DANANTARA'S CEO THINKS THE NEW SOVEREIGN WEALTH FUND CAN HELP INDONESIA FINALLY UNLOCK ITS POTENTIAL

INDONESIAN President Prabowo Subianto came to power last year off the back of a campaign with several grand promises. Chief among them: 8% annual economic growth by the end of his term in 2029.

- BY LIONEL LIM

His brainchild to get there is the country's latest sovereign wealth fund, Danantara, short for Daya Anagata Nusantara, which means “the power of the future for Indonesia.” It's tasked with boosting the economy, especially through domestic investments.

The fund is also taking over Indonesia's dozens of state-owned enterprises (SOEs), consolidating and streamlining their operations to make them more competitive. The idea is that integrated management can lead to more effective and optimized national resources, resulting in higher economic growth and better jobs.

Yet critics have governance concerns because of a revised law that gives the president greater control of the entities and their billions of dollars in annual dividends. These concerns contributed to a dip in Indonesia’s stock market index when the fund was launched in late February. Danantara, which reports to the president, will eventually oversee all SOEs (including Global 500 companies Pertamina, the oil and gas giant, and electricity company Perusahaan Listrik Negara).

The idea of sovereign wealth funds—investment funds managed by state actors hoping to leverage their financial surplus—has existed since Kuwait set one up in 1953 to manage its oil revenues. This surplus can come from sales of natural resources in oil-rich nations like Saudi Arabia or Norway, foreign exchange as in China, or even bumper tax revenue in the case of Ireland. Sometimes the funds take an active role, backing up-and-coming startups, making a play for strategic sectors, or investing in companies based in their own country.

But Danantara is somewhat different in that it’s trying to manage and invest in its own state enterprises while investing surplus funds drawn from its SOEs’ dividends. The young entity's CEO, Rosan Roeslani, argues this will finally help Southeast Asia’s largest economy develop its potential.