Saturday, December 2, 2023

Japan Pledges $4b to Indonesia's Sovereign Wealth Fund

Wishnu Bagus Prasetyo, Mashud Toarik
December 5, 2020 | 9:54 pm
SHARE
Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan, center, and State-Owned Enterprises Minister Erick Thohir, right attend a meeting in Tokyo on Friday. (Photo courtesy of the Coordinating Ministry for Maritime Affairs and Investment)
Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan, center, and State-Owned Enterprises Minister Erick Thohir, right attend a meeting in Tokyo on Friday. (Photo courtesy of the Coordinating Ministry for Maritime Affairs and Investment)

Jakarta. Japan has pledged a commitment to invest $4 billion in Indonesia's inaugural sovereign wealth fund, marking a speedy development that may hold the key for the Southeast Asian country's infrastructure ambitions.

Japan was the second country to pledge a concrete amount to the fund after the US International Development Finance Corporation (DFC), the United States's financing arm, did so last month. 

"JBIC is ready to support SWF Indonesia's funding of $4 billion, twice as much as what was pledged by DFC," Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan said in a statement after a meeting with Maeda Tadashi, the governor of Japan Bank for International Cooperation (JBIC) in Tokyo on Friday.   

Luhut led an Indonesian delegation that includes State-Owned Enterprises Minister Erick Thohir and Indonesian Ambassador to Japan Heri Akhmadi and held a marathon meeting with Maeda and no less than 20 other potential Japanese investors in the finance and energy sector.

Advertisement

"JBIC will be one of the financial institutions participating in the Indonesia master fund called the Nusantara Investment Authority (NIA)," Heri said in the statement. 

"The support from JBIC and the Government of Japan will certainly strengthen the strategic cooperation ties between Indonesia and Japan, and attract more Japanese private sectors to invest in Indonesia,” Heri said.

Indonesia set to establish the fund to raise an alternative funding source for its ambitious infrastructure projects in the next few years. The 2020 Law on Job Creation mandated the government to establish the fund, and it has been working toward a goal to set the fund up and running next year.  

"The government regulation (PP) that regulates Indonesia sovereign wealth fund will be completed in mid-December. The regulation will certainly accelerate the fund establishment," Erick said.

The Coordinating Ministry for Maritime Affairs and Investment said a team would work closely to follow up the JBIC commitment. The ministry expects to see JBIC investment in the fund in the first quarter of next year.

Luhut and Erick are scheduled to fly to Abu Dhabi and Saudi Arabia on Saturday to secure more investment commitments for Nusantara Investment Authority.

Indonesia has run twin deficits in the past few decades, so it can not afford to fund the sovereign wealth fund from the foreign exchange reserves or the government's budget surpluses, like Norway or Singapore, and invest in real or financial assets worldwide.

So, the country opted to follow Russia's model instead. The Nusantara Investment Authority would pool funds from investors worldwide and channel it to strategic projects in Indonesia. 

Erindra Kristawan, the chief investment officer of Star Asset Management, a Jakarta-based fund manager, said Indonesia's new sovereign wealth fund could bridge the mismatch between short-term funds and long-term funding needs the country's construction and infrastructure sectors. 

Indonesia's state-owned construction companies have maxed out their leverage in the past five years to take on President Joko "Jokowi" Widodo's infrastructure ambition. Now, with Nusantara Investment Authority assuming the financing responsibility, the companies could get the breathing space they needed for taking on new projects, he said.  

"The companies can get new contracts and grow again in the future," Erindra said. 

Tags: Keywords:
SHARE

POPULAR READS


News 13 hours ago

Philippines Opens Monitoring Base on Remote Island in Disputed South China Sea

Thitu is one of nine islands, islets and atolls that have been occupied by Philippine forces since the 1970s
News 14 hours ago

President’s Office Refutes Allegations of Interference in Setya Novanto Case

Former House Speaker Setya Novanto is currently serving a 15-year prison sentence after being convicted of corruption charges.
Special Updates 14 hours ago

Teras by Plataran to Open at Pondok Indah Mall 2

Teras by Plataran will open at Pondok Indah Mall (PIM) 2 in Jakarta this Sunday
Lifestyle 20 hours ago

Foreign Tourist Arrivals Drop 8.57 Pct in October

BPS reported that foreign tourist arrivals had seen a 8.57 percent drop in October compared to the previous month.
News Dec 1, 2023 | 11:48 am

Indonesia Vows Rock Solid Support for Palestine

Indonesia will continue its push for a two-state solution.

Popular Tag


Opini Title

COPYRIGHT © 2023 JAKARTA GLOBE. ALL RIGHTS RESERVED