Indonesia’s New Sovereign Wealth Fund

In 24 February 2025, the President of the Republic of Indonesia launched a new investment management agency, (BPI) Daya Anagata Nusantara, also called Danantara. Daya Anagata Nusantara means “the future power of Nusantara”. Nusantara literially means “archipelago” and refers to the archipelagic Indonesia. Danantara is a strategic entity that will seek to consolidate and optimize government investment to support national economic growth. Its vision is to encourage the transformation of the Indonesian economy by growing a global sovereign wealth fund, supporting national development, and creating prosperity for all Indonesian people. Danantara is established through Law No.1/2025.

Sovereign Wealth Fund

A sovereign wealth fund (“SWF”) is a state-‐owned investment fund comprised of funds generated by the government and invested in real and financial assets such as stocks, bonds, real estate, precious metals or, in thealternative, investments such as private equity funds or hedge funds. Sovereign wealth funds invest globally.

An International Working Group of Sovereign Wealth Funds (IWG) (2008) in SWFs Generally Accepted Principles and Practices, which is also referred to as Santiago Principles, defines SWFs as:

“special purpose investment funds or arrangements, owned by the general government. Created by the general government for macroeconomic purposes, SWFs hold, manage, or administer assets to achieve financial objectives, and employ a set of investment strategies which include investing in foreign financial assets. The SWFs are commonly established out of balance of payments surpluses, official foreign currency operations, the proceeds of privatizations, fiscal surpluses, and/or receipts resulting from commodity exports. This definition excludes, inter alia, foreign currency reserve assets held by monetary authorities for the traditional balance of payments or monetary policy purposes, operations of state-‐owned enterprises in the traditional sense, government-‐ employee pension funds, or assets managed for the benefit of individuals”.

The International Working Group of Sovereign Wealth Funds (IWG) (2008) divides such funds into 3 types of SWF, i.e: 1) a SWF established as a separate legal entity, with special tasks and activities as stipulated in a special regulation (such as in Kuwait, South Korea, Qatar and the United Arab Emirates/Abu Dhabi Investment Authority/ADIA); 2) a SWF established as a state-‐owned company (such as Temasek and Government of Singapore Investment Corporation/GIC, or China Investment Corporation/CIC, which fall under their respective company law; or 3) a SWF as a group of assets without any establishment of a legal entity, but owned directly by a government or central bank, such as in Botswana, Canada/Alberta, Chile and Norway.

In general, the objectives of a SWF are to:

• Protect and stabilize the budget and economy from excessive volatility due to domestic currency appreciation;
• Diversify the economy from previously relying upon non-‐renewable commodity exports to sectors with higher added value, such as manufacturing and services;
• Generate greater returns than foreign exchange reserves;
• Help monetary authorities eliminate unwanted liquidity, including the effects of trade surpluses, on strengthening the domestic currency;
• Increase savings for future generations so that they can be better prepared to face future challenges, by converting current non-‐renewable resource wealth into renewable financial assets;
• Fund social and economic development including infrastructure, both physical (such as roads and railways) and non-‐physical (such as education and health); and
• serve as a political economic strategy, especially through investment in government bonds, important institutions and companies which play a large role in the economy of the target country.

Danantara

Danantara is designed as an unique entity to consolidate and leverage state assets to create a more efficient investment vehicle. This strategy involves aggregating assets from various state-‐owned enterprises, special mission vehicles or other businesses entities, such as PT Sarana Multi Infrastructure and the country’s first sovereign wealth fund, the Indonesian Investment Authority (INA). Aggregating them is intended to allow them to be used more strategically. Through consolidating those assets, Danantara aims to amplify their value through financial leveraging and optimised management, so it can serve as an economic engine alongside the state budget.

For the initial stage, Danantara will consolidate Indonesia’s so-‐called ‘Magnificent Seven’ State-‐owned enterprises: 3 (three) State-‐owned Banks, State Energy company Pertamina, State electricity company PT PLN, State telecommunications company PT Telkom, and State mining holding company MIND ID. Danantara shall manage assets worth an estimated US$900 billion. This move signifies a major shift in the country’s economic strategy, aiming to leverage its resources and drive sustainable growth through strategic investments. The fund’s initial investment of US$20 billion will be strategically deployed across various sectors, including renewable energy, food production and strategic mineral processing. This initial capital will serve as a catalyst, attracting further investment and driving economic growth.

The formation of Danantara is stated in the Law No. 1 of 2025 on the Third Amendment to Law Number 19 of 2003 concerning State-‐Owned Enterprises. Unlike the Ministry of State-‐Owned Enterprises, Danantara has a different role and function. Danantara is responsible for investment management outside the State Revenue and Expenditure Budget (APBN).

Danantara’s funds will act as a catalyst for investment, attracting both domestic and foreign capital. Danantara funds will be channelled to national priority sectors, including infrastructure development, food security, energy security, industrial down-‐streaming, import substitution industries and digital transformation. Danantara is committed to sustainable development, prioritizing investments that generate long-‐term economic benefits while minimizing environmental impact. This includes supporting green technologies, promoting responsible resource management and investing in social infrastructure.

Danantara recognizes the importance of good governance and transparency. The fund is committed to operating with integrity, ensuring accountability, and maintaining public trust. Independent oversight and regular audits will be essential to ensure responsible management of assets.

Danantara shall be operated under a structured governance model designed to ensure accountability, financial discipline and independence from political interference.

Key governance structures include:

• A Supervisory Board – Appointed by the President of Indonesia, responsible for setting high-‐level strategy and ensuring transparent governance.
• An Executive Management team – Led by financial and investment experts, tasked with managing daily operations and optimizing State Owned Enterprise (SOE) asset performance.

Danantara is guided by a long-‐term vision for Indonesia’s economic future. The fund’s investments are aimed at creating sustainable economic growth, generating employment opportunities, and improving the quality of life for all Indonesians.

Indonesia’s previous sovereign wealth fund, INA, was launched in 2021 to attract foreign investment into infrastructure, banking and state-‐owned enterprises. However, with a capital base of just US$10.5 billion, INA was not designed to consolidate and restructure SOEs at scale. By contrast, Danantara has been given a much broader economic transformation mandate. Unlike INA, which focuses on asset management and co-‐ investments, Danantara has the authority directly to oversee SOEs, approve capital increases, and restructure companies through mergers, acquisitions and spin-‐offs.

President Prabowo Subianto has emphasized that Danantara is not merely an investment fund, but a powerful instrument for national development. The fund is expected to play a crucial role in achieving the government’s ambitious target of increasing annual economic growth from 5% to 8%. By optimizing the management of state assets and attracting foreign investment, Danantara aims to create a more prosperous and equitable future for Indonesia.

Sovereign Wealth Fund

The author believes that there will be an opportunity to link the SWF model with the Islamic Endowment (“Waqf”) Assets. Article 33 of the Indonesian Constitution states that: the land, the waters and the natural resources within shall be under the powers of the State and shall be used to the greatest benefit of the people. While Waqf is an Islamic concept that refers to the handover or transfer of ownership rights over an asset for a specific purpose, usually for public or charitable purposes, the Waqf asset can be in the form of land, buildings, or other assets. The purpose of Waqf is to provide benefits to society or to support various charitable activities. Waqf is an inalienable charitable endowment; it typically involves donating a building, plot of land or other assets for religious or charitable purposes with no intention of reclaiming the asset. It is widely used throughout Muslim countries to develop and support communities. To illustrate, a field is donated as Waqf asset. The community may use the field in ways that are beneficial, among others by planting fruits and vegetables. When ripe, the harvest will benefit the whole community. However, since as a Waqf asset nobody legally owns the field itself, the donation is ongoing and will support generation after generation. In a Waqf, an administrator/manager/ custodian shall be appointed to manage the Waqf Assets.

According to the Ministry of Religious Affairs, currently there are more than 57,200 hectares of Waqf land throughout Indonesia; while the potential cash Waqf is US$ 12 billion per annum. Annual increase of Waqf assets reaches 6%. Based on such fact, the author believes that the Waqf assets can be further developed for the greatest benefit for the people, among other means by linking the Waqf assets and business investments conducted by Danantara. The Waqf assets, especially in the form of buildings, lands or other assets, can be used as underlying assets in issuing Islamic bonds (sukuk) to develop the Waqf assets -‐ for example for food estate programs, where the Waqf manager/custodian may enter into a cooperation with Danantara.

There is a similarity between the Waqf concept and Article 33 of Indonesia’s Constitution, that the framework advocates state ownership and collective benefit from natural resources to address poverty, economic inequality and resource mismanagement. The Islamic principles underscore the collective ownership of natural resources, reflecting an obligation to manage these assets inclusively. Such resources should be treated as public trusts (Waqf), where the principal value is preserved, and the derived benefits serve societal needs.

It must be kept in mind however, and the citizenry be wary, that if not managed with high transparency and accountability, Danantara could pose a threat to economic stability. The biggest risks include potential misuse of funds and too much political influence in investment decision-‐making. Danantara must prioritize the principles of accountability, transparency, and public involvement in its management. With strict supervision and good governance, Danantara can become an extremely important pillar for national economic growth.