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Government’s sovereign wealth fund plan questioned
Jokowi said previously that the planned sovereign wealth fund was expected to attract at least $20 billion of foreign inflows.
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President Joko "Jokowi" Widodo (left) chats with Abu Dhabi Crown Prince Sheikh Mohamed Bin Zayed Al Nahyan from the United Arab Emirates (right) during the President's visit to Abu Dhabi on Sunday, Jan. 12, 2020. (Presidential Palace Press Bureau/Laily Rachev)
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he government’s plan to establish its own sovereign wealth fund has raised questions regarding the source of funding, as well as how the fund is managed to ensure it does not suffer the same fate as Malaysia’s 1Malaysia Development Berhad (1MDB).
The fund’s establishment will be regulated in the anticipated omnibus bill on job creation, which is currently being drafted by the government.
A presentation shared by the Office of the Coordinating Economic Minister on the omnibus bill revealed that the fund’s establishment was aimed at managing and allocating a sum of funding and/or state assets. The fund’s assets will be in the form of state capital injection, assets/business development returns, state-owned enterprise assets, grants and other defined sources.
The sovereign wealth fund will be owned by the government and will be able to engage in direct or indirect investments and work with other parties.
“Losses in the sovereign wealth fund, however, will not be counted as state losses,” said Office of the Coordinating Economic Minister expert staff member Elen Setiadi on Friday.
The government expects to submit the omnibus bill on job creation to the House of Representatives this week for deliberation. If passed into law, it will amend around 1,200 articles in more than 80 prevailing laws that have been blamed for hampering investment in the country.
“The sovereign wealth fund will need good governance based on international values as investors will demand such a thing to prevent corruption and financial fraud,” said Centre for Strategic and International Studies (CSIS) economic department head Yose Rizal Damuri over the phone on Friday.
