The Indonesian Government has approved Danantara, a new sovereign wealth fund designed to consolidate state-owned enterprises and attract investment. With an initial US$61 billion in funding, it is expected that the new fund will operate under the direct supervision of President Prabowo Subianto.

Indonesia’s decision to establish a second sovereign wealth fund suggests it may be taking inspiration from Singapore’s approach to managing state investments.

Singapore operates two major funds with distinct roles, GIC, which manages the country’s foreign reserves by investing globally in stocks, bonds, real estate and private equity, and Temasek Holdings, which directly owns stakes in domestic and international companies, taking a more active role in its investments.

By creating Danantara, alongside the country’s existing sovereign fund, Indonesia Investment Authority ( INA ), Indonesia appears to be structuring its investment strategy in a similar way, with one fund focused on managing state-owned assets and another on broader investment opportunities.

The launch of Danantara is part of President Prabowo Subianto’s plan to accelerate economic growth and optimize state assets. The fund, which will operate under his direct supervision, follows the creation of the initial wealth fund the Indonesia Investment Authority ( INA ) in 2020. With an initial capital of US$61.3 billion, Danantara is expected to manage assets worth up to US$982 billion, which will rapidly position it among the world’s largest sovereign wealth funds.

Danantara will take control of Indonesia’s major state-owned enterprises, including Bank Mandiri, BRI, BNI, Pertamina, PLN, Telkom Indonesia and MIND ID. By consolidating these assets, the government hopes to improve efficiency and attract foreign investment, mirroring Temasek’s approach.

However, its establishment has sparked concerns about transparency, governance and potential overlaps with the INA. Unlike INA, which operates as part of the government’s finance ministry, Danantara, because it will report directly to the president, has raised concerns about possible political influence.

The fund’s creation comes as the government seeks alternative ways to finance key projects, including a costly free school meal programme and the continued development of Nusantara, the new capital city. With a projected budget deficit of US$31.3 billion in 2024, securing investment-driven solutions is a priority.

Despite its potential, Danantara faces significant challenges, including legal protections that shield it from asset seizures, concerns over corruption risks and uncertainty about its relationship with INA.

While it has secured parliamentary approval, long-term industry figures say its success will depend on strong governance, investor confidence and the ability to manage state assets effectively without disrupting Indonesia’s financial stability.