Indonesia to apply rules pertaining to sovereign wealth fund

Indonesia to apply rules pertaining to sovereign wealth fund

President Joko Widodo attended the annual meeting of the financial services industry in Jakarta, Thursday (Jan 16, 2020). (ANTARA/Bayu Prasetyo/AK)

Jakarta (ANTARA) - President Joko Widodo (Jokowi) confirmed that Indonesia will soon have in place rules concerning sovereign wealth fund (SWF), or endowment fund, to accommodate the entry of more investments through instruments based on the concept.

"Regarding our financial sector, we will have rules regarding the sovereign wealth fund. We will have an inflow of US$20 billion after the rules come out," President Jokowi remarked during the annual meeting of the financial services industry in Jakarta on Thursday.

Jokowi noted that institutions were currently keen to invest through the SWF instrument in Indonesia.

The president chose to not divulge details of the institutions in question, though he believed that the opportunity must be welcomed.

"I do not need to mention the institution. If the House of Representatives approves the articles submitted by the government, our economy will grow better," the president pointed out.

On the occasion, he stated that Indonesia’s financial sector remains largely stable.

"This is good since other countries have not been well-informed by the World Bank and the IMF that the global economic growth will decline in 2020. However, our financial sector is generally stable," he stated.

Indonesia and the United Arab Emirates (UAE) had earlier explored the establishment of an SWF as an alternative financing method for infrastructure development or investment. In a written statement in Jakarta on Thursday, Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan admitted to having received a proposal from the UAE government for the establishment of an SWF.

"As a result of discussions centring on a sovereign wealth fund with the Abu Dhabi Investment Authority (ADIA), the minister of energy, the CEO of Mubadala, and several high-ranking officials in Abu Dhabi, we will study this proposal soon, and I hope this decision would not take long," Pandjaitan remarked during a meeting in Abu Dhabi, Tuesday, September 17.

The funding will be derived through a collection of investment funds from various countries, including the UAE. Thus, investment in Indonesia can be increased gradually to US$5 billion and then to $10 billion.

The funds can be utilized to finance infrastructure projects or investments, in general.

"The UAE officials will visit Indonesia next month to meet officials of the Indonesian Ministry of Finance and Sarana Multi Infrastruktur to discuss the schemes and regulations and the legislation required for the establishment of SWF. They will also share their experiences with Indonesian officials on the formation of a similar fund with India and Egypt," he expounded.

In accordance with the concept of the endowment fund, the use of state assets, managed by state-owned enterprises, can be improved to boost the people's prosperity, Pandjaitan remarked.

Despite the government's ownership share being below 50 percent, with a good contract, the government can still control the fund.

An endowment fund or sovereign wealth fund is a financial institution owned by the State that owns or manages public funds and invests them in broad and diverse assets to obtain greater returns.

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