Indonesia bets that a new sovereign wealth fund will ultimately unlock that possibility

His brainchild is Danantara, the country’s latest sovereign wealth fund, short for Daya Anagata Nusantara, which means “the power of the future of Indonesia.” He is tasked with boosting the economy, especially through domestic investment.

The fund also takes over dozens of Indonesian state-owned enterprises (SOEs) to consolidate and streamline their businesses to make them more competitive. The idea is that integrated management can lead to more effective and optimized national resources, leading to higher economic growth and better jobs.

However, critics have concerns about governance due to the revised law that gives the president an entity in annual dividends and a greater control of billions of dollars. These concerns contributed to the DIP of Indonesia’s stock market index when the fund was launched in late February. Reporting to the President, Danantara will ultimately oversee all SOEs (including global 500 companies Pertamina, The Oil and Gas Giant, and the power company Perusahaan Listrik Negara).

The idea of a sovereign wealth fund – an investment fund managed by state officials who want to take advantage of financial surplus – has existed since Kuwait was founded in 1953 to manage oil revenues. This surplus could also come from oil-rich countries such as Saudi Arabia and Norway, foreign exchange, or bumper tax revenue in the case of Ireland. Funds can play an active role, helping them up and down, play in the strategic sector, or invest in companies based in their own country.

However, Danantara differs to some extent in that he is trying to manage and invest in his own state-owned enterprises, while investing in the surplus funds drawn from the SOE dividends. Rosan Roesrani, CEO of Young Entity, argues that this will ultimately help Southeast Asia’s biggest economy develop its potential.

“We have this dual role: how can we optimize assets from state-owned companies to create more value and at the same time create quality jobs?” Rosan tells Fortune. He points out that revenues need to be needed as a sovereign fund, but the priority is “sustainable economic growth.”

Southeast Asia’s largest economy

Indonesia accounts for about 40% of the region’s population and land area. According to World Bank data, around 280 million people spread across around 17,000 islands, with GDP of $1.4 trillion in 2024. This makes Indonesia the top 20 economy worldwide.

Indonesia was a fierce hit during the 1997-98 Asian financial crisis, but was one of the region’s most powerful performers during the 2008-09 global financial crisis, with an increase of 4.6% in 2009. From 2010 to 2024, the economy grew by an average annual rate of 4.74% per World Bank.

However, Country will kick out some of its per capita GNI neighbors, which reached $4,910 in 2024. This is sufficient to classify it as a moderate country by the World Bank definition. However, the per capita GNI in Singapore, Malaysia and Thailand reached $74,750, $11,670 and $7,120, respectively.

In other words, not all Indonesians earn as much as their local peers.
It is blessed with abundant natural resources, including oil, gas and important minerals.

However, Rosan believes Danantara can help him make good use of Indonesia’s resources. “We want to develop a downstream industry with added value, and by doing that, we improve human capital, create better quality jobs, and clearly generate economic benefits,” he says.

Indonesia has already attracted investment in the nickel industry as part of its downstream strategy after banning the export of raw nickel ore before Danantara in January 2020.

New phase

Danantara also needs to streamline the SOEs of the country (an effort that began under former President Djoko Widodo) and make them more competitive. “In the past, sometimes you think (SOE) they’re likely to have a monopoly. Sometimes when there’s no competition, sometimes you’re more relaxed,” says Rosan.

Hilman Palaon, a researcher at the Indo-Pacific Development Center at Lowy Institute, believes Danantara is a new stage. “National investment management, asset integration and key restructuring efforts: it is expected to play a key role in reshaping the SOE landscape,” he says.

That includes reducing deficits and unnecessary bureaucracy, and correcting Indonesia’s reputation for opacity and sometimes corruption.

“Maybe in the past, SOEs have always had special treatment,” explains Rosan. “Normally, there is always a priority that if there is a government project, it should be awarded to another SOE. We will modify such priorities.”

As these companies become increasingly important to the economy, continuous SOE reform is needed, consulting Nardello & Co.

The country is already taking a step in the right direction. “In recent years, Indonesia has made great strides in improving the performance and efficiency of SOEs by integrating the number of SOEs and improving anti-briety protocols.”

Although not all SOEs are plagued by this issue, they generally should be more efficient, transparent and digital.

Artificial intelligence and digitalization are one of eight sectors Danantara has targeted for investment, increasing the standard of living while growing Indonesia’s economy. Other sectors include renewable energy, food security, and healthcare.

“We are still behind in the healthcare industry. We still import 90% of our raw materials for our medicine,” says Lausan. “We are behind in terms of physicians… We are around 100,000 doctors just to meet new market standards, not OECD standards.”

Danantara has already signed several memorandums to Indonesian companies in its strategic division and granted loans to Indonesian companies. To explore renewable energy investments, there is an MOU with ACWA Power, a Saudi Arabian company specializing in desalination and green hydrogen technology. The total funding is estimated at $10 billion.

There is also a partnership between Qatar’s sovereign wealth fund QIA and CIC, a Chinese sovereign wealth fund aimed at promoting investment in Indonesia. Domestic, Danantara invested in petrochemical and energy company Chandra Asri and provided a $405 million loan to national airline Garuda Indonesia.

“Danantala’s early investment decisions show that Prabowo wants to ensure domestic production of key industrial inputs and provide a lifeline for struggling SOEs to play a prominent role in the national economy,” Abbott points out.

Legacy Play

With over $900 billion in assets and an annual dividend of around $8 billion that can be used for investments, Rosan estimates Danantara is not a new force in global finance. This is a signal that Indonesia will take responsibility and fully control its wealth, manage its resources with strategic forecasts, and invest in the future.

“Danantala has great ambitions,” says Paraon, a researcher at the Rody Institute. “It reflects Indonesia’s bold vision to be free from the middle-income trap and become a developed country, but the real challenge lies in turning those ambitions into action.”

Although Rozan was a mainstay in Indonesian politics, taking on various ministerial duties, ambassador to the US, as Prabowo’s campaign manager and strategist, he is also a finance manager. Before politics, he worked in banking and co-founded his own investment company, Recapital Group.

“I came from the private sector and I was actually on the investment side. So this is either investing in Indonesia (similar to my previous work), or investing in Indonesia,” he says.

Beneath him are several notable peers who also come from the financial and private sector, including Pandu Sharil, the chief investment officer of Danantara and an early supporter of Southeast Asian technology giant seas.

Danantara also drafted that non-Indonesians would sit on the Advisory Committee and serve on a voluntary and non-binding basis. Famous hedge fund manager Ray Dario, well-known American economist Jeffrey Sachs and former Thai Prime Minister Thaksin Sinawatra.

The two Americans are no strangers to this country. Dario’s Oceans has worked with Indonesian officials to map the seabed, and Sachs has previously advised the Indonesian government.

And while Thaksin’s role may raise some brows due to the allegations of corruption, Rosan says Thaksin is respected in Southeast Asia and his opinion is useful.

If Danantara succeeds in transforming Indonesia’s economy and lifting its standard of living, it will undoubtedly strengthen Prabowo’s legacy.

Coupled with the more competitive SOE, more investment in the country would in theory generate more jobs, but Rosan is aware of the skepticism and expectations the fund implements.

“Clearly, if a new entity receives more than $900 billion in total assets, expectations are very high,” he said, adding that the fund will not only “do” from a return perspective, but will raise governance and compliance standards. “We now build trust by having the best talent, excellent governance and transparency.”

That’s a strong argument. However, when asked if he was certain that the conversation around Danantara would talk to Fortune again in five years, Rosan replies firmly. We will see “many differences” as he places it.

This article is published in the August/September issue of luck “Danantara CEO believes that a new sovereign wealth fund will help Indonesia unlock that possibility in the end.”