perusahaan Listrik Negara, miner Mining Industry Indonesia, energy company Pertamina and telco Telkom Indonesia, all of which are expected to be transferred to Danantara.
Under the previous framework, dividends from state-owned enterprises were directed to the Finance Ministry, while the government’s stakes in these companies were overseen by the Ministry of State-Owned Enterprises.
Danantara will also manage a portion of the assets held by the Indonesia Investment Authority, the country’s first sovereign wealth fund established by former president Joko Widodo. Since its founding in 2020, it has managed assets totalling 160 trillion rupiah.
With Danantara, Prabowo aims to drive ambitious development plans for Indonesia, including his signature campaign promise of free lunches, all while navigating the challenges of fiscal limitations.
Prabowo has appointed veteran banker Muliaman Hadad to lead Danantara, with the vision of replicating the success of Singapore’s Temasek.
The agency aims to attract both domestic and global investors while deploying billions of dollars into international markets, solidifying its role as a key player in the global investment landscape.
In recent discussions with lawmakers on the Bill, Minister of Law Supratman Andi Agtas conveyed Prabowo’s vision for state-owned enterprises to drive the development of industries centred on nickel, bauxite and copper.
Prabowo also emphasised the crucial role of state-owned enterprises in strengthening the supply chains of strategic sectors such as renewable energy and electric vehicles.
Risks – politics and bureaucracy
Observers considered the establishment of Danantara by Prabowo to be a strategic move to optimise the role of state-owned enterprises – particularly those with massive assets and dividends – in driving the economy forward.
However, concerns arose that Danantara’s management could become a political tool if not monitored with competence and independence.
Toto Pranoto, a lecturer and state-owned enterprise analyst from the University of Indonesia, cautioned that the dual role of the minister of state-owned enterprises in overseeing the new investment agency could slow down decision-making due to bureaucratic delays.
“As an investment agency, Danantara must have broad authority and the ability to make quick decisions, and should not follow the bureaucratic style of ministries,” he said.
Analysts at CreditSights, Fitch Group’s debt research firm, recently stated that the impact of Danantara on Indonesian state-owned enterprises will largely depend on the effectiveness of its consolidation and management.
However, there are risks, including potential political influence over fund utilisation, challenges in the integration process and Danantara’s impact on the strategic direction of such enterprises.
“It could affect investor confidence in the portfolio companies, and conflicting interests from the different stakeholders that might hinder the proper and timely execution of instructions,” they wrote in a note.
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