Decks cleared for setting up Indonesia’s sovereign wealth fund

Photo: Nick Agus Arya/Unsplash

Indonesia’s parliament has cleared the decks for establishing a sovereign wealth fund (SWF) — the Investment Management Institution (LPI). The creation of an SWF was part of the omnibus bill on job creation cleared by parliament on Monday.

The sovereign wealth fund is intended to increase and optimise the value of state assets in the long term, and attract investment from global investors, including international institutions and corporations, the bill said. The government will inject Rp15 trillion ($1 billion) into the LPI and will also re-inject funds if the capital decreases significantly.

The bill identifies five sources that could be LPI’s assets: state-assets and transferred assets of state-owned enterprises, capital participation, income from business developments, grants, and other legitimate sources.

The vice-minister of state-owned enterprises Budi Gunadi Sadikin estimated that the LPI’s asset management can reach $500-600 billion. This is achievable if all state-owned enterprises (SOEs) launch initial public offerings (IPO). The cumulative market value of the SOEs will be around $480 billion, as the total revenues of all SOE companies is Rp2,400 trillion ($165 billion), the vice-minister explained.

“The government will be able to have a sovereign wealth fund bigger than Temasek,” Sadikin was quoted as saying by Bisnis Indonesia on Tuesday. 

According to the bill, LPI will be governed by a supervisory board and a board of directors. The minister of finance will be the chairman of the supervisory board. The SOE minister and three other professionals will be members.

Concerns over omnibus bill

The omnibus law revises over 70 of Indonesia’s existing regulations and attempts to simplify business permits and land acquisition processes besides easing foreign ownership requirements.

Yet, there are concerns.

“SWF won’t guarantee that foreign investors will come in a short time,” Bhima Yudhistira, an economist at Jakarta’s Institute for Development of Economics and Finance (INDEF) told DealStreetAsia. “The omnibus law is not urgent for now. It gives a signal that the government is not focusing on solving the main issue, which is the pandemic. COVID-19 has disturbed economic activities and made investors uninterested in Indonesia, as purchasing power is slowing down.”

In a separate development, Reuters reported that 35 global investors, managing $ 4.1 trillion in assets, have expressed their concerns to Indonesia’s government that the law could endanger the country’s tropical forests. The investors included Aviva Investors, Legal & General Investment Management, the Church of England Pensions Board, Netherlands-based asset manager Robeco, and Japan’s largest asset manager, Sumitomo Mitsui Trust Asset Management.

“While we recognise the necessity for reform of business law in Indonesia we have concerns about the negative impact of certain environmental protection measures affected by the omnibus bill on job creation,” Peter van der Werf, senior engagement specialist at Robeco, said in the statement.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.