Indonesia launches new sovereign fund

Indonesia launched a sovereign fund, which is expected to boost growth of Southeast Asia's biggest economy, on Feb 24.

Indonesian President Prabowo Subianto launched the Daya Anagata Nusantara Indonesia fund (Danantara) at the presidential palace in the capital city of Jakarta. The much anticipated super holding company aims to manage and invest dividends earned by state-owned enterprises which include oil and gas firm Pertamina, electricity distributor PLN, Bank Rakyat Indonesia, Bank Negara Indonesia, Bank Mandiri, Telkom Indonesia, and mining industry holding firm MIND ID.

Danantara, which is projected to manage over $900 billion worth of assets, is Indonesia's second sovereign wealth fund. The Indonesia Investment Authority, the country's first sovereign wealth fund established in 2021, will operate separately from Danantara.

Prabowo said establishing Danantara is a new way for the Indonesian government to manage and utilize the country's abundant natural resources.

"After 80 years (as an independent sovereign country), why are there still hungry children? Why, after eight decades, there are still villages and towns that don't have electricity?" Prabowo said at Danantara's launch ceremony.

"It is not because we lack natural resources, but it may be because our way of managing and utilizing (our resources) have not yet given full benefits, the greatest possible, to the people," Prabowo said.

He said Danantara will initially put $20 billion into more than 20 projects including nickel, bauxite and copper processing, artificial intelligence development, oil refineries and renewable energy.

However, analysts said this new body should operate under strict supervision.

Josua Pardede, chief economist at the Jakarta-based Permata Bank, said Danantara has a great potential for becoming a catalyst of Indonesia's economic growth, by optimizing state enterprise assets and using more focused investment strategies.

"By focusing on transparency and multi-layer supervision, Danantara has an opportunity of becoming a world-class investment company that is credible and has integrity. This is why strict transparency, effective communication and independent supervision must become first priority for minimizing the risks of moral hazards and for strengthening accountability," Pardede told China Daily.

Ariawan Gunadi, an expert in business land international trade law, said unclear supervision of the body will case worries about possible misuse of authority and corruption in that body. The government needs to strengthen its supervision system, involve independent institutions and civil society organizations," he said in his column for katadata.com.

Gunadi said international audit bodies with strict audit standards need to be involved in the work of Danantara.

Prabowo said Danantara is not merely an investment management body but an instrument for national development.

Prabowo has appointed Rosan Roeslan, minister of investment and downstream and head of the Coordinating Board for Investment, as the CEO of Danantara.

Donny Oskaria, who is deputy minister for state-owned enterprises, has been appointed as chief operating officer while Pandu Patria Sjahrir, founding partner of venture capital firm AC Ventures, will serve as chief investment officer.

Erick Thohir, minister of state-owned enterprises, will head Danantara's supervisory board while Muliaman Hadad, a former central bank official, will serve as deputy chairman,

Prime Sarmiento in Hong Kong contributed to this story.