Indonesia’s State-Owned Enterprise (SOE) Reform and the Launch of Danantara: What You Need to Know

What is Danantara?

Danantara stands for Daya Anagata Nusantara , where Daya means energy or strength, Anagata means future, and Nusantara refers to the Indonesian archipelago. It is Indonesia's sovereign wealth fund (essentially an investment management body).
The fund is reportedly modeled after Singapore's Temasek Holdings, signaling the government's intention to take a more strategic, centralized approach to managing and optimizing SOE assets. It has a similar role to Indonesia's existing sovereign wealth fund, the Indonesia Investment Authority, created by former President Joko Widodo (“INA”). However, Danantara's reach is broader because it not only manages specific assets but also brings together government assets from different ministries to make them more efficient and integrated.

Danantara's Roles and Functions

Danantara will have three main pillars—sovereign wealth fund, development investment, and asset management—and will be responsible for managing and optimizing state-owned enterprises and other assets outside the state budget.

President Prabowo Subianto has confirmed that an initial fund of USD 20 billion will be reallocated to Danantara from his budget cuts across ministries and agencies as part of his austerity measures. Danantara will invest in Indonesia's natural resources and assets to support sustainable and high-impact projects in renewable energy, advanced manufacturing, downstream industries, food production, and food security.

Expected Changes due to Danantara

• Centralized Investment Management : Manages and optimizes SOE assets
• Restructuring Mandate : Will take over all SOEs by March 2025
• Policy Shift : The Ministry of SOEs will shift from asset management to policy oversight

In the initial phase, Danantara plans to take over the management of seven SOEs, as follows:

• PT Bank Mandiri (Persero) Tbk – Indonesia's largest bank;
• PT Bank Rakyat Indonesia (Persero) Tbk – one of Indonesia's largest banks, focused on microfinance and micro, small, and medium-sized enterprises (MSMEs);
• PT PLN (Persero) – a state-owned electricity company;
• PT Pertamina (Persero) – a state-owned oil and gas company;
• PT Bank Negara Indonesia (Persero) Tbk – a state-owned commercial bank;
• PT Telkom Indonesia (Persero) Tbk – a state-owned telecommunications conglomerate; and
• PT Mineral Industri Indonesia (Persero) / MIND ID – a fully state-owned mining company with a foothold in the aluminum, gold, coal, bauxite, nickel ore, and copper industries, among others.

These companies will bring Danantara's total asset portfolio to approximately USD 900 billion, placing it among the world's largest sovereign wealth funds.

Reportedly, a major shift is underway: INA and other special mission vehicles under the Ministry of Finance are expected to merge into Danantara as part of a broader consolidation strategy. Talks are already in progress with key stakeholders to facilitate this transition.

To ensure transparency and effective governance, Danantara operates with a structure akin to a public company. It has appointed international advisors, including prominent figures like Ray Dalio and Jeffrey Sachs, to guide its investment strategies and operations.

Conclusion: Transformative Changes in Indonesia’s State-Owned Enterprises

Indonesia's amended SOE Law marks a major structural shift—redefining SOEs, separating them legally from the state, and streamlining asset management through Danantara. Despite its ambitious objectives, Danantara faces scrutiny regarding governance and potential political interference. Observers draw parallels with Malaysia's troubled 1MDB fund, expressing concerns over transparency and the risk of mismanagement. The fund's success will depend on its ability to maintain rigorous governance standards and deliver tangible economic benefits without succumbing to political pressures.

Businesses interacting with SOEs should:

• Review whether their partners fall under the expanded SOE definition
• Adjust to potential new compliance requirements
• Monitor Danantara's evolving role and investment strategy

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The information provided in this article does not, and is not intended to, constitute legal advice and is for general informational purposes only. Readers of this article should contact an attorney to obtain advice with respect to any particular legal matter.