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February 4, 2025 | 05:51 pm
TEMPO.CO, Jakarta - Indonesia is setting up a state investment agency that will manage government holdings in some of the country's biggest firms, after parliament on Tuesday, February 4, 2025, approved the vehicle which is intended to operate like Singapore's investment arm Temasek.
The creation of the Daya Anagata Nusantara Investment Management Agency, or Danantara, was announced soon after President Prabowo Subianto took office in October, with the aim of improving the performance and returns from state investments.
Danantara's initial capital will be at least Rp1,000 trillion ($61 billion), and deputy speaker of parliament Sufmi Dasco Ahmad told reporters it will take over all government holdings in state companies from the State-Owned Enterprises (SOE) Ministry.
State companies, which in 2023 had a combined assets worth Rp11,684.3 trillion, play a dominant role in Southeast Asia's biggest economy. They paid Rp82.1 trillion in dividends to the finance ministry in 2023, official data showed.
"Danantara is officially set up and formed in order to consolidate the management of state-owned companies and optimize the management of dividends and investments," SOE Minister Erick Thohir told parliament.
The state companies include leading lenders Bank Mandiri (BMRI.JK), Bank Rakyat Indonesia (BBRI.JK), and Bank Negara Indonesia (BBNI.JK), electricity utility PLN, miner MIND ID, energy firm Pertamina, telco company Telkom Indonesia (TLKM.JK) and cement maker Semen Indonesia (SMGR.JK).
The idea behind Danantara is to replicate the success of Singapore's Temasek, which had a portfolio value of $284 billion in investments globally as of last March and a 14% total shareholder return since its inception in 1974, according to its website.
Lawmakers and government officials did not provide details for Danantara's plans going forward. Danantara's office did not respond to requests for comments.
Toto Pranoto, a University of Indonesia lecturer who was a consultant for the bill, told Reuters that Danantara will set up two entities: a "superholding" that manages state companies and an investment firm that manages dividends and leverages assets.
In a January note, CreditSights, Fitch Group's debt research firm, said if Danantara could efficiently and effectively consolidate SOEs, it would bring about better funding access and operational improvements as well as better access to global markets.
But it also warned the agency could be susceptible to political interference.
"We see some risks upon the establishment of Danantara, including potential political influence on the utilization of the fund, the integration process, and influence of Danantara on the strategic direction of the SOE, could affect investor confidence in the portfolio companies," it said, adding that Danantara was still seen as a modest credit positive event for the concerned SOEs.
Deputy speaker Dasco said the government's focus on creating a strong legal framework for Danantara should ease any investor worries.
($1 = Rp16,340)
REUTERS | Stefanno Sulaiman
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