Jakarta, CNBC Indonesia – The government will soon have an Investment Management Institution (LPI) aka Sovereign Wealth Fund (SW) with an initial capital of IDR 15 trillion.
The establishment of this state-owned endowment fund is in accordance with the mandate of the Work Creation Omnibus Law (Ciptaker) which was just passed yesterday, Monday (6/10/2020).
Deputy Minister of State-Owned Enterprises (BUMN) Budi Gunadi Sadikin revealed that the value of SWF Indonesia’s capital actually has the potential to be greater than the initial capital value.
He estimated that the SWF managed funds to be formed later could reach US $ 500 billion-US $ 600 billion, or the equivalent of Rp 7,350 trillion-Rp 8,820 trillion (exchange rate of Rp 14,700 / US $).
This value will be greater than the SWF owned by Abu Dhabi (Abu Dhabi Investment Authority / ADIA) or could reach half of the value of the Norwegian SWF, the Government Pension Fund Global (Norges Bank).
SWF Norway is currently the largest in the world, managing funds of US $ 1,100 billion-US $ 1,200 billion.
However, Budi revealed that this value could be obtained if all state-owned companies conducted an initial public offering (initial public offering/IPO).
The estimated IPO value that could be obtained is US $ 480 billion or equivalent to Rp 7,056 trillion.
This value can be achieved, because BUMN revenue per year alone can reach IDR 2,400 trillion.
“If all BUMNgo public, with an average sales to price ratio from the IDX in normal times 3-4 times, if sales are Rp. 2,400 trillion, Rp. 2,400 trillion if I share Rp. 14,500, around US $ 165 billion, “he said.
“If you just multiply it by 3, the sales to price ratio is around US $ 480 billion in market value in company value,” Budi said in a virtual discussion with Lemhanas on Tuesday (06/10/2020).
The SWF Institute website notes that Abu Dhabi’s ADIA has assets of up to US $ 579.62 billion or equivalent to IDR 8,520 trillion with 46 subsidiaries and a diverse investment portfolio including in the financial and transportation sectors.
Meanwhile, Norges Bank, SWF Norway which also functions as a central bank, managed funds reached NOK 10.42 trillion or around IDR 15,808.32 trillion at an exchange rate. this time.
Furthermore, Budi explained, the valuation, he continued, would be able to continue to increase along with the continuous improvement in company performance.
“That must have been in the same class as Abu Dhabi Investment SWF Abu Dhabi. The biggest SWF is Norway with US $ 1,100 billion-US $ 1,200 billion,” he added.
As previously reported, this SWF will consist of a Supervisory Board and a Board of Directors.
The Supervisory Board consists of the Minister of Finance as chairman and concurrently member, the Minister of BUMN as a member and three persons from professional elements as members.
As for the selection of members of the Supervisory Board from the professional element through a selection committee formed directly by the President. Further provisions regarding the selection of members of the Supervisory Board from the professional element are regulated by Government Regulation (PP).
Meanwhile, there are five members of the Board of Directors who come from professional elements. The Board of Directors is in charge of carrying out the operational management of the LPI.
In this Ciptaker Law, Article 170 paragraph (2) also states that the initial capital of the LPI is set at least IDR 15 trillion in cash. Also, if the LPI’s capital decreases significantly, the government can reinvest its capital.
“In the event that the Investment Management Institution’s capital is significantly reduced, the Government can increase the return of the Investment Management Institution’s capital,” writes Article 170 paragraph (3).
Further provisions regarding the Investment Management Institution, shall be regulated by Government Regulation (PP).
In simple terms SWF is a fund that is owned by the government and is ready to be invested. The forerunner to the emergence of SWF in the world was initiated by Kuwait.
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