Key Concepts
- Shareholder Return
- Corporatization of State-Owned Enterprises (SOEs)
- Business Judgment Rule
- Sovereign Wealth Fund (SWF)
- Strategic Sectors (Food Security, Energy Security, Digital Infrastructure, Healthcare)
- Public Service Obligation (PSO)
- Productivity Per Capita
- Leverage
- IRR (Internal Rate of Return)
Corporatization of SOEs and the Role of Danara
The primary goals are to increase shareholder return for publicly listed SOEs and to achieve full corporatization within the SOE sector. The law governing Danara emphasizes the business judgment rule, protecting decision-makers from criminalization for business decisions. Politicians are excluded from the SOE ecosystem to ensure professionalism. Danara can hire talent globally, not just from Indonesia. All eyes are on Danara, with oversight from parliament and other government facets, ultimately reporting to the President. Reputation is paramount.
The Need for a Second Sovereign Wealth Fund
The existence of a second sovereign wealth fund is justified by comparing Indonesia to other ASEAN nations. Singapore (6 million population) has two SWFs, and Malaysia (20 million population) has two or three. Indonesia previously only had one. The market and opportunities are large enough to support at least two. Middle Eastern countries often have multiple SWFs. Danara focuses on optimizing SOE assets and creating large businesses, while ENA excels in partnership businesses. Collaboration between Danara and ENA is encouraged, allowing investors to choose based on risk parameters and investment size.
Reinvestment of SOE Dividends and Strategic Sectors
Dividends from SOEs will be reinvested into strategic sectors instead of directly returning to state coffers. Garuda Indonesia is cited as a strategic asset, similar to Singapore Airlines, where the Singaporean government invested heavily. Danara plans a $400 million initial injection into Garuda with the goal of transforming it into a global organization. Indonesia's large and underpenetrated domestic market presents significant opportunities. Increasing foreign tourism through the airline business is also a key objective.
Investment Priorities and Partnerships
Danara prioritizes investments in food security, energy security, downstream industries, digital infrastructure, and healthcare. The aim is to create global-minded, large-sized companies through partnerships. These partnerships are crucial for bringing in know-how to increase the country's productivity per capita.
Collaboration with Temasek and Renewable Energy
President Joko Widodo anticipates close collaboration between Singapore's Temasek and Danara across all sectors. Renewable energy is a key area of focus, particularly after recent leaders' meetings. Digital opportunities are also being explored. Temasek's investment style is well-known, facilitating straightforward collaboration.
SOE Dividends and Leverage
President Prabowo Subianto projects SOE dividends to reach $18 billion this year. Danara can leverage these dividends, using the capital for productive investments. This differs from state capital, which must be used for the benefit of the entire population without necessarily considering IRR.
Public Service Obligation
A line will not be crossed if it's only for public goods and not for private. The Dantara law allows for Public Service Obligations (PSO), funded by the state budget.
Conclusion
Danara's mission is to enhance shareholder value, corporatize SOEs, and drive economic growth through strategic investments in key sectors. Collaboration with international partners and a focus on increasing productivity per capita are central to its strategy. The fund aims to operate with transparency and accountability, contributing to Indonesia's long-term economic development.
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