Finance Minister Sri Mulyani Indrawati said Rp 30 trillion of the capital would be in cash, while the remaining would be in the form of state-owned enterprises (SOEs) shares and other state assets.

The fund is aimed at attracting Rp 225 trillion in investment, with foreign funds from the United Arab Emirates, Japanese conglomerate Softbank and the US International Development Finance Corporation (IFDC) already lining up to invest in the fund, officials said previously.

It remains unclear where the wealth fund will be invested, although Sri Mulyani mentioned a combination of development fund and stabilization fund. Officials have previously mentioned projects in sectors including infrastructure, health care, energy and resources, tourism and technology. Other sovereign wealth funds elsewhere invest in financial markets as well.

“We are currently formulating the government regulation as the President has asked to prioritize this,” Sri Mulyani told reporters on Wednesday. “We are hoping to get strategic and reputable partners so that we can develop the fund to better attract investment.”

The establishment of the sovereign wealth fund, which will be called the Indonesia Investment Authority, is included in the Job Creation Law. The law has met with widespread protests and criticism from labor unions and civil groups over the potentially negative impact it could have on labor rights and the environment, although the government’s goal is to attract investment, boost economic growth and create jobs.

The fund will have a supervisory council led by the finance minister, with members including the SOEs minister and three more professionals, according to the law. The board of directors will include five professionals to oversee the fund’s operation, including to formulate the fund’s policy and work plan, among other things.

The government can inject more money into the fund should its capital decline significantly, the law states.

Indonesia would follow Russia’s sovereign wealth fund model as it would raise the required funds from private investors instead of from the country’s reserve funds, Deputy SOEs Minister Kartika “Tiko” Wirjoatmodjo said earlier this year.

The Russia Direct Investment Fund (RDIF) has invested and committed 1.9 trillion rubles (US$24.35 billion), of which 1.7 trillion rubles came from coinvestors, partners and banks. It has also attracted over $40 billion in foreign capital into the Russian economy through long-term strategic partnerships since its establishment in 2011.

Although the fund could act as alternative financing sources to boost economic growth, the government must ensure that the fund should be transparent and independent, said Permata Bank economist Josua Pardede,

“Both the supervisory council and board of directors must be independent, transparent and far from political interest to mitigate the risk of corruption,” he told The Jakarta Post. “As the fund will manage a significant amount of assets, prudent management is the key to avoid potential state losses.”

Political interests should be avoided to prevent the fund from becoming like Malaysia’s 1Malaysia Development Berhad (1MDB), said Institute for Development of Economics and Finance (Indef) senior economist Aviliani.

The 1MDB fund came under the spotlight following alleged money laundering and financial fraud in which Malaysian and US investigators believe about $4.5 billion was misappropriated.

Aviliani said that if managed properly, the sovereign wealth fund could allow cash-strapped Indonesia to invest more in infrastructure as it would allow foreign investors to partner with or invest in the fund.

“The fund may be able to increase foreign investors’ trust in Indonesia, which has been hindered by regulatory uncertainty, but it should be implemented and supervised carefully to avoid any special interests,” she told the Post in a phone interview.

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