Indonesia has launched a new sovereign wealth fund with an initial US$20 billion commitment that could potentially boost its economy or falter if its management falls short of international standards.
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Daya Anagata Nusantara, or Danantara, launched last week by President Prabowo Subianto, will be an investment vehicle and a holding company for Indonesia’s powerful state-owned sector. Major Indonesian conglomerates such as state lender Bank Mandiri, oil and gas giant Pertamina, and telecommunications leader Telkom Indonesia, will come under the fund.
Speaking at the fund’s launch on Monday, Prabowo said Danantara would manage more than US$900 billion worth of assets drawn from state-owned enterprises (SOEs). Touting its impact, he added that the fund would help lift annual economic growth from 5 per cent to 8 per cent within his five-year term.
With its huge asset base, Danantara would rank as the world’s fourth-largest sovereign wealth fund, surpassing those of Saudi Arabia and Singapore.
Unlike Saudi Arabia and Singapore, however, Indonesia has consistently recorded a budget deficit, according to analysts. While Prabowo called the proposed funding of Danantara through a transfer of SOE assets an “efficient solution”, analysts have warned about potential transparency issues and mismanagement.
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Last month, student-led protests erupted across Indonesia after Prabowo announced sweeping austerity measures, redirecting billions from the state budget to Danantara and his other flagship programmes, including a free-meal scheme for schoolchildren and expecting mothers projected to cost US$28 billion annually.