Guard Danantara to avoid a fate like 1MDB Malaysia

Today, Monday (24/2/2025), should be a historical record for the transformation of state wealth management. If all goes well, at 10:00 at the State Palace, Jakarta, President Prabowo Subianto will launch the Daya Anagata Nusantara Investment Management Agency or Danantara.

The President is also scheduled to inaugurate Danantara's top brass, including Minister of Investment and Downstream Rosan Roeslani as CEO (Chief Executive Officer), Deputy Minister of SOEs Dony Oskaria as COO (Chief Operating Officer), and Deputy President Director of PT TBS Energi Utama Tbk Pandu Sjahrir as CIO (Chief Investment Officer).

Anagata is a Sanskrit word meaning ‘future’. If the name is a prayer, this investment management body is burdened with the hope of being a financial vehicle for the country to ensure an increasingly empowered Indonesia.

While delivering a speech at the 2025 World Governments Summit international forum in Dubai, United Arab Emirates, Thursday (13/2/2025) virtually, the President said that Danantara is a sovereign wealth fund with total managed funds of more than 900 billion US dollars (Rp. 14,674 trillion) to carry out high-impact investments.

The task assigned by the President to Danantara is to manage all assets of state-owned enterprises (BUMN), including dividends which have so far been non-tax state revenues in the State Budget (APBN).

The OECD has highlighted systemic problems of governance and weak regulation of SWFs in African, Asian, European and Middle Eastern countries.

With assets under management of nearly Rp15,000 trillion, Danantara will become the fourth largest sovereign wealth fund in the world. This value is much larger than Temasek (Singapore) or Khazanah (Malaysia) which are often used as references.

Just to give you an idea of how big the value of IDR 15,000 trillion is, Indonesia's 2025 state budget is in the range of IDR 3,000 trillion, while the gross domestic product (GDP) is around IDR 23,000 trillion.

Previously, BUMN had already been closely associated as a tool for political "bancakan". So you can imagine how big the temptation is for those who enjoy this "bancakan" if the legal framework, transparency, and accountability of Danantara, as the SWF that will manage all state assets, are unclear.

Danantara was formed based on the third amendment to Law Number 19 of 2003 concerning State-Owned Enterprises (BUMN). The revision to Law No. 19/2003 has been approved as law in a plenary meeting of the DPR, Tuesday (4/2/2025).

Although the policy contains crucial changes related to the governance of BUMN under Danantara, until the launch of Danantara, Law No. 19/2024 concerning BUMN—at least until this article was completed—had not been ratified in the State Gazette of the Republic of Indonesia and signed by the President.

In addition to the controversy over the BUMN Law which seems non-transparent, as a government institution, Danantara also requires government regulations (PP) that are in line with the law. PP is needed as a basis for operational activities and governance as well as a corridor for professionalism and meritocracy of the system run by Danantara.

Speaking of weak legal frameworks, the OECD has highlighted systemic problems of governance and weak regulation of SWFs in African, Asian, European and Middle Eastern countries. This condition has triggered corruption scandals, money laundering and other illicit activities by high-ranking government officials and their cronies.

The cases of 1Malaysia Development Berhad (1MDB), Fundo Soberano de Angola, and Fund for Future Generations in Guinea, should serve as lessons on how looting of SWFs occurs.

The Guardian called it the world's biggest financial scandal. When it was first established in 2009, 1MDB, Malaysia's sovereign wealth fund controlled by the finance minister, was created to support long-term economic development through global partnerships and foreign investment.

Over time, 1MDB lost its vision due to corruption and political issues. Not a few businessmen and state officials were finally caught, including former Prime Minister Najib Razak.

Quoted from Reuters, Razak was found guilty of embezzling funds from 1MDB subsidiary SRC International. At least US$4.5 billion (equivalent to Rp69 trillion) is suspected of having been misused and harming the state.

The 1MDB case provides a lesson for Danantara about the importance of strong governance and independent oversight, far from political interference. Danantara needs a strict audit mechanism, financial reports that are open to the public, and clear limits on political interference in all investment decisions.

Paramadina University economist Wijayanto Samirin said that with the revision of the BUMN Law, BUMN assets are no longer considered separated state assets and BUMN losses are not state losses. Thus, the PP which is the legal basis for Danantara must regulate the existence of an independent audit conducted by parties with integrity.

"We are entering an era where BUMN audits must be conducted by truly independent public accountants. Affiliation with global auditors is a requirement," he said.

PP is needed as a basis for operational and governance activities, as well as being a corridor for professionalism and meritocracy of the system run by Danantara.

Despite the formation of Danantara which is very politically charged, if it operates independently, professionally, and with integrity, Danantara can be a catalyst for economic growth, provide sustainable development funding, attract investment, improve national welfare, and global competitiveness.

Don't let Danantara become another example of a failed SWF in the next few years, which instead triggers corruption scandals and illicit activities by high-ranking government officials and their cronies.

This should not happen in Indonesia, because such conditions are only possible in countries with high levels of corruption and weak rule of law.