Indonesia’s parliament to Vote on Danantara Bill, Aiming to Transform State Investments
Indonesia’s parliament is set to vote on a groundbreaking bill that will pave teh way for the establishment of the Daya Anagata Nusantara Investment Management agency, or Danantara. This new agency, announced just two days after President Prabowo Subianto took office in October, aims to revolutionize the management of state investments by operating similarly to Singapore’s renowned Temasek Holdings.The bill, which has already received endorsement from the parliamentary commission overseeing state-owned enterprises (SOEs), is expected to pass smoothly. According to Darmadi durianto, a lawmaker involved in the process, Danantara will receive an initial capital of 1,000 trillion rupiah ($60.86 billion), though the source of funding remains undisclosed.
A New era for State-Owned Enterprises
Danantara is poised to take over government stakes in some of Indonesia’s largest state companies,including major lenders Bank mandiri,Bank Rakyat Indonesia,and Bank Negara Indonesia,and also key players like electricity utility PLN,miner MIND ID,energy firm Pertamina,and telco giant Telkom Indonesia. Collectively, these companies boast combined assets of $600 billion, according to CreditSights, a debt research firm under the Fitch Group.
the bill emphasizes the optimization of dividends from state companies through Danantara,as highlighted by Law Minister Supratman Andi Agtas. Currently, dividends are paid to the Finance Ministry, while the State-Owned Enterprises ministry manages government holdings. Under the new legislation, the SOEs Ministry will act as a supervisor for Danantara, retaining a small stake in state companies and veto power over corporate actions.
Structure and Vision
Toto Pranoto, a University of Indonesia lecturer and consultant for the bill, revealed that Danantara will establish two entities: a “superholding” to manage state companies and an investment firm to handle dividends and leverage assets. This dual structure aims to replicate the success of Temasek, which has achieved a 14% total shareholder return as its inception in 1974, with a global portfolio valued at $284 billion as of march 2023.
Potential and Risks
While Danantara is expected to bring about better funding access, operational improvements, and enhanced global market integration, concerns about political interference loom large. CreditSights warned, “We see some risks upon the establishment of Danantara, including potential political influence on the utilisation of the fund, the integration process, and influence of Danantara on the strategic direction of the SOE, which could affect investor confidence in the portfolio companies.”
Despite these risks, the establishment of Danantara is viewed as a modest credit positive event for the concerned SOEs. The agency’s office has yet to comment on potential political influence.
Key Highlights of Danantara
| Aspect | Details |
|————————–|—————————————————————————–|
| Initial Capital | 1,000 trillion rupiah ($60.86 billion) |
| Key Companies | Bank Mandiri, Bank Rakyat Indonesia, PLN, Pertamina, telkom Indonesia, etc. |
| Combined Assets | $600 billion |
| Structure | superholding and investment firm |
| Model | Inspired by Singapore’s Temasek Holdings |
As Indonesia moves forward with this ambitious initiative, the success of Danantara will hinge on its ability to balance efficiency, transparency, and independence from political pressures. The vote on Tuesday marks a pivotal moment in the country’s economic landscape, with the potential to reshape the future of state investments.
