Indonesia’s new sovereign wealth fund will focus on infrastructure

Out-Law News | 12 Mar 2021 | 12:29 am | 1 min. read

Indonesia’s new sovereign wealth fund is exploring investing in several infrastructure projects including 24 toll road concessions worth $2.6 billion, according to Reuters.

The concessions include a toll road south of the capital Jakarta and parts of a new Trans Sumatra highway. They are operated by three state owned companies, which are the construction companies Waskita Karya and Hutama Karya, and a toll road operator Jasa Marga.

The new sovereign wealth fund is called the Indonesia Investment Authority (INA) and was launched in February. The Indonesian government funded it with $1 .1 billion its startup capital from its 2020 budget and put another $5.4bn into it from the 2021 budget.

Infrastructure expert John Yeap of Pinsent Masons, the law firm behind Out-Law, said: “Sovereign wealth funds are typically set up to manage a nation’s wealth, whereas in Indonesia’s case, this is more in line with countries such as India where the objective is the facilitation of foreign direct investments. The investment into the road sector in the country therefore makes sense as it will enable the state to be involved in the development of an important essential infrastructure sector, involving not just its own capital but foreign direct investment from the countries that have already committed to invest. Going forward, the market will no doubt be looking to the details of the governance structure so as to avoid the mismanagement experienced in other such funds due to the lack of transparency and accountability.”

The INA is expected to help Indonesia’s domestic and foreign investors raise funds to finance development programmes, especially domestic infrastructure programmes.

The fund has received investment commitments of $22.8bn from United Arab Emirates, $4bn from Japan, $2bn from Canada and the US respectively.