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Indonesia injects $4.2bn into sovereign wealth fund for infrastructure

Out-Law News | 17 Nov 2021 | 2:13 am | 1 min. read

The Indonesian government has allocated an additional US$4.2 billion into its sovereign wealth fund for financing infrastructure projects.

Indonesia’s sovereign wealth is known as the Indonesia Investment Authority (INA), and was launched in February with initial capital US$5.4bn. It is expected to help Indonesia’s domestic and foreign investors raise funds to finance development programmes, especially domestic infrastructure projects.

The INA’s latest funding round includes a Rp15tn(US$1.05bn) state capital injection (PMN) from this year's state budget and Rp45tn (US$3.16bn) in equity from Bank Mandiri and Bank Rakyat Indonesia (BRI), an Indonesian local report said. The government wants INA to manage over US$100bn in funds.

John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “With Indonesia’s need for significant investment into its fast modernising society, and together with the costs associated with sustainable development, the additional injection of funds into the INA will no doubt be well utilised. The challenge will be to ensure proper prioritisation of investments together with a transparent and accountable management structure in order to ensure the nation and the international partners on the effectiveness of the fund in achieving its objectives.”

The additional investment is part of the government’s commitment to invest Rp 75 trillion into INA this year to finance major infrastructure projects, tourism and technology projects.

Five countries have committed a total of US$19.8bn to INA: Canada, Japan, the Netherlands, the United Arab Emirates and the US. The total includes a $2bn investment by the United States International Development Finance Corporation (DFC). The UAE previously promised to invest $10bn and the Japan Bank for International Cooperation (JBIC) said it would invest $4bn.

In May INA signed agreements for a new toll road investment platform with three foreign investors: the Abu Dhabi Investment Authority (ADIA) of the UAE, APG Asset Management (APG) of the Netherlands, and Caisse de dépôt et placement du Québec (CDPQ) Canada. INA will invest $750 million and the other three will provide $1bn each for the platform.