Indonesia’s Fifteen Minutes of SWF Fame

Ashby Monk

Faisal Maliki Baskoro of the Jakarta Globe broke the big news today that Indonesia has decided not to set up a new SWF. But the bigger scoop here is the news that Indonesia was actively considering setting up a new SWF. Had anybody else heard about this? I was totally in the dark on this one.

Anyway, here’s Boskoro’s take on things:

“The government has canceled plans to create a state-owned enterprises investment fund that would have helped finance infrastructure projects. Plans for the fund, which would have used government minority stakes in partially privatized state-owned enterprises to raise money, were apparently illegal. Muhammad Said Didu, secretary at the State-Owned Enterprises Ministry, said on Tuesday that the proposed fund conflicted with a law giving the Finance Ministry control over the government’s minority stakes…”

I’m not all that surprised to hear this new fund has been scrapped. First, it’s pretty tough to do anything that’s illegal, even when you’re in the government. Second, the purported structure was quite bizarre:

“The planned investment fund, called the SOE Fund, was to rely on funds raised by state investment company Danareksa Capital, which would have been charged with managing the government’s minority shares in nine companies.”

So this would have been a sort of “sovereign debt fund”? OK. I’m still with him thus far; there are plenty of these out there. But…

“Danareksa Capital does not yet exist — it was to be established specifically for the SOE Fund project…”

Let me see if I can sum this up: The entity that was supposed raise the money for the new SWF by leveraging its stakes in nine state owned companies doesn’t exist? You’ve lost me. And apparently you’ve lost Muhammad Said Didu, Secretary at the State-Owned Enterprises Ministry:

“At first it sounded like a good idea, but it lacks a legal basis and the form it would have taken meant that the ministry would have interfered with businesses.”

Still, don’t count Indonesia out completely from the SWF club; the article also says that an SWF is “something the government has wanted since 1998.” Watch this space…

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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