Indonesia to set up 5 billion USD sovereign wealth fund hinh anh 1Illustrative image (Photo: Internet)
Jakarta (VNA) - The Indonesian government is preparing 75 trillion Rp (5.1 billion USD) for the nation’s sovereign wealth fund (SWF) to attract investment and support the economy as global heavyweights from the United States to the United Arab Emirates have expressed interest to join.

The Jakarta Post quoted Indonesian Finance Minister Sri Mulyani Indrawati as saying that 30 trillion Rp of the sum would be in cash, while the remaining would be in the form of state-owned enterprises (SOEs) shares and other state assets.

The fund is aimed at attracting 225 trillion Rp in investment, with foreign funds from the United Arab Emirates, Japanese conglomerate Softbank and the US International Development Finance Corporation (IFDC) already lining up to invest in the fund, officials said previously.

The establishment of the sovereign wealth fund, which will be called the Indonesia Investment Authority, is included in the Job Creation Law. The law has met with widespread protests and criticism from labor unions and civil groups over the potentially negative impact it could have on labor rights and the environment, although the government’s goal is to attract investment, boost economic growth and create jobs.

The fund will have a supervisory council led by the finance minister, with members including the SOEs minister and three more professionals, according to the law. The board of directors will include five professionals to oversee the fund’s operation, including to formulate the fund’s policy and work plan, among other things.

The Indonesian government can inject more money into the fund should its capital decline significantly, the law states. Indonesia would follow Russia’s sovereign wealth fund model as it would raise the required funds from private investors instead of from the country’s reserve funds, Deputy SOEs Minister Kartika “Tiko” Wirjoatmodjo said earlier this year.

According to Permata Bank economist Josua Pardede, although the fund could act as alternative financing sources to boost economic growth, the government must ensure that the fund should be transparent and independent.

“Both the supervisory council and board of directors must be independent, transparent and far from political interest to mitigate the risk of corruption. As the fund will manage a significant amount of assets, prudent management is the key to avoid potential state losses,” he said./.