Indonesia Soon To Own Sovereign Wealth Fund.

Updated: Dec 16, 2020

Following the enactment of Law No. 11 of 2020 on Job Creation (“Job Creation Law”) by the Government, Indonesia will soon establish an investment management institution as the Indonesian sovereign wealth fund (“SWF”). The aim of the SWF is to manage government investments through cooperation with state-owned enterprises (“SOE”) and other parties to optimize its assets.

Under the Job Creation Law, the initial capital of the SWF could be:

  1. Cash

  2. State property;

  3. State receivables to an SOE or other company; and/or

  4. State shares in an SOE or other company.

The Government has issued a draft government regulation on the SWF (“Draft”) as part of the implementation of the Job Creation Law.

Below are some key provisions of the Draft.


The Job Creation Law stipulated that the initial capital of the SWF would be cash totaling at least IDR15 trillion (USD1.1 billion).

The Draft, however, stipulated that the SWF’s capital would be IDR75 trillion (USD5.325 billion) and its fulfilment would be implemented in stages until 2021.

Role and Authority of SWF

Under the Draft, establishment of the SWF is intended to increase and optimize investment value managed in the long term to support sustainable development.

To implement its role, the SWF is authorized to:

  1. place funds in financial instruments

  2. carry out asset management;

  3. cooperate with other parties, including trust fund entities;

  4. determine potential investment partners;

  5. grant and receive loans; or

  6. administer assets.

To implement the above, the SWF may collaborate with third parties, including but not limited to investment partners, Investment Managers, SOEs, government bodies or institutions, or other domestic or foreign entities.

Organizational Structure

The SWF is managed by:

  1. A Supervisory Board, comprising:

  2. Minister of Finance as chair

  3. Minister of SOEs as a member; and

  4. 3 people with professional standing, as members.

  1. Board of directors (“BoD”), whose 5 members are of professional standing.

If necessary, the SWF may form an advisory board that is responsible to the BOD with functions to provide advice and report to the BoD.

Assets, Loan and Management


SWF Assets may be sourced from:

  1. State equity participation;

  2. Business and asset development;

  3. Transfers of Government or SOE assets;

  4. Grants; and

  5. Other legitimate sources.

In order to enhance asset value, SWF may collaborate with third parties in order to:

  1. provide or accept power of attorney to manage;

  2. form a joint-venture company; or

  3. pursue other forms of collaboration.

SWF assets can be transferred for the purpose of capital participation in a joint-venture company.


The SWF can provide or receive loans as credit facilities, bonds or other debt instruments. The SWF may also pledge its assets to secure loans.

The SWF must carry out a risk analysis on each loan it provides or receives, which at minimum should cover:

  1. the purpose of the loan;

  2. evaluation of the investment or project feasibility; and

  3. loan repayment capability

Asset Management

Asset management is based on principles of good governance that include transparency, accountability, responsibility, independence and fairness.

Formation or Participation in Fund

The SWF may establish or participate in funds from a third party. A fund’s legal status or format could be as a joint venture, mutual fund or collective investment contract, or another venture with either an Indonesian or foreign legal entity.

The SWF can appoint a representative to a fund established as a limited liability or joint-venture company or similar entity.

SWF’s BoD must manage the fund’s risk and supervise its investment performance. Provisions on risk management and supervision will stipulated by the BoD.


The government’s establishment of the SWF is aimed at boosting investment in Indonesia and may create new job opportunities within the spirit of the Job Creation Law.

The Draft introduces the SWF as an institution established by the Job Creation Law and sui generis (unique) as a financial management entity. The Draft, however, does not provide further elaboration on the legal nature of the SWF: whether it will be established as an SOE, government institution, or fund. It is important to clarify the SWF’s legal characteristics, as each type of legal entity has its own legal provisions and ramifications.

Given the legal opacity of the SWF, the relationship between the SWF and the government is insufficiently clear, particularly the status of government assets as contributions to the SWF. This also begs the question of how the SWF would return its earnings to the government.

In another significant provision, the Draft states that the SWF cannot be declared bankrupt unless it can be proven insolvent by an independent institution appointed by the Ministry of Finance.

For further information, please contact: Freddy Karyadi, Partner, ABNR +62818103949 Novario Asca H, Senior Associate, ABNR

Register here for your monthly Asia legal updates