Prabowo’s Investment Fund off the Ground
Shades of 1MDB?
By: Ainur Rohmah
Indonesian President Prabowo Subianto’s plan to boost state revenue through the establishment of a new sovereign investment fund is running into flak even before it gets underway. Named the Daya Anagata Nusantara Investment Management Agency, or Danantara, it is initially designed to oversee a fund of approximately US$20 billion, with plans to invest in more than 20 strategic projects including nickel downstreaming, artificial intelligence and renewable energy.
But while Prabowo has hailed Danantara as a force that will bolster Indonesia’s future economy, it is coming at a time when Indonesia has been hit by a spectacular series of scandals that would make any international investor think twice about investing in the country:
Top officials of the state energy company Pertamina have been arrested in a case officials say has cost the government US$12 billion.
Sri Rejeki Isman, or Sritex, one of the largest textile firms in Indonesia, has collapsed into bankruptcy, leaving 19,000 workers in Central Java without jobs, and ancillary industries employing up to 50,000 workers without a central customer.
eFishery, supposedly providing technology and data to improve the operations of fish and shrimp farmers, valued at more than US$1 billion, has also collapsed with investigators believing officers inflated revenue by almost US$600 million, meaning more than 75 percent of its reported 2024 figures were bogus.
There is a string of lesser scandals as well, including a counterfeiting ring run out of a major university, and the arrest for corruption of the secretary general of the country’s biggest political party.
Danantara, according to officials, is designed to pool resources from natural resource export revenues and government assets across various ministries. Seven state-owned enterprises (SOEs) are reportedly set to be consolidated, including PT Bank Mandiri, PT Bank Rakyat Indonesia, PT PLN, PT Pertamina, PT Bank Negara Indonesia, PT Telkom Indonesia, and mining holding company PT Mineral Industri Indonesia.
Key investment areas are to include nickel, bauxite, and copper downstreaming; artificial intelligence data centers; oil refineries; petrochemical plants; food and protein production; aquaculture; and renewable energy. The government aims for Danantara to eventually manage assets exceeding US$900 billion, positioning it to compete with advanced sovereign wealth funds in other countries.
But as Asia Sentinel reported in August, many of the country’s state-owned enterprises are running out of the ability to pay and the government will have to bail them out or stop building huge projects. Estimates from 2023 suggest that Indonesia's six biggest construction SOEs collectively faced debt over Rp1,000 trillion (US$62.8 billion), an average of US$11.3 billion per company, which is likely to severely limit their ability to invest in new projects and technology. That raises questions about whether Danantara will be a way of using profits from some SOEs to prop up others drowning in debt.
Despite widespread criticism and protests over these austerity measures, Prabowo has pushed forward, targeting savings of over Rp300 trillion within a year. “Funds previously hindered by inefficiency, corruption and misallocation will now be reallocated to Danantara and invested in 20 or more national projects,” he said.
Anti-corruption activists fear that Danantara could face a dark fate if the government fails to establish robust governance and independent oversight. They point to the draft revision of the SOE Law, which includes a business judgment rule (BJR) clause that could shield Danantara’s directors from legal repercussions, even if their decisions violate regulations or harm the state. Additionally, auditors will only be able to examine Danantara’s operations with approval from the House of Representatives (DPR).
“These rules could turn Danantara into a vehicle for personal or group capital accumulation,” said Wana Alamsyah, a researcher at Indonesia Corruption Watch (ICW). He also expressed concern that Danantara’s establishment could weaken the authority of law enforcement agencies like the Corruption Eradication Commission (KPK) and the Supreme Audit Agency (BPK). “BPK and KPK are not granted the authority to audit or enforce the law. This could increase the risk of corruption in SOEs under Danantara,” he added.
Corruption within state-owned enterprises (SOEs) has been rampant, Alamsyah noted. Indonesia Corruption Watch, he said, found 119 corruption cases linked to SOEs between 2016 and 2021, resulting in state losses exceeding Rp 40 trillion.
Prabowo, however, dismissed these concerns, stating that Danantara will be managed “with great care, transparency, and will be auditable at any time by anyone.” Danantara’s head, Rosan Roeslani, assured that agencies like the KPK and BPK will have authority to act if legal violations occur. He cited the enactment of legal instruments regulating Danantara’s activities and the appointment of a supervisory board as evidence of this commitment.
The supervisory board is to be chaired by State-Owned Enterprises Minister Erick Thohir. Two former Indonesian presidents, Susilo Bambang Yudhoyono (SBY) and Joko Widodo (Jokowi), have been appointed as advisers. Both have sons in government positions, who are rumored to be groomed as future leaders. SBY’s son, Agus Yudhoyono, currently serves as Coordinating Minister for Infrastructure and Regional Development, while Jokowi’s eldest son, Gibran Rakabuming, is Vice President after serving as Mayor of Solo.
Those appointments have drawn criticism from anti-corruption activists, who argue that they lack professionalism and aren’t based on meritocratic principles. However, this comes as no surprise, as the selection of top officials within state-owned enterprises (SOEs) has long been characterized by political bargaining or rewards to parties that contributed to the political process and election victories.
Roeslani, picked to lead Danantara, is a former US ambassador and current minister of Investment and Downstreaming/Head of BKPM. He also chaired Prabowo’s national campaign team for the 2024 presidential election. The agency will have two holding entities: an operational holding led by Deputy SOE Minister Dony Oskaria and an investment holding led by Pandu Sjahrir, a coal businessman and professional investor. Pandu is the nephew of Luhut Binsar Pandjaitan, a former coordinating minister for maritime affairs and investment known for his close ties to Jokowi.
The inclusion of so many politically connected figures in Danantara’s leadership has thus raised concerns about potential political interference in investment decisions. Critics fear that decisions may be driven by political agendas or factional interests rather than economic analysis and profit potential. Weak oversight by the DPR, dominated by government-aligned parties, further could exacerbate these concerns.
Despite the skepticism, Danantara’s founding has been met with hope that it could become a driving force for economic growth. With a target of 8 percent economic growth, the government cannot rely solely on the state budget but must also attract more foreign direct investment, particularly through projects initiated by Danantara.
In the best case, beyond strengthening fiscal stability and reducing reliance on the state budget, Danantara’s revenues could fund infrastructure, healthcare, education, and other public sectors. However, Ariyo emphasized that these hopes will only materialize if the fund implements the principles of good corporate governance, transparency and accountability.
According to Tempo media, Danantara fulfills a personal mission for Prabowo to revive the vision of his father, Djojohadikusumo, a former economic minister during the New Order era, who once proposed a similar agency. In Sumitro’s vision, the agency would function as an investment trust and guarantee fund, managing 1-5 percent of state-owned enterprises' profits.
Danantara is said to draw inspiration from Singapore’s Temasek Holdings and Malaysia’s Khazanah Nasional Berhad. However, Malaysia’s experience with 1Malaysia Development Berhad (1MDB), established in 2009, serves as a cautionary tale. In 2015, the 1MDB scandal rocked Malaysia, revealing massive power abuse, money laundering, and corruption involving then-Prime Minister Najib Razak, who is now in prison, and his associates. Indonesia has to hope that it is Temasek and not 1MDB that becomes the model.