In an interview with The Straits Times on March 20, Danantara’s chief investment officer Pandu Sjahrir shared the fund’s investment strategy and objective. - DANANTARA
JAKARTA: Indonesia’s sovereign wealth fund Danantara will focus on investments in the mineral sector, digital infrastructure, renewable energy and healthcare, among others, even as critics questioned its ability to avoid mixing business with political interests.
Launched on Feb 24 by President Prabowo Subianto, Danantara – short for Daya Anagata Nusantara – has faced criticism for appointing Prabowo’s political allies, former presidents Joko Widodo and Susilo Bambang Yudhoyono, to its board of advisers.
In an interview with The Straits Times on March 20, Danantara’s chief investment officer Pandu Sjahrir talked about the fund’s investment strategy and objective. He also dismissed concerns over possible political intervention while addressing governance and a recent stock market rout.
He said Danantara’s role is to complement rather than compete with the private sector. As an investment vehicle and holding company for state-owned enterprises (SOEs), its goal is to strengthen their role in driving the national economy.
“Danantara’s strategy is to facilitate economic development by making strategic investments that drive sustainable industrialisation. We aim to work hand in hand with the private sector, focusing on fostering collaboration, encouraging mutual growth and creating business opportunities,” he added.
Danantara was established three years after the country’s first sovereign wealth fund, Indonesia Investment Authority (IIA), was created. IIA focuses on co-investing with foreigners in Indonesia’s infrastructure projects such as ports.
Pandu said the timing was right for entering the mineral downstreaming sector, particularly nickel, given the commodity’s current price downturn. Digital infrastructure – especially data centres – is also becoming increasingly vital for Indonesia’s economic expansion, he noted.
In the past decade, Indonesia saw steady flows of Chinese and South Korean investment into electric vehicle supply chains, where nickel is a key raw material.
It banned the export of raw nickel in January 2020, a policy that led to a surge in the development of higher-value-added downstream industries such as nickel smelters in Morowali regency by China’s Tsingshan Holding Group and an electric vehicle battery cell factory in Karawang regency by South Korea’s LG Energy Solution and Hyundai Motor Company.
It also banned the export of other minerals, including bauxite in June 2023, followed by copper ore and concentrate in January 2025.
The price of nickel is currently about US$16,200 a tonne, compared with its peak price of US$21,615 a tonne on May 20, 2024.
As for data centres, Pandu said: “Indonesia requires approximately US$20 billion (S$26.7 billion) in investment over the next two years to build data centres that support AI (artificial intelligence) technology, with a needed capacity of around two gigawatts.”
Such investment in the sector would support Indonesia’s digital economy growth.
With more than 220 million internet users, the country has vast potential in the data centre industry.
However, Indonesia, South-East Asia’s largest economy, trailed behind neighbouring countries like Malaysia for several reasons, including higher electricity prices and less attractive investment incentives.
Danantara is also exploring investments in waste-to-energy projects, aligning with the country’s transition to cleaner energy and improved waste management infrastructure.
“The fund aims to leverage strategic partnerships and innovative technologies to drive long-term economic and environmental benefits,” Pandu said.
Danantara, which is expecting a full roll-out soon, will be open to hiring both local and international talent to strengthen its management, he added.
All of Indonesia’s 65 SOEs, spanning industries from telecommunications to mining, will be consolidated under Danantara, with 99 per cent of their shares transferred to the fund while 1 per cent remains under the Ministry of SOEs.
“This structure ensures state oversight while enabling the fund to leverage its sizeable assets for more efficient fund-raising and investment,” Mr Pandu said.
Among the SOEs to be placed under Danantara are three banks – Bank Mandiri, Bank Rakyat Indonesia and Bank Negara Indonesia – and state electricity utility Perusahaan Listrik Negara, oil and gas company Pertamina, Telkom Indonesia, and Mining Industry Indonesia, which owns gold, coal and nickel mines.
Bank Negara Indonesia on March 21 launched its wealth management service in Singapore, targeting high-net-worth customers, including Indonesians residing in the city-state. It works with Schroders and Fullerton Asset Management.
The total assets of the 65 SOEs as at 2023 were recorded at 10,400 trillion rupiah (S$841.2 billion), according to PricewaterhouseCoopers. This would make Danantara one of the world’s largest sovereign wealth funds.
Prabowo has said the Indonesian government would inject more than 100 trillion rupiah into Danantara, drawing from budget savings achieved through measures such as cuts in travel, hotel seminars and the use of office air-conditioners.
Danantara has “strong safeguards” against abuse and fraud, Pandu said, addressing critics’ concerns about political interference and governance risk.
These factors were among the triggers cited by some as having caused Indonesian stocks to stumble on March 18 to levels not seen in over a decade.
In reality, the rout was mainly caused by a mix of concerns over the populist programmes of Prabowo that require massive funding, declining tax revenues and the downgrading of Indonesia’s stocks and bonds by US investment bank Goldman Sachs, driven by increasing fiscal risks.
Speculation about Finance Minister Sri Mulyani Indrawati’s possible resignation and questions surrounding Danantara taking the SOE reins added to the negative sentiment.
Addressing the stock market’s plunge on March 18, Pandu said: “Market fluctuations happen all the time. Perception and awareness naturally play a role, especially when something new is introduced.”
He added: “Danantara Indonesia may be part of that narrative, but what we want to emphasise is this: Danantara is about building a world-class institution with a clear mission – to fully corporatise SOEs and manage state capital in a responsible, transparent and profitable way.”
On concerns about political interference, Pandu said: “Our goal is clear: Separate business from political interests, and ensure SOEs are run like real companies focused on value creation.”
Local media reports have also voiced concerns that Danantara may face a scenario similar to the mega corruption case of Malaysia’s state fund 1MDB, which implicated senior politicians and private financiers who allegedly embezzled billions of dollars from it.
“We understand why comparisons are being made, but the newly passed SOE Law has introduced a series of strong safeguards – ring fences – that make scenarios like 1MDB structurally very difficult to occur,” Pandu said.
“Our main focus is governance. That starts with transparency – making sure investors and stakeholders understand how we operate, what we invest in and how decisions are made. We believe in open communication and clear accountability.
“Second, it’s about people. We will be transparent about the team behind Danantara Indonesia. Let the public and investors judge for themselves: Are these professionals with world-class experience and integrity, or individuals pursuing narrow interests?” he said.
Prabowo hopes to rely on Danantara to help drive the national economy, as he aims to achieve an 8 per cent annual growth during his five-year term. The Indonesian economy has been growing at an average of 5 per cent a year in the past decade.
The SOE Law was amended on Feb 4 to address regulatory constraints SOEs face. Safeguards to increase governance and prevent fraud have also been implemented.
Previously, SOE executives faced legal consequences, including imprisonment, for company losses stemming from business risks rather than fraud, mismanagement or abuse of power.
The new law shields directors from personal liability for decisions made in good faith and with reasonable care. It also ensures SOE losses will not directly impact the state’s balance sheet.
Furthermore, SOE dividends will now be transferred to Danantara instead of the Finance Ministry, giving the fund greater financial flexibility, Pandu said.
This allows Danantara to reinvest dividend proceeds into further expansion and strategic investments, while enabling it to determine how profits will be allocated to the state, he added.
“We believe we’re building a system with the right incentives – where calculated, professional risk-taking is encouraged, but always with public trust at the core.” - The Straits Times/ANN
