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The Parliament of Indonesia has approved the establishment of a new sovereign investment fund to manage some of the most important state companies in the country and to generate capital for Indonesian investments elsewhere.
The new body, which is called the Daya Anagata Nusantara Investment Management Agency, or Danantara, will take over control of all government ownership in state -owned companies of the Ministry of Foreign Affairs (SOE).
“Danantara has been officially set up and formed to consolidate the management of state -owned companies and to optimize the management of dividends and investments,” Erick Thohir, the Minister of State Companies, told the parliament after the approval of the law.
Danantara, announced shortly after President Prabowo Subianto took office in October, will have according to the first capital of at least 1,000 trillion Rupiah (around $ 61 billion) Reuters. This was Allegedly based About the estimated consolidated capital of the SOOs of Indonesia, which came to 1,135 Biljoen Rupiah in 2023.
Such as Bloomberg reported In anticipation of yesterday’s vote, the bill will help ‘to formalize the authority of Danantara about state assets, allowing the capital increases to approve; Restructuring of companies through mergers, acquisitions and spin-offs; And create new investment possession after consultation with the Parliament. “Danantara will have the” flexibility to make direct and indirect investments and to collaborate with SOOs and external investors. “
Like the Jakarta Globe reportedSeven Major Soes will form the “backbone” of Danantara: the State Spower Utility Perdusahaan Listrik Negara, the energy company Pertamina, the mineral Industri Indonesia mineral indonesia and telecom operator Telkom Indonesia, as well as the Staatsbank Bank Mandiri, Bank Rakyatia.
Indonesian officials have been open about the fact that Danantara is intended to replicate the successes of the investment fund of Singapore Temasek Holdings. Temasek, founded in 1974, led the large exchange rate reserves of the city state in investments around the world. From March 2024, the fund had one Portfolio value of S $ 389 billion ($ 287.5 billion), according to the Temasek website.
As reuters reportedDanantara will set up two entities: an organ that manages SOOs, under the supervision of the SOE ministery, and an investment firm that will “manage dividends and assets will lever”.
Danantara is not the first sovereign power fund in the country. In 2021, the government of President Joko Widodo founded the Indonesia Investment Authority (Ina), which is currently manage About $ 10.5 billion in capital and state assets, including interests in state banks. But a new fund was deemed necessary to support the ambitious economic agenda of President Pabowo, which wants to achieve an annual growth rates of 8 percent for the duration of his term of office. Danantara wants to expand his managed assets to $ 982 billion at the end of Pabowo’s term, making it the fourth largest sovereign wealth fund worldwide.
As the diplomat has previously written columnist James Guild, the most important obstacle for Indonesia is to set up a sovereign wealth fund that, in contrast to Singapore, Norway, or the Golf States, it is a net debtor and no strange exchange rate surplus usually forms that is that The basis for a fund. The new administration has apparently overcome this obstacle by putting together its SOOs in a pool of assets, currently worth it An estimated $ 600 billionWho can then use it to obtain financing for further investments, while (in theory) it optimizes the return from Soe’s to the state.
All this sounds good on paper, but there are a number of uncertainties attached to the company. The first is Danantara’s relationship with Ina: in particular whether it will ultimately absorb Ina, who works under the supervision of the Ministry of Finance, or whether the two work together, with potential messy overlaps of authority.
Secondly, the fact that Danantara will come under the direct supervision of the president, inevitably raises questions about the independence of the body – a question that can influence how it is observed by foreign investors and international markets. In a memorandum published in January, that was quoted by ReutersSaid the credit credits that Danantara had the potential to improve Jakarta’s SOOs and therefore improve access from Indonesia to funds on international markets. However, it also warned that the agency could be susceptible to political interference.
“We see some risks in the establishment of Danantara, including potential political influence on the use of the fund, the integration process and the influence of Danantara on the strategic direction of the SOOs,” said it.
Then there are concerns about the enormous size of the company, which possibly entails major risks. Like the Jakarta Globe reported“The law grants Danantara -of assets -inserting by law enforcement agencies, which expresses concern about possible corruption risks. Danantara also authorizes SOOs to combine or split and create new holding companies, giving it considerable control over state assets. “