Indonesian President Prabowo Subianto got here to energy final yr off the again of a marketing campaign with a number of grand guarantees. Chief amongst them: 8% annual financial progress by the tip of his time period in 2029.
His brainchild to get there’s the nation’s newest sovereign wealth fund, Danantara, brief for Daya Anagata Nusantara, which implies “the ability of the long run for Indonesia.” It’s tasked with boosting the financial system, particularly by means of home investments.
The fund can also be taking on Indonesia’s dozens of state-owned enterprises (SOEs), consolidating and streamlining their operations to make them extra aggressive. The concept is that built-in administration can result in simpler and optimized nationwide assets, leading to greater financial progress and higher jobs.
But critics have governance considerations due to a revised regulation that offers the president better management of the entities and their billions of {dollars} in annual dividends. These considerations contributed to a dip in Indonesia’s inventory market index when the fund was launched in late February. Danantara, which reviews to the president, will finally oversee all SOEs (together with World 500 firms Pertamina, the oil and fuel big, and electrical energy firm Perusahaan Listrik Negara).
The concept of sovereign wealth funds—funding funds managed by state actors hoping to leverage their monetary surplus—has existed since Kuwait set one up in 1953 to handle its oil revenues. This surplus can come from gross sales of pure assets in oil-rich nations like Saudi Arabia or Norway, international alternate as in China, and even bumper tax income within the case of Eire. Generally the funds take an lively function, backing up-and-coming startups, making a play for strategic sectors, or investing in firms based mostly in their very own nation.
However Danantara is considerably totally different in that it’s attempting to handle and spend money on its personal state enterprises whereas investing surplus funds drawn from its SOEs’ dividends. The younger entity’s CEO, Rosan Roeslani, argues this can lastly assist Southeast Asia’s largest financial system develop its potential.
earlier than climbing again up once more in mid-April.
Chart by Fortune
“We have now this twin function: How can we optimize belongings from state-owned enterprises to create extra worth, and on the similar time create high quality jobs?” Rosan tells Fortune. As a sovereign fund, there have to be returns, he notes, however the precedence is “sustainable financial progress.”
Southeast Asia’s largest financial system
Indonesia accounts for roughly 40% of the area’s inhabitants and landmass. About 280 million persons are unfold over some 17,000 islands, and the nation had a GDP of $1.4 trillion in 2024, in response to World Financial institution knowledge. That places Indonesia within the high 20 economies globally.
Whereas Indonesia was hard-hit in the course of the Asian Monetary Disaster of 1997–98, it was one of many area’s strongest performers in the course of the 2008–09 World Monetary Disaster, rising by 4.6% in 2009. From 2010 to 2024 its financial system grew by a mean 4.74% a yr, per the World Financial institution.
However the nation trails a few of its neighbors in GNI per capita, which reached $4,910 in 2024. That’s sufficient to categorize it as an upper-middleincome nation by the World Financial institution’s definition. But GNI per capita in Singapore, Malaysia, and Thailand reached $74,750, $11,670, and $7,120, respectively.
Which means not all of Indonesia’s persons are incomes as a lot as their regional friends—regardless of
being blessed with plentiful pure assets, like oil, fuel, and demanding minerals.
However Rosan thinks Danantara can assist Indonesia efficiently leverage its assets. “We wish to develop a value-added downstream trade; doing that may enhance our human capital, create extra high quality jobs, and clearly create a greater financial return,” he says.
Indonesia has already attracted investments to its nickel trade as a part of its downstreaming technique after banning the export of uncooked nickel ore in January 2020—effectively earlier than Danantara.
A brand new part
Danantara should additionally streamline the nation’s dozens of SOEs (an effort began below earlier president Joko Widodo) and make them extra aggressive. “Previously, generally [SOEs] assume they’re more likely to monopolize. If you don’t have competitors, sometimesyou turn into extra relaxed,” Rosan says.
Hilman Palaon, a analysis fellow on the Lowy Institute’s Indo-Pacific Improvement Centre, thinks Danantara marks a brand new part. It’s “anticipated to play a key function in reshaping the SOE panorama: managing state investments, consolidating belongings, and main restructuring efforts,” he says.
That includes lowering pink tape and pointless forms, in addition to fixing Indonesia’s repute for opaqueness and, generally, corruption.
“Possibly up to now, an SOE all the time had particular therapy,” Rosan explains. “Normally if there’s a authorities challenge, there’s all the time precedence that it must be awarded to a different SOE. That form of precedence we’re going to revise.”
Continued SOE reform is required as these firms turn into more and more vital to the financial system, notes Maxwell Abbott, an affiliate managing director and head of political threat and strategic intelligence for APAC at consultancy Nardello & Co.
The nation has already taken a step in the best route, he says: “Lately, Indonesia has made vital progress in bettering SOE efficiency and effectivity by consolidating the variety of SOEs and bettering anti-bribery protocols.”
Rosan argues that not all SOEs are saddled with this difficulty, however that SOEs typically must be extra environment friendly, clear, and digitized.
Synthetic intelligence and digitization represent one in all eight sectors Danantara has focused for funding, to develop Indonesia’s financial system whereas elevating the usual of dwelling. Different sectors embrace renewable power, meals safety, and well being care.
“We’re nonetheless manner behind by way of the well being care trade. We nonetheless import 90% of our uncooked supplies for prescription drugs,” Rosan says. “We’re behind by way of medical doctors…Simply to fulfill the emerging-market customary, not OECD customary, we’re brief about 100,000 medical doctors.”
Danantara has already signed a number of memorandums of understanding or given loans to Indonesian firms in strategic sectors. It has an MOU with ACWA Energy, a Saudi Arabian firm specializing in desalination and inexperienced hydrogen tech, to discover renewable power investments. Complete funding is estimated to be as a lot as $10 billion.
It additionally has partnerships with QIA, Qatar’s sovereign wealth fund, and CIC, China’s sovereign wealth fund, aimed toward facilitating investments to Indonesia. Domestically, Danantara has invested in Chandra Asri, a petrochemical and power agency, and offered a $405 million mortgage to nationwide airline Garuda Indonesia.
“Danantara’s early funding selections present Prabowo needs to make sure home manufacturing of essential industrial inputs and supply lifelines to struggling SOEs that play a distinguished function within the nationwide financial system,” Abbott notes.
The legacy play
With greater than $900 billion in belongings and annual dividends of about $8 billion that can be utilized for investing, by Rosan’s estimation, Danantara isn’t only a new drive in international finance; it’s a sign that Indonesia will now absolutely management its wealth responsibly, handle its assets with strategic foresight, and spend money on its future.
“Danantara carries massive ambitions,” says Palaon, the Lowy Institute analysis fellow. “It displays Indonesia’s daring imaginative and prescient to interrupt free from the middle-income entice and turn into a developed nation, however the true problem lies in turning these ambitions into motion.”
Whereas Rosan has been a mainstay in Indonesian politics with totally different ministerial assignments, an ambassadorship to the U.S., and a job as Prabowo’s marketing campaign supervisor and strategist, he’s additionally a finance man. Earlier than politics, he labored in banking and cofounded his personal funding agency, Recapital Group.
“I got here from the personal sector and have truly been on the funding aspect. So that is [similar] to my earlier job, investing in Indonesia or out of Indonesia,” he says.
Underneath him are a number of notable friends who additionally hail from the finance trade or the personal sector, together with Pandu Sjahrir, Danantara’s chief funding officer and an early backer of Southeast Asia tech big Sea.
Danantara has additionally drafted non-Indonesians to sit down on the board of advisors, serving on a voluntary and nonbinding foundation: famed hedge fund supervisor Ray Dalio, distinguished American economist Jeffrey Sachs, and former Thai prime minister Thaksin Shinawatra.
The 2 People are not any strangers to the nation: Dalio’s OceanX has been working with Indonesian officers to map its seabed, and Sachs beforehand suggested the Indonesian authorities.
And whereas Thaksin’s function might elevate some eyebrows due to corruption allegations, Rosan says Thaksin is revered in Southeast Asia and that his enter can be helpful.
If Danantara succeeds in remodeling Indonesia’s financial system and lifting dwelling requirements, then it’s going to arguably bolster Prabowo’s legacy, which remains to be considerably blotted by his time as a military commander in the course of the Suharto-era dictatorship from the mid-Nineteen Sixties to the Nineties.
Whereas extra investments within the nation coupled with extra aggressive SOEs would in principle create extra jobs, Rosan is conscious of the skepticism and expectation for the fund to carry out.
“Clearly when a brand new entity receives greater than $900 billion in whole belongings, the expectation may be very excessive,” he says, including that the fund is not going to solely “carry out” by way of returns however will elevate governance and compliance requirements. “We’re constructing belief proper now by having the perfect expertise, and likewise having good governance and transparency.”
It’s a powerful declare. However when requested if he’s assured that the dialog round Danantara can be constructive if he speaks to Fortune once more in 5 years, Rosan responds with a agency sure. As he places it, we’ll see “quite a lot of distinction.”
This text seems within the August/September difficulty of Fortune with the headline “Danantara’s CEO thinks the brand new sovereign wealth fund can assist Indonesia lastly unlock its potential”
