The soon-to-be established Investment Authority of Indonesia (IAI) Danantara will work alongside the SOEs Ministry to oversee and manage the country’s state-run firms with more than Rp 10 quadrillion (US$609.2 billion) in assets.

Danantara is set to be the primary "executing agency" for SOE management, but the SOEs minister would also maintain a role, particularly related to oversight through the supervisory board and strategic policies as shareholder of the SOEs managed under the body.

All corporate actions, including the appointment of a board of directors and commissioners, will fall under Danantara’s mandate, but the SOEs minister could make objections or veto the body’s decision.

The result of the new rule represents a compromise, which allows for two competing centers of power within the new body instead of just one.

Danantara’s head Muliaman Hadad, which President Prabowo Subianto appointed on Oct. 28 last year along with his cabinet, must be ready to work with SOEs Minister Erick Thohir who has retained his position and influence.

We cannot rule out that it could risk ambiguity and hinder the proper and timely execution of instructions, which is a problem in a competitive corporate world where everything needs to be agile.

Furthermore, the division could also mean uncertainty for investors and potential partners. Global credit research firm CreditSights raised these concerns in January, stressing that investors’ confidence thrives in clarity, not otherwise.

It is also unlikely the new arrangement would clear out the long-neglected confusion over SOEs commercial and public service obligations mandate, let alone solving the tug-of-war between political interests already plaguing SOEs affairs for years.

To address these concerns, the government should ensure there would be robust safeguards and clear delineation of duties within Danantara’s governance structure, especially to ensure the body will maintain certain independence and live up to its purpose in catapulting state-run firms’ performances.

We also wish to see that Danantara be run by a highly skilled, professional team with expertise in finance, investments and business, as opposed to those with vested political interests, supported by clear conflict-of-interest policies.

We have yet to see how the law revision would translate the integration of the Indonesia Investment Authority (INA), which has existed for years under different regulations, namely the Job Creation Law.

A transition should be carried out carefully by mitigating its impact on existing foreign investors' money already pooled in the country’s first wealth fund.

The law revision, however, still offers hope in improving SOEs governance, particularly by erecting a holding investment entity that would manage these dividends so it could be reinvested in the form of expansion and new ventures or invested in things that could yield more returns, akin to those carried out by many world wealth funds.

Previously, SOEs dividends were mostly seen as a quick cash to patch up state revenue, which last year alone amounted to over Rp 86 trillion.

We hope President Prabowo will not repeat similar mistakes as in the past, when a significant amount of revenue would just be spent to fuel current spending needs.

Ideally, we should have had these entities decades ago, particularly when Indonesia was still a major oil exporter with significant revenue from the commodity, but dividends from SOEs could offer a fresh start to build the country’s long term and more strategic wealth creation.

Lastly, it remains to be seen how far Danantara could play such a strategic role as the country’s superholding and investment management agency.

Only time will tell whether the body will repeat the success achieved by the likes of Temasek. For the sake of the nation, we are hoping for the best.