The Indonesian government has earmarked an additional US$4.2 billion to pour into its sovereign wealth fund for funding infrastructure projects.
Indonesia’s sovereign wealth is known as the Indonesia Investment Authority (INA) and was founded in February with an initial capital of US$5.4bn. It is hoped that this new entity would provide an avenue through which Indonesia’s local and international investors raise sufficient capital to fund development programs, especially domestic infrastructure projects.
The INA’s latest funding round includes a Rp15tn(US$1.05bn) capital injection from the state drawn out from this year’s state budget. According to reports by local news agencies, there was also another Rp45tn (US$3.16bn) in equity from Bank Mandiri and Bank Rakyat Indonesia. The mission of the government is for INA to manage over US$100bn in funds.
John Yeap of Pinsent Masons, reflecting on the development said: “With Indonesia’s need for significant investment into its fast modernizing society, and together with the costs associated with sustainable development, the additional injection of funds into the INA will no doubt be well utilized. The challenge will be to ensure proper prioritization of investments together with a transparent and accountable management structure to ensure the nation and the international partners on the effectiveness of the fund in achieving its objectives.”
This latest investment is part of a broader plan by the government to invest Rp 75 trillion into INA this year, which will be used to finance major infrastructure projects, tourism, and technology projects.
So far, five countries have made total commitments of US$19.8bn to INA, including Canada, Japan, the Netherlands, the United Arab Emirates, and the US. The total funds raised include a US$2bn investment by the United States International Development Finance Corporation (DFC). The UAE promised sometime past to invest US$10bn and the Japan Bank for International Cooperation (JBIC) said it would invest US$4bn.
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