Sovereign Wealth Fund, Is This What Indonesia Need to Have Right Now?
Infrastructure is important, but not right now
The news in 2020 is mostly about pandemic and the race of making an effective vaccine. But, if you pay some attention to Indonesia’s economic, there is one topic come out of the water: the creation of Sovereign Wealth Fund.
Sovereign wealth fund is actually not a rare practice. In fact, some countries has had it for decades. Some performs very well but some didn’t.
Let start with the definition. Sovereign wealth fund (SWF) is state-owned investment fund comprised of money generated by the government, often derived from a country’s surplus reserves. In simpler term, it is just like an ordinary mutual fund, but government hold majority of stakes.
Why a country create SWF? To make some money, of course, and more importantly to finance national development projects like toll road and housing.
With that in mind, Indonesia established its SWF(the name is Indonesia’s
Investment Authority/INA) through Omnibus Bill on Job Creation last year. The INA will be supervised by the Minister of Finance, Minister of SOE and three professionals. The board of the directors are yet to be announced, maybe until mid February 2021.
The most important issue is coming from the funding side. Most SWF funding coming from nation’s surplus reserves from state-owned natural resource revenues or trade surpluses. Indonesia doing some workaround here and deciding to rely on foreign direct investment/FDI.
INA is targeted to raise up to USD 20 billion in funding. So far, Indonesia government poured USD I billion, followed by some commitment from overseas investors like follows:
- USD 1.5 billion from Dutch Pension fund APG
- USD 300 million from Macquarie group
- USD 2 billion from Canadian pension fund/Caisse de dépôt et placement du Québec (CDPQ)
- USD 2 billion from US International Development Finance Corporation (IDFC)
- USD 4 billion from Japan Bank for International Corporation (JBIC)
INA is supposed to provide alternative financial sources for continuous infrastructure development. But, did Indonesia need to have INA like right now?
INA has the main purpose to boost infrastructure, there is still no sign of using the fund for social assistance. In fact, it will be better if the focus is used to reduce the infection rate of Covid-19.
INA is definitely bringing very good sentiment for construction companies since the primary objective is to invest in strategic national projects, especially in infrastructure. WSKT, WIKA, PTPP and ADHI are on hype! Their stock prices are going up for the last three months.
But, I think that objective can be postponed until covid-19 is contained nationally, at least. Our focus should be getting people vaccinated nation-wide. Or more importantly, to get some incentives for medic.
It is very heart-breaking when the news stated medic’s incentive will take a pay-cut. Government actually plan Rp619tn, up roughly 50% from the first plan Rp356,5tn allocated to National Economic Recovery Program (PEN). While, the budget is up, the incentive for medic was cut down from Rp15mio to Rp7,5mio at the highest. I mean, that medic should be get more than less incentives, right?
I hope they will think of that plan again. At least, just put medic our priority. They are our actual heroes.
