Photo from setneg.go.id
The idea of creating a ‘superholding’ of state-owned enterprises (SOEs) – promoted during his presidential campaign by Prabowo Subianto – is now becoming a reality.
Danantara, ‘energy for future’, as it is called, was officially launched by the president on 24 February 2025. Unlike most sovereign wealth funds (SWFs), which manage oil or gas surpluses, Danantara was established by the consolidation of the vast assets of seven huge Indonesian SOEs – encompassing telecommunication and banking, as well as the oil and gas sector.
In fact, Danantara will oversee US$ 900 billion in total assets, making it one of the world’s largest SWFs. Amidst a nationwide student protest ‘Dark Indonesia’ against the Prabowo administration’s 306.7 trillion rupiah of budget cuts, Prabowo announced that the fund will serve as a pivotal national development instrument to fuel his ambitious 8% growth target.
For its supporters, the fund is modelled on Singapore’s very successful Temasek Holdings. But SWFs, whether in developed or developing countries often engender controversies – even Temasek. The amount of their assets, their owners, the interests they represent, and whether the public can monitor them can raise alarm around the world.
The problems are ingrained in each element of a sovereign wealth fund – S, W, and F. In Danantara, the ‘S’ (sovereign) problem –ownership– is addressed through a typical Indonesian approach: Article 33(2) of the Constitution, which asserts the absolute power of the state to control important branches of production and natural resources.
As for ‘W’ (wealth), Danantara has been positioned as part of the new administration’s attempts to equalise wealth distribution, so gains are earmarked as a social dividend. Prabowo pledged transparency in a speech, saying “Danantara can be audited any time by anyone because it is owned by the people”. Adopting a ‘multi-layered supervision system’, it will be subject to audits by the country’s Supreme Audit Agency (BPK) as well as by an Oversight Committee, an Audit Committee, and others.
‘F’ (fund) is dealt with by the newly-amended Law No. 19 of 2003 on SOEs, which limits the SOE minister’s role to overseeing the fund and shields the authority from legal liability for losses unless unlawful personal gains are proven.
Competing forms of capitalism?
For many observers, Danantara potentially reproduces Indonesia’s predatory political economy. On this view, SOEs embody rising economic nationalism, that is state capitalism, and crowd out capital formation by private firms.
Yet, digging into its board structure, it is apparent that Danantara instead reflects combined forms of capitalism – private fossil-fuel and tech, as well as state capital – that have overall benefited from Indonesia’s oligarchic politics, as well sustaining its high costs.
For example, Danantara’s board members include Rosan Roeslani, a prominent coal industry executive, who is also Investment Minister and Prabowo’s campaign head and fund manager. Pandu Sjahrir, the nephew of Luhut Panjaitan (one of Jokowi’s closest advisers, widely known as ‘Mr Fix-it’), is chief investment officer. Dony Oskaria, who occupied strategic positions in key SOEs including Garuda Indonesia during Jokowi’s administration, is the chief operating officer. SOE Minister Erick Thohir and other senior figures are on the board of advisers. Among these well-connected politico-economic elites, is Tony Blair, the former British prime minister, who now serves as a member of Danantara’s supervisory board. He is a high profile figure who was a strong advocate of Jokowi’s pet project, Indonesia’s new capital city, Nusantara, and who worked closely with the Coordinating Ministry of Maritime Affairs and Investment under Luhut, through his think tank, the Tony Blair Institute for Global Change.
But despite the list of rich and powerful names involved in its management, exactly how Danantara will operate remains unclear. As Prabowo announced, it will receive a $20 billion capital injection to support industrialisation in key sectors, such as critical mineral processing, data centres and AI, oil refining, food production, and renewable energy. These are all sectors where domestic demands for capital remain high but are risky – both in terms of regulation and financing– for foreign investors.
In fact, over the past few years, these sectors – particularly nickel downstreaming and food estates – have been nurtured by executive discretion, with policy decisions benefiting select groups of domestic tycoons and their foreign allies. These chosen domestic fossil-fuel conglomerates and politico-bureaucrats are drawn closer to the corridors of state power. They often serve as intermediaries between the state-led ‘downstreaming’ program and international capital, including Chinese capital, which has fuelled the upstream part of Indonesia’s electric vehicle (EV) industry.
This ambivalent governance model risks Danantara being seen as an extension of emerging alliances between extractive capital, state capital, and trans(national) capital that have been active within the state structure. This could perpetuate dynamics that have taken shape in a number of national strategic projects that basically conflate ‘public’ with ‘private’ – usually to the benefit of ruling elites.
Oligarchic governance
The extent to which Danantara can allow innovation also remains unclear.
As mentioned, the new SOEs Law protects Danantara’s board members from personal liability for the fund’s losses in a bid to encourage business dynamism and innovation. But, while pledging transparency as a major safeguard against potential mismanagement of assets, Prabowo has simultaneously laid the groundwork for potential internal accountability problems by inviting former presidents and religious organisations to help supervise the fund. In other words, some of the most powerful interests in the country will become enmeshed in the ownership and control of state capital.
It remains to be seen if the leadership of Danantara can resist the temptation to sacrifice long-term investment gains – the overarching aim of SWFs – for short-term interests to accommodate the logic of the existing power structure in the country, especially at a time when opposition forces are disorganised and weak.
The Indonesia Investment Authority (INA), launched in 2021 with initial capital of U$5 billion, is an example of the problem. Initially set up to attract foreign investment, it functions as a ‘pass-through’ entity that raises funds from foreign investors and channels them to domestic entities. Yet, the outward focus of INA and its investment portfolio often seem contradictory. As shown in its financial statement, while pooling funds from abroad, the INA has also been investing heavily in subsidiaries of debt-heavy local construction SOEs.
From a political perspective, this makes sense. During the Covid-19 pandemic, these SOEs featured in infrastructure politics as they sustained short-term economic growth. This helped Jokowi’s governing political alliance maintain economic momentum in the run-up to the 2024 elections, won by his chosen successor, Prabowo. It makes much less sense from an economic perspective.
Strategic mismatch
Unlike INA, Danantara has an overtly inward focus, with the ultimate goal of having more Indonesian SOEs included in the Global Fortune 500 list. At a glance, this resembles China’s strategy which led to 128 Chinese companies listed in the 2024 Fortune Global 500.
However, the success of Chinese companies was not necessarily due to asset consolidation but, rather, risk-taking activities for creating economies of scale, trial and error in the process of internationalisation, and technological leapfrogging. As well as traditional giants such as Sinopec and State Grid, Chinese tech firms and battery and EV makers continued to climb the ladder thanks to breakthroughs in technological innovation.
Meanwhile, the inward-focus characteristic of Danantara, coupled with Prabowo’s massive fiscal spending cuts, seems contrary to what is required for the structural transformation. In particular, the sweeping cuts leave no room for R&D, a key pillar for innovation and leapfrogging.
It is also not clear what benchmark is used to assess ‘high-impact projects’ eligible for financing, and whether initial funding can lead to technological catch-up. There is a real risk of perpetuating extractivism and reinventing non-performing SOEs as mere financial intermediaries. This is what happened with Indonesia Battery Corporation (IBC), once promoted as a battery producer. In early February this year, IBC was changed to become New Energy Materials Investment Holdings, now tasked with simply holding investments in the production of battery components and raw materials, without significant operational involvement.
So, while the state continues its original mandate to develop downstream processing, it is clear that it is not inclined to invest the massive sums required to generate new knowledge and technology.
The politics of investment
In the months ahead, the government owes the Indonesian people more clarity about the Danantara’s powers and responsibilities, the role of government and stakeholders, and the rules for investment and management.
As mentioned, Article 33(2) of the Constitution says that the state controls important branches of production and natural resources, but it must always be remembered that Article 33(3) says that this control must be exercised the maximum benefit of the people – and not elites.
