Indonesia to launch sovereign wealth fund in January next year

Deputy State-Owned Enterprises (SOEs) Minister Kartika Wirjoatmodjo said on Tuesday the government would soon establish the fund to handle government investments. The establishment of the sovereign wealth fund, which will be called the Indonesia Investment Authority, was included in the Job Creation Law.

“We will launch the Indonesia Investment Authority soon as the Job Creation Law mandates its establishment,” he told a virtual discussion but did not go into more details.

The government is preparing Rp 75 trillion (US$5.1 billion) in capital for the nation’s sovereign wealth fund as global heavyweights from the United States to the United Arab Emirates have expressed interest to join.

Finance Minister Sri Mulyani Indrawati said Rp 30 trillion of the capital would be in cash, while the remaining would be in the form of shares in state-owned enterprises (SOEs) and other state assets.

The law has met with widespread protests and criticism from labor unions and civil groups over the potentially negative impacts it could have on labor rights and the environment, although the government’s goal is to attract investment, boost economic growth and create jobs.

The fund is aimed at attracting Rp 225 trillion in investment, with the United Arab Emirates, Japanese conglomerate Softbank and the US International Development Finance Corporation (IFDC) already lining up to invest in the fund, officials said previously.

“The establishment of the sovereign wealth fund is aimed at optimizing asset value in the long-term as part of the efforts to support sustainable development,” the law states.

However, it remains unclear where the wealth fund will be invested, although Sri Mulyani mentioned a combination of development funds and stabilization funds.

Officials have previously mentioned projects in sectors such as infrastructure, health care, energy and resources, tourism and technology. Sovereign wealth funds elsewhere also invest in financial markets.