JAKARTA (Reuters) – Indonesia’s parliament will on Tuesday vote on a bill that will allow the government to set up a new investment agency expected to manage its stakes in some of the biggest state companies.
The creation of the Daya Anagata Nusantara Investment Management Agency, or Danantara, was announced two days after President Prabowo Subianto took office in October, with the aim of improving the performance and returns from state investments, operating similarly to Singapore’s state investment arm Temasek.
The bill is likely to pass having received endorsement at the weekend from the parliamentary commission overseeing state owned enterprises.
The new agency is set to receive 1,000 trillion rupiah ($60.86 billion) in its initial capital, Darmadi Durianto, a lawmaker from the parliament’s commission overseeing the bill told Reuters. He did not provide more detail on the source of funding.
Government-owned stakes in Indonesia’s biggest lenders Bank Mandiri, Bank Rakyat Indonesia, and Bank Negara Indonesia, as well as electricity utility PLN, miner MIND ID, energy firm Pertamina and telco company Telkom Indonesia are among those expected to be transferred to Danantara, media have reported.
Those companies have combined assets reaching $600 billion, according to CreditSights, Fitch Group’s debt research firm.
The bill that lawmakers will vote on calls for the optimisation of dividends from state companies via Danantara, law minister Supratman Andi Agtas said at the weekend
Under current rules, dividends are paid to the Finance Ministry, while government holdings in state companies are managed by the State-Owned Enterprises Ministry.
Toto Pranoto, a University of Indonesia lecturer who was a consultant for the bill, told Reuters the new legislation proposes the SOEs ministry act as a supervisor for Danantara and maintains a small stake in state companies and veto power on corporate actions.
Danantara will set up two entities: a “superholding” that manages state companies and an investment firm that will manage dividends and leverage assets, he said.
The agency seeks to replicate some of the success of Singapore’s Temasek, which had a portfolio value of $284 billion in investments globally as of last March, with a 14% total shareholder return since its inception in 1974, according to its website.
In its January note, CreditSights said that if Danantara could efficiently and effectively consolidate SOEs, it would bring about better funding access and operational improvements as well as better access to global markets. But it also warned the agency could be susceptible to political interference.
“We see some risks upon the establishment of Danantara, including potential political influence on the utilisation of the fund, the integration process, and influence of Danantara on the strategic direction of the SOE, could affect investor confidence in the portfolio companies,” it said, adding that Danantara was still seen as a modest credit positive event for the concerned SOEs.
The office of Danantara did not immediately respond to a request for comment on possible political influence on the agency.
($1 = 16,430.0000 rupiah)
(Reporting by Stefanno Sulaiman; Additional reporting by Gayatri Suroyo; Editing by Martin Petty)
