Indonesia is set to launch the Danantara Sovereign Wealth Fund to accelerate economic growth and attract investment. As the nation pushes to enhance its global competitiveness, this fund plays a central role in supporting development projects and state-owned enterprises.
However, the initiative has sparked debate. Will it lead Indonesia toward prosperity, or could it create economic pitfalls? Stakeholders continue to assess the benefits and risks, making Danantara’s future a key topic of discussion.
What is the Danantara Sovereign Wealth Fund?
Ariyo DP Irhamna, an economist at the Institute for Development of Economics and Finance (Indef), explains that Danantara operates as a state investment management entity established by the Indonesian government.
Officially known as the Investment Management Body of Daya Anagata Nusantara (BPI Danantara), this fund functions as a “state-owned investment bank,” managing strategic assets and financial resources, including revenues from natural resource exports.
President Prabowo Subianto, as reported by CNN, elaborated on the name’s significance, stating, “I name it Danantara, Daya Anagata Nusantara. It means the strength or energy of Indonesia’s future.” He emphasized that this fund represents “the people’s money,” with an asset management target nearing US$980 billion. The fund is set to launch on February 24, 2025.
Indonesia’s Economic Growth Strategy Behind Danantara
As Indonesia aims for rapid economic growth, the Danantara Sovereign Wealth Fund emerges as a crucial tool. State-Owned Enterprises (SOE) observer Toto Pranoto believes this initiative can drive the nation’s economic expansion.
“The state can no longer rely solely on the state budget to achieve 7% economic growth. This target becomes attainable if foreign direct investment flows into projects initiated by Danantara,” he stated, as reported by BBC.com.
Toto highlighted two reasons global investors may find Danantara attractive. First, since the fund will invest in these projects, risk is distributed more evenly. Second, Danantara’s significant asset base will strengthen its credibility, making it a reliable investment partner.
Supporting this perspective, Ariyo DP Irhamna noted that Danantara could act as a gateway for investors to participate in sustainable and innovative projects, fostering long-term economic growth.
Governance and Transparency Concerns
Despite its potential, Danantara has raised concerns about governance and transparency. Wana Alamsyah, a researcher at Indonesia Corruption Watch (ICW), warns that the fund could weaken oversight by law enforcement agencies, including the Financial Audit Agency (BPK) and the Corruption Eradication Commission (KPK).
“BPK and KPK lack the authority to conduct audits or enforce legal action.
As a result, the risk of corruption within state-owned enterprises involved in Danantara may increase,” he explained, as reported by Tempo. Alamsyah further pointed out that corruption in state-owned enterprises has been a long-standing issue.
Between 2016 and 2021, ICW monitored 119 corruption cases involving these enterprises, with misappropriated state funds exceeding Rp 40 trillion. With Danantara’s emergence, law enforcement could face even greater challenges, increasing the risk of financial misconduct.
Luhut’s Confident View on Danantara
Chairman of the National Economic Council (DEN), Luhut Binsar Pandjaitan, holds a different perspective. He sees Danantara as a strategic move to improve efficiency and transparency among state-owned enterprises.
Speaking at the Indonesia Economic Summit 2025 in Jakarta, Luhut emphasized that the fund enables SOEs to form joint ventures, enhancing their operations and oversight.
“Danantara, in my opinion, is a highly strategic decision. By forming joint ventures, these companies become more efficient and transparent. We gain better visibility into their operations, making it a significant step forward,” he stated. His optimism underscores the government’s firm commitment to positioning Danantara as a driver of economic growth.
What Lies Ahead for Danantara?
The Danantara Sovereign Wealth Fund presents both opportunities and risks. The government envisions it as a vehicle for efficiency and investment, but concerns over governance and transparency persist.
Its success hinges on strong management and oversight.
If executed effectively, it could drive sustained economic growth. However, mismanagement could erode public trust. The 1MDB scandal in Malaysia serves as a cautionary tale, highlighting the dangers of corruption in sovereign wealth funds.
Source: cnnindonesia.com, tempo.co, finance.detik.com, bbc.com
Image: Serkan Toröz / Getty Images
