Indonesia has amended a law governing the Southeast Asian nation’s powerful state-owned enterprises, laying the legal foundation for a new agency to manage billions of dollars in state assets while seeking investments domestically and potentially overseas.
Lawmakers, mostly from President Prabowo Subianto’s ruling coalition, approved the revision in a plenary session on Feb. 4. The new framework paves the way for Daya Anagata Nusantara, or Danantara, to consolidate Indonesia’s state firms and supervise their operations, investments and dividends, State-Owned Enterprises Minister Erick Thohir said in parliament.
Danantara, touted as an investment vehicle akin to Singapore’s Temasek, is one of Prabowo’s key initiatives to mobilize funding for his strategic projects, including a flagship free school lunch program, the construction of more public housing, and efforts to promote food and energy self-sufficiency. The president needs to ramp up spending to boost Southeast Asia’s largest economy without bloating the state budget.
The agency, which will be overseen by ministers and report directly to the president, will seek to help the administration achieve its goal of boosting economic growth to 8% within Prabowo’s term, Thohir said. State Secretary Minister Prasetyo Hadi added that the new entity would be established with capital of at least 1,000 trillion rupiah ($61 billion), with its launch subject to a final decision by the president.
Bloomberg News on Feb. 3 reported that the agency’s capital would stem from cash, state-owned assets, or government-owned shares, citing draft legislation.
Thohir didn’t say which state-owned enterprises would be transferred to Danantara. Previous local media reports have suggested the agency could eventually manage major state assets such as PT Bank Mandiri, Mining Industry Indonesia and state oil and gas giant PT Pertamina.
Deputy Speaker Sufmi Dasco Ahmad said the government would soon issue implementing regulations to provide further legal clarity.
Indonesia’s state-controlled companies, which have long dominated various sectors of the trillion-dollar economy, collectively paid the equivalent of more than $5 billion in dividends to the government in 2023, according to official data.
Lavanya Venkateswaran, senior Asean economist at OCBC, said the framework for the new agency was largely within expectations, but that a number of clarifications were required “to fully assess Danantara’s potential impact on growth,” including the question of which state enterprises will come under its remit and how the fund will operate.
“We will need greater clarity on how things change under Danantara compared with the SOE ministry” regarding the state assets being transferred, she said. “The true test will be whether Danantara can produce the intended results of greater investments and wealth generation.”
Lakshmanan R, head of South & Southeast Asia Corporates Research at CreditSights, added that a key question will be how much direct control Prabowo has over the agency.
“If the president has autonomous power to take decision on Danantara, then it could lead to questionable practices,” he said. “But if it is the government of Indonesia that will still have decision-making powers, then we don’t see much change in governance from what it is currently.”