JAKARTA: China's Silk Road Fund (SRF) has signed a framework agreement to invest up to 20 billion yuan (US$2.99 billion) in Indonesia's sovereign wealth fund, the funds said on Monday (Jul 4).
The agreement allows for investment in all sectors open to foreigners in Indonesia, in particular those promoting economic connectivity between the countries, the Indonesia Investment Authority (INA) and the SRF said in a joint statement.
"We believe that investment in Indonesia and the region has high potential, especially when conducting it together with INA," said Yanzhi Wang, the president of the SRF.
Unlike many other sovereign wealth funds, which manage excess oil revenues or foreign exchange reserves, the INA's business model seeks to attract foreign co-investors to help fund economic development.
The United Arab Emirates has pledged to invest US$10 billion with the INA, after the sovereign wealth fund's launch in February 2021.
Indonesian authorities have said other global agencies such as the US International Development Finance Corporation and Japan Bank for International Cooperation had also expressed interest in becoming co-investors.
The INA has also formed a US$3.75 billion toll road fund with Canada's Caisse de dépôt et placement du Québec (CDPQ), APG Asset Management (APG) and a unit of the Abu Dhabi Investment Authority (ADIA) last year.
The Silk Road Fund was set up at the end of 2014 and is backed by China's foreign exchange reserves, China Investment Corp, the Export-Import Bank of China and the China Development Bank.
In 2019, Indonesia had asked China to set up a special fund within its Belt and Road Initiative (BRI) for investment in Southeast Asia’s largest economy, after offering projects worth US$91 billion, government officials said at the time.
The latest framework agreement sets out general terms and principles for the SRF and the INA to screen and decide on joint investments, according to the statement.