Indonesia to launch Temasek-style fund amid transparency concerns

Indonesia will soon launch Danantara, a national investment agency to overhaul multibillion-dollar state-owned assets. The move is a cornerstone of President Prabowo Subianto’s economic strategy.

Experts, however, warn that the fund’s success will depend on strict transparency and insulation from political influence – a crucial takeaway from Malaysia’s 1MDB scandal.

Some observers have raised concerns about potential overlaps with the country’s sovereign wealth fund, the Indonesia Investment Authority (INA).

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Nonetheless, the new president’s push for Danantara is largely seen as a strategic move to optimize national assets and streamline how the country manages them.

Documents reviewed by The Business Times showed that Danantara is set to oversee seven state-owned enterprises (SOEs) across finance, energy, and mining. These enterprises are said to be financially robust and deliver substantial returns.

However, Danantara’s launch, which was set for last week, has been postponed, as the president is on a two-week overseas trip.

Economists were quick to point out that in the wake of the 1MDB scandal – an embezzlement scheme involving billions of dollars siphoned from the state fund – Indonesian officials must recognize the necessity of “top-tier professional management” for the fund.

“Danantara must remain free from political influence and conflicts of interest,” says Wijayanto Samirin, senior economist at Jakarta-based Paramadina University. “It should be staffed by professionals of integrity, with strong track records as a prerequisite.”

The initiative is viewed as a bold step to consolidate SOE assets, aiming to support Prabowo’s agenda by engaging the private sector more deeply in the growth of Southeast Asia’s largest economy.

Taking a leaf out of Singapore’s Temasek book

Prabowo has tapped Muliaman Hadad, a seasoned financial expert and former head of the Financial Services Authority, to lead Danantara.

Although the new agency’s precise role and scope are unclear, Hadad stated in late October that Prabowo envisions Danantara as a global investment powerhouse, comparable to Singapore’s Temasek and able to channel billions of dollars into international companies.

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Unlike the SOE ministry, he said, Danantara’s focus will be solely on state investment management.

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