Indonesia’s Danantara Fund Names High-Profile Advisors Amid Market Concerns

Indonesia’s newly established sovereign wealth fund, Danantara Indonesia, has announced a high-profile advisory team that includes former presidents, global economists, and business leaders.

The appointments aim to boost investor confidence as the fund prepares to manage over $900 billion in state assets.

Among the notable figures joining Danantara are former Indonesian Presidents Joko Widodo and Susilo Bambang Yudhoyono, hedge fund billionaire Ray Dalio, economist Jeffrey Sachs, and former Thai Prime Minister Thaksin Shinawatra. Reports also suggest that former British Prime Minister Tony Blair may be added to the team, though officials have not confirmed this.

Danantara was launched last month by President Prabowo Subianto as a central vehicle for managing Indonesia’s state-owned enterprises (SOEs). The fund will reinvest SOE dividends into commercial projects aimed at achieving Prabowo’s ambitious 8% economic growth target by 2029.

According to Danantara CEO Rosan Roeslani, the advisory team will help navigate global economic risks, including financial market volatility and geopolitical uncertainty. He emphasized that the appointments of respected professionals would serve as a “positive signal” for the Indonesian economy and job creation.

Despite these assurances, Indonesia’s financial markets have reacted negatively to Danantara’s creation. The Jakarta Composite Index fell by up to 7% last week, triggering a temporary trading halt, and continued to decline on Monday, reaching its lowest level since August 2021. The rupiah also weakened, reflecting broader concerns over the country’s fiscal health and economic trajectory.

Analysts have attributed the market selloff to uncertainty surrounding Danantara’s governance and transparency. Some investors worry that political influence over the fund could impact decision-making and reduce accountability.

“Investors are concerned about the consolidation of listed SOE holdings into a new sovereign wealth fund with little disclosed about its governance,” said Charlie Linton, an Asia-Pacific equity portfolio manager at Ninety One.

Economist Wijayanto Samirin echoed these concerns, stating that Danantara’s leadership must ensure that the fund remains independent of political interference to maintain investor confidence.

Danantara will oversee assets across banking, energy, telecommunications, and infrastructure. Indonesia’s seven largest SOEs alone control assets worth $570 billion, equivalent to 40% of the country’s GDP.

The fund’s first round of investments, estimated at $20 billion, will focus on mineral processing, artificial intelligence, energy, and food security. However, some analysts are skeptical about whether diverting SOE dividends away from the state budget is sustainable, especially as Indonesia faces a budget deficit.

The government is already under financial pressure due to Prabowo’s flagship $28 billion social welfare program, which includes providing free lunches for schoolchildren and pregnant mothers. Redirecting SOE profits to Danantara may widen the fiscal gap, raising further concerns among investors.

Despite the initial market volatility, government officials remain confident that Danantara will help drive long-term economic growth. CEO Rosan Roeslani emphasized that the fund can be audited at any time, aiming to address transparency concerns.

With input from the Financial Times, Reuters, and Bloomberg.