Indonesia Finally Has a Sovereign Wealth Fund: Indonesia Investment Authority (INA)
After news spread late last year, it is official now! Indonesia has its own sovereign wealth fund, called the Indonesia Investment Authority (abbreviated as INA). On 16 February 2021, Indonesian President Joko Widodo announced the list of people that will this investment management institution. For starters, Widodo selected Ridha DM Wirakusumah - previously President Director of Bank Permata - as the CEO of INA.
IDR 15 Trillion Injected into INA as Startup Capital from State Budget (APBN)
Moreover, the Indonesian government set aside IDR 15 trillion (approx. USD $1.1 billion) - taken from the 2020 State Budget - for INA's activities. This is followed by another injection of IDR 75 trillion (approx. USD $5.4 billion) in 2021. This surely seems like a big investment on the government's side. But once we put it into perspective, the figures seem justified.
Until the end of 2020, the Indonesian government collected investment commitments from various countries, ranging from the United Arab Emirates to the United States, amounting to USD $30.8 billion. If these commitments are indeed fulfilled, then Indonesia quickly recoups these public investments.
Who Are in Charge of the Indonesia Investment Authority (INA)?
| Individual | Position |
| Ridha DM Wirakusumah | CEO |
| Stefanus Ade Hadiwidjaja | Board of Directors |
| Eddy Porwanto | Board of Directors |
| Marita Alisjahbana | Board of Directors |
| Arief Budiman | Board of Directors |
INA the Solution for Infrastructure Project Financing in Indonesia?
The establishment of INA is part of the Omnibus Job Creation Law, which is targeted to be the solution to investment bottlenecks in Indonesia, as well as an encouragement for foreign investors who are eyeing Indonesia but are uncertain due to the country's notoriously high degree of legal uncertainty.
Investment Commitments via INA:
| Nation | Value (billion USD) |
| United Arab Emirates | 22.8 |
| Japan | 4.0 |
| Canada | 2.0 |
| United States | 2.0 |
The Indonesian government seems to be aware that in order to fulfill its infrastructure development ambitions it is impossible to rely solely on state budgets and foreign debt, especially now the COVID-19 pandemic has hit the global economy. Moreover, so far, Indonesia's export earnings remain too dependent on commodities (which are characterized by volatile price movements). So, shocks in commodity-related sectors can certainly imply shocks to Indonesia's state revenue.
That also makes INA different from the Investment Coordinating Board (BKPM). Incoming funds are not solely in the form of loans, but also come in the form of equity or shares.
The Indonesian government also targets INA to provide a maximum dividend of 30 percent each year. This expectation can be considered quite moderate, when compared to the dividends of state-owned companies, which return dividends averaging 20-45 percent in the years before the COVID-19 pandemic hit.
For this reason, INA must be able to manage its assets properly, including obtaining the right investment partner candidates.
INA's First Target: Toll Road Projects
Where will the trillions of rupiahs worth of INA funds that have been injected into the institution go? INA CEO Ridha Wirakusumah said toll road projects are the first investment priority for INA. The multiplier effect that toll roads trigger is Ridha's reason for prioritizing this sector, rather than ports, airports, and other types of infrastructure.
Indonesia's Ministry of Public Works and Housing targets to build 2,500 km of new toll roads in the 2019–2024 period. If achieved it would mean there will be around 4,500 km of toll roads that can be used by Indonesian residents. Up to the end of 2020, Indonesia's toll road network only consisted of 2,346 km.
INA's plan is certainly a breath of fresh air for companies engaged in Indonesia's toll road sector, such as Hutama Karya, Waskita Karya, and Jasa Marga. Moreover, Waskita Karya is planning to divest its ownership in nine toll roads this year with a value of around IDR 11 trillion (approx. USD $786 million).
Waskita Karya Projects to Be Divested:
| Toll Road Sections |
| Medan - Kualanamu |
| Tebing Tinggi |
| Kuala Tanjung - Tebing Tinggi - Parapat |
| Cibitung - Cilincing, Cinere - Serpong |
| Bogor - Ciawi - Sukabumi |
| Depok - Antasari |
| Pemalang - Batang |
| Batang - Semarang |
| Krian - Legundi - Bunder Manyar |
Is Indonesia Left Behind?
It can be argued that Indonesia is quite late in terms of creating a Sovereign Wealth Fund when compared to a number of other countries. Not only compared to Europe but even nations located much closer to us - such as Singapore and Malaysia - created Sovereign Wealth Funds decades ago.
Sovereign Wealth Funds (SWF) in Singapore and Malaysia:
| Nation | SWF Name | Assets Controlled |
| Singapore | GIC Private Limited | USD $100 billion |
| Malaysia | Khazanah Nasional | USD $61.4 billion |
Still, it is better to start rather late than never. And INA will certainly meet challenges in the period ahead. For example, one challenge that lingers on in Indonesia is (the potential for) corruption.
Indeed, it is a dilemma when looking at the risk of corruption on the one hand, and the potential for investment in a country that still has bright prospects like Indonesia, on the other hand. However, if we take a look at President Widodo's sheer ambition to turn INA into a world-class investment institution, it is quite possible that INA will become a mainstay for investors to enter into jumbo projects such as the new capital city in East Kalimantan (worth IDR 500 trillion). In the early stages of the new capital city project it is targeted to build a government center on an area of 6,000 ha from the available 180 thousand ha until 2024. However, before the whole project is completed, Indonesia will have celebrated its 100th anniversary in 2045.
This article was written by Elizabet Siregar
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