Indonesia‘s new sovereign wealth fund will offer dedicated industry funds in a bid to drum up $15 billion investment and deepen access to global capital by Southeast Asia’s biggest economy, finance minister Sri Mulyani Indrawati told Reuters.
The structure, outlined in a briefing by top economic ministers last Friday, has been adopted to entice global investors with various appetites for risk, return, and the length of investment.
Luhut headed to the United States and Japan at the weekend to pitch the fund to private equity firms. He will also discuss the fund, to be known as the Indonesia Investment Authority, with the World Bank and the International Monetary Fund.
Indonesia‘s fund seeks to attract investment to finance infrastructure projects and stimulate economic growth, following models adopted by countries including India, Turkey and Malaysia.
But the industrial-scale corruption and massive losses involving Malaysia’s 1MDB fund is an example of what can go wrong if a fund is poorly governed.
Indonesia‘s fund will be managed by professionals and have a supervisory board comprised of ministers.
The former official said it was unclear how much power the supervisory board would have over investment decisions until there were more details on appointments and how the fund’s managers and board interact with each other.
Luhut said the United Arab Emirates had assisted in developing the fund structure, along with the international finance development arms of the U.S. and Japanese governments.
Indonesia will put an initial $5 billion in cash and stakes in state-owned enterprises (SOEs) to kick-start the fund, which will also manage securitised SOE assets, Sri Mulyani said.
The government was currently mulling options for tax incentives for investors, including a “tax holiday” or allowance, she said.
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