Australian pension funds eye Indonesia as next major investment target
“Our goal is to get our investors up there to see how INA is organized. We will set up communication channels so that on subsequent visits we can review opportunities,” Jones says.
“The first step is to build relationships, to get a level of assurance that the INA is what it says it is.”
Key to those relationships is INA chief executive Ridha Wirakusumah, who will soon complete the first of two major deals for the sovereign wealth fund that will commit capital from Canada, the Netherlands and the United Arab Emirates to routes to toll through Sumatra and Java.
“In its first 70 years, Indonesia built 700 kilometers of toll roads. In the past seven years, Indonesia has built 2000 kilometers. I was saying to the president, if we want it to rhyme, we should have built 7,000 kilometers in the last seven years,” Ridha said. FRG weekend.
Ridha has time to joke around with the president – usually referred to as Jokowi – as he sees him a lot. He receives many requests for updates from the Palace. Jokowi has less than two years to govern and the INA’s success – or failure – in attracting foreign investment to help fund Indonesia’s many infrastructure needs is a priority.
INA’s job is to generate funds through the sale of state-owned assets. It has central government funding to make these acquisitions, but relies heavily on out-of-country investment.
The creation of the INA last year was an acknowledgment that Indonesia had problems to solve. “INA has gained a positive perception among foreign investors as its legal mandate appears to be to shield its governance from political pressures,” said David Sumual, chief economist at Bank Central Asia in Jakarta.
Like many others, Sumual endorses the stringent requirements placed on members of INA’s Supervisory Board and Board of Directors. Candidates cannot be members of a political party and must have experience in large companies or abroad; a major hurdle for buddy nominations.
Another attraction for those seeking to appropriate the Indonesian growth story is that the INA has preferential rights to purchase the assets of state-owned companies. It will also have priority when state-owned companies attempt to transfer assets, and these rights can be delegated to INA joint ventures.
The INA also seeks protection from existing bankruptcy laws, as its insolvency can only be proven by an independent body appointed by the Ministry of Finance. “This feature could provide co-investors with some assurance as it somewhat protects INA against unfounded creditor claims,” Sumual said.
The government has also prepared special tax treatments for INA co-investors. Other long-term observers say the INA must demonstrate that it can structure deals so adroitly that foreign investors can overcome their concerns about legal challenges down the line.
On Tuesday, Jokowi announced 392 trillion Indonesian rupiah ($38 billion) in infrastructure spending next year. This will be channeled through various ministries and projects likely to be completed by 2024 will be given priority; this includes roads, energy projects, water infrastructure, waste treatment facilities and IT infrastructure. The aim is to match private investment with public funds wherever possible.
All of these projects are vital if Indonesia is to achieve its goal of becoming the world’s fourth largest economy by 2050. INA wants to go beyond transport infrastructure. He identified renewable energy, healthcare, financial services, consumer and technology as areas he wants to boost.
Wednesday was National Day in Indonesia and for the first time since 2019 there was no holding back in the celebrations. Across the country, kids have loved playing the games that traditionally mark the holidays but have disappeared since 2019.
In the capital Jakarta, the streets of the neighborhood were full of children racing in sacks or trying to get ahead while carefully carrying marbles in a spoon. They also climbed palm trees, competed to catch ducks in the river, and encouraged parades.
The relief to be back on the streets was palpable. A year ago, Indonesia was just emerging from a catastrophic outbreak of the delta variant of the coronavirus. At the time, Finance Minister Sri Mulyani was adamant that the reform process including the INA should stay on track. The economic recovery from the pandemic is now well under way.
Clearly Jakarta and Canberra would both like to see Australian investors involved. Australian taxpayers could also benefit from handsome returns if the right investment structures can be found.
Additional reporting by Natalia Santi