The recent establishment of the Indonesian sovereign wealth fund (SWF), Danantara, has sparked controversy due to its funding coming from a large sum of the state budget, freed up by the government’s austerity program. Despite its transformative potential, ongoing entanglements of politics and business risk undermining Danantara’s success.
Danantara will manage the operations of all of Indonesia’s state-owned enterprises (SOEs) and reinvest their profits, primarily by financing national strategic projects. Jakarta believes the so-called ‘superholding’ could help Indonesia achieve its target of eight per cent annual GDP growth and transform the economy. With an enormous US$900 billion in assets originating from the state’s largest companies, there is a hopeful argument that Danantara would bring the country closer to its dream of joining the developed nations’ club. Yet critics have expressed concerns about accountability, asserting that the lack of legal mechanisms to oversee Danantara’s performance increases the risk of corruption.
Global political trends and Indonesia’s historical approach to SOE governance help explain why the Prabowo administration is putting so much money into this massive reform.
To begin with, Indonesia is not alone in stepping into the SWF game. Most developing and developed countries have sought to introduce analogous measures, partly in response to the intensifying US–China rivalry. The rise of China through state-led economic policies has reshaped the way countries manage capitalism, with a growing emphasis on state intervention often coming at the expense of democratic processes.
This dynamic has prompted many countries to strengthen the state’s role in actively directing investment, trade and strategic industries. Many high-income countries have begun to ‘weaponise’ their markets — using economic policies as geopolitical tools — through stringent regulations or heavy state involvement in strategic sectors like mining and technology. The United States and its allies, for example, have enacted a trade law restricting mineral companies with more than 25 per cent Chinese ownership from entering their markets.
Indonesia is no exception to this trend. In response to US-led trade laws against China, Indonesia has courted investments from South Korea to diversify its economic partnerships. Jakarta has also passed the Law on Job Creation to streamline the licensing and investment processes in the mining sector, making it more attractive for alternative partners to invest in Indonesia. Rushed through with minimal opposition, this legislation reflects Indonesia’s new era of tighter state economic control while paradoxically embracing neoliberal capital accumulation.
Post-reformation Indonesia has struggled to build a strong democracy. Its political system remains dominated by rent-seeking elites in various sectors. SOEs have long served as arenas where these political elites try to secure key positions for their allies to amass wealth and consolidate power. This pattern of political patronage persisted under both the Yudhoyono and Jokowi presidencies, where the SOE commissioners were always selected based on political support or party affiliation rather than merit. This allowed elites to channel state resources into their networks through subcontracting projects and concession permits.
Prabowo is continuing this trend with Danantara, as reflected in the agency’s organisational structure. Despite the presence of professionals and international names, many of its top-ranking officers were part of the President’s official campaign team or are known political supporters. Rosan Roeslani, the appointed CEO, was Prabowo’s campaign chief, while the role of Chief Investment Officer went to Pandu Sjahrir, a young businessman who served as the campaign’s deputy treasurer. Pandu’s family connections are also significant — his uncle, Luhut Pandjaitan, is a key Jokowi ally and Prabowo’s long-time friend.
Beyond individual appointments, Danantara’s leadership structure emerged from a broader political negotiation. Prabowo’s associates and State-Owned Enterprises Minister Erick Thohir — widely regarded as a Jokowi loyalist — reportedly bargained over key roles. Thohir ultimately secured oversight of the agency, ensuring his political leverage within the entity.
The President’s picks raise further questions about conflicts of interest. Besides Thohir, other key figures took on operational responsibilities while maintaining their cabinet positions. Thohir’s deputy, Dony Oskaria, was appointed Chief Operating Officer, while Rosan remains Minister of Investment and Downstreaming. Such overlap blurs the line between regulators and operators.
Given these dynamics and the absence of legally binding financial regulations, concerns are mounting that appointing loyalists to manage the SWF may open avenues for fund mismanagement. Political influence and a lack of transparency in Danantara’s management have also heightened investor uncertainty, driving market volatility and stock declines.
The global and domestic political dynamics suggest at least two critical implications. Danantara will move forward as planned, with significant state involvement. The international order, which is seemingly moving in the same direction, will support this move. Danantara could also mark a new chapter in political patronage — this time on an unprecedented scale, given its centralised financial power and vast state asset portfolio.
While Danantara has the potential to become a game-changer for the country, its goals may ultimately clash with short-term political interests. If the entanglement of business and politics remains unaddressed, Indonesia’s SWF governance risks being driven by personal gain, irrespective of robust state backing.
Nandito Oktaviano is a researcher at Center for Political Studies, University of Indonesia.
Teuku Harza Mauludi is a researcher at Center for Political Studies, University of Indonesia.
