Indonesia launches sovereign wealth fund to manage assets worth US$900 billion; initial budget to kickstart 20 ‘strategic projects’
At the launch of the Danantara fund on Feb 24, Indonesian officials also sought to address some concerns on transparency and financial audit raised by observers, including some interviewed by CNA earlier.
Indonesian President Prabowo Subianto delivers his speech during the launch of a sovereign wealth fund known as Daya Anagata Nusantara, or Danantara, in Jakarta on Feb 24, 2025. (Photo: AFP/Bay Ismoyo)
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JAKARTA: A new Indonesian sovereign wealth fund aims to manage the assets of all state-owned enterprises in the country worth more than US$900 billion, with President Prabowo Subianto saying that the fund will invest in 20 or more high-impact national projects this year.
At the launch of the Daya Anagata Nusantara - or Danantara - fund on Monday (Feb 24), Indonesian officials also sought to address some concerns on transparency and financial audit raised by observers, including some interviewed by CNA last week.
Southeast Asia’s biggest economy saw a wave of student protests in major Indonesian cities last week as a result of the government’s budget cuts to fund Prabowo’s flagship programme - the free nutritious meal initiative for students - and Danantara.
The government’s recent state budget cuts enabled it to save about US$44 billion, about US$20 billion of which will be used for Danantara.
Speaking at the launch on Monday, Prabowo said that Danantara's first wave of investments worth US$20 billion would be used for “strategic projects” involving nickel, bauxite, copper, food production, renewable energy, artificial intelligence, oil refineries and petrochemical plants.
“These are the sectors that will determine our future, our resilience and our nation's independence,” said Prabowo.
When assuming office in late October, Prabowo had set a target annual economic growth of 8 per cent. It currently is at about 5 per cent.
Prabowo on Monday said Indonesia is ready to collaborate with everyone, including foreign partners, to make Danantara a success story and create new jobs.
“Indonesia sends a clear message to all friends and partners worldwide (that) Indonesia is open for collaboration, open for business, open for investment, and open to shared prosperity,” he said.
“Danantara Indonesia will allow us to expand our international cooperation, and I hope that all global partners will recognise Indonesia’s potential not just as an emerging economy but also as a pillar of regional stability and shared progress.”
The president added that Indonesia is determined to become a developed country, and the establishment of Danantara is another step towards that aim.
“We have already proven our commitment to managing Indonesia’s wealth and assets with very careful financial discipline and responsible governance in our first 100 days.”
QUESTIONS ABOUT TRANSPARENCY
Danantara is headed by Investment and Downstreaming Minister Rosan Roeslani, who was also the head of Prabowo’s presidential campaign team during last year’s election.
State-owned Enterprises Minister Erick Thohir, who also campaigned for Prabowo last year, is the chairman of the supervisory board of the fund.
Prior to Danantara’s official launch, some experts had raised concerns about issues of transparency as it was unclear how the new sovereign wealth fund would be audited.
Analysts told CNA that the country’s audit board (BPK) and financial and development supervisory agency (BPKP) could only audit Danantara with Parliament's approval, which is dominated by Prabowo’s coalition - the Advance Indonesia Coalition.
This came after Parliament amended a law regarding state-owned enterprises on Feb 4.
“Previously, the BPK could audit financial reports of the state-owned enterprises through various methods, but now it can only be audited through examinations with a specific purpose to detect whether or not there is state loss,” said Yassar Aulia, a researcher with non-governmental organisation Indonesia Corruption Watch (ICW).
“Audits are also reportedly only possible with the approval or request of Parliament.”
However, Rosan dismissed such concerns.
At a press conference on Monday after Danantara’s launch, the minister stressed that “there is no immunity from the law in this country”.
“So the KPK (Corruption Eradication Commission) can (audit), especially if there are improper or criminal actions, it is very, very possible,” he said, adding that the BPK may also conduct checks and audits on the new fund.
When asked by CNA whether Parliament’s approval is needed to audit Danantara, Rosan said the KPK could audit the newly launched sovereign wealth fund “anytime”. Still, he said the BPK, meanwhile, would have to go through a mechanism to audit Danantara, without revealing further details.
Besides concerns about its transparency, there are also worries about whether Danantara could be successful, which Prabowo believes is understandable.
“This can be expected because this is a new initiative in our history,” said Prabowo on Monday.
“Today, all Indonesians can be proud because, with a total asset of more than US$900 billion under management, Danantara Indonesia will be one of the world's largest sovereign wealth funds.”
THE ROLE OF FORMER PRESIDENTS
Previously, Prabowo said that former Indonesian presidents could be advisers for Danantara, a move Yassar from ICW also deemed as worrying as it could lead to mismanagement of the fund since they are not professionals in the investment sector.
Speaking on Monday, Head of the Presidential Communication Office Hasan Nasbi said that the advisers appointed to the fund would be determined by Prabowo at a later time.
Prabowo’s predecessor Joko Widodo and former president Susilo Bambang Yudhoyono - as well as former vice-presidents Ma’ruf Amin, Jusuf Kalla and Boediono - attended Monday’s event.
They shared the stage with Prabowo, Vice-President Gibran Rakabuming Raka, Rosan and Erick as Danantara was officially launched in Jakarta.
However, Indonesia’s fifth president Megawati Soekarnoputri, was noticeably absent from the event.
Megawati is one of three former living presidents of Indonesia and chairwoman of the Indonesian Democratic Party of Struggle (PDI-P), the country’s largest party in Parliament and not a member of Prabowo’s coalition.
When asked whether Megawati’s absence signals her lack of involvement in Danantara, Hasan did not reply.
IS DANANTARA REALLY NEEDED?
Danantara is Indonesia’s second sovereign wealth fund after Indonesia Investment Authority (INA), which was launched during Widodo’s time in office. The latter invests in transport and logistics projects, green energy and health services, among others.
Danantara also consolidates a bigger asset than INA, which received an initial capital of US$5 billion from the government when it was launched in 2021. As of 2023, INA manages less than US$10 billion worth of assets.
According to Indonesia’s central bank on Feb 20, the country’s current account deficit widened in 2024. It experienced a current account deficit of US$8.9 billion for the year, equivalent to 0.6 per cent of the gross domestic product (GDP), widening from 2023's gap of US$2 billion, or 0.1 per cent of GDP.
Given Indonesia’s current fiscal condition, executive director of economic think tank the Center of Economic and Law Studies (CELIOS) Bhima Yudhistira believes the government could instead maximise INA by getting investors to invest more into the country’s first sovereign wealth fund.
“They should just improve INA and all the state-owned enterprises,” Bhima opined.
Meanwhile, economist Esther Sri Astuti from the Institute for Development of Economics and Finance shares the same view.
She highlighted that many state-owned enterprises are still “problematic”, and the government should focus on revamping them instead, believing some of these firms to be unprofitable while others have unclear functions or are redundant.
“Those state-owned enterprises should be improved first, then a super holding can be created,” said Esther.
Indonesia had 65 state-owned enterprises as of 2023, but it slashed some for efficiency last year to eventually only have 30 companies.
According to Toto Pranoto, an economics expert from the University of Indonesia, dividends from state-owned enterprises were given to the finance ministry before Danantara was established.
“With the new regulation, Danantara can directly manage dividends derived from state-owned enterprises’ profits or investments. So, do dividends still have to be deposited to the state?
“It depends on the policy agreed upon between Danantara and the government (as well as) the Ministry of Finance. This means that if Danantara needs most of the profit for business expansion, the dividends given to the state would also automatically be small,” said Toto.
