Prabowo’s bold bet: Indonesia’s new US$900b wealth fund sparks hopes and fears

Nevin Al Sukari - Sana'a - Indonesia’s President Prabowo Subianto (centre) shakes hands with former president Joko Widodo during the launch of a sovereign wealth fund known as Daya Anagata Nusantara, or Danantara, in Jakarta on February 24, 2025. — AFP pic

JAKARTA, Feb 24 — Indonesian President Prabowo Subianto on Monday launched a new sovereign wealth fund set to be the biggest in South-east Asia’s largest economy and give the ex-general greater control of the country’s coffers.

He wants to tap into the fund’s assets — planned to be more than US$900 billion (RM3.96 trillion) — to boost Indonesia to developed economy status, despite expert concern about its governance.

Here’s what the fund — named Danantara — will mean for the archipelago nation.

Big pledges

Prabowo has launched a cost-cutting spree across government ministries to fund Danantara and other campaign promises such as a multi-billion-dollar free lunch plan for children.

The fund will start with a budget of US$20 billion, according to state media, some of which the president says has come from the cuts.

That initial money will be poured into around 20 projects across mineral resources, food production and renewable energy, he said.

The fund’s capital will come from dividends, cash and assets, as Prabowo tries to boost liquidity and investments to lift growth to his optimistic target of eight percent, from around five percent now.

“It was created so we can have liquidity that can boost our economy,” said Eko Listiyanto, vice director of the Jakarta-based Institute for Development of Economics and Finance.

“This is a good step, as long as it is managed properly.”

Ambiguity

Details on how the fund will work and which entities will fall under its control have been few and far between.

But it was announced Monday that Prabowo ally and investment minister Rosan Roeslani would head the fund, boasting business experience that should provide some investor confidence.

Minister for state-owned enterprises Erick Thohir will assume an oversight role, according to the revised law that permitted the creation of Danantara.

Public accountants will Audit the fund as it will not be subject to checks by the country’s Supreme Audit Agency (BPK), unless ordered by a Prabowo-dominated parliament, according to the law.

Two units will reportedly be created under the fund’s umbrella — a holding company to oversee state-owned enterprises and an investment arm.

Experts have also called for the creation of an oversight body.

“Indonesia should create a mechanism to monitor possible abuses within Danantara and to investigate alleged corruption,” said Andreas Harsono, Indonesia researcher at Human Rights Watch.

“It is a challenge now with the weakened anti-corruption commission and the regression of democracy in Indonesia.”

Governance concerns

The fund will also report directly to Prabowo, with at least one expert who declined to be named saying the president’s control over it was “like Najib”, referring to the former Malaysian leader who oversaw scandal-ridden sovereign wealth fund 1MDB.

Datuk Seri Najib Razak is in jail for corruption related to the plunder of 1MDB after the scandal sparked investigations in the United States, Switzerland and Singapore.

“This is a new body so people will question everything. Some people are wary that this will be a political tool,” Eko said.

But the potential for graft could be reduced as Danantara will attract global investors the government will need, he added.

“People know that pre-Danantara state-owned enterprises were often used as cash cows,” he said.

If the government was seen to be interfering in business too much, “investors will not be interested”.

Public trust

Yet on the street, Prabowo’s moves have proven unpopular among young people.

Thousands, led by students, protested across Indonesia’s cities last week in an early test of Prabowo’s economic shake-up.

So the legitimacy of the fund will be key, experts say, claiming it should report to finance professionals and not presidents, like Singapore’s investment arm which has a portfolio of US$288 billion.

“If our benchmark is Temasek, Temasek is supervised by professionals,” said Jahen Fachrul Rezki, an economy researcher at the University of Indonesia.

The potential that “this huge amount of money could be interfered with by the government, this has created fear,” he said.

“If that happens, once the trust is gone, the impact will be massive.” — AFP