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December 17, 2020, 10.34 PM

JAKARTA, – Indonesia’s President Joko “Jokowi” Widodo has officially established an Indonesian sovereign wealth fund following the signing of the Government Regulation (PP) No. 74/2020 on December 14.

The newly-established institution, which is called Indonesia Investment Authority (LPI), aims to increase and optimize the investment value that will be managed in the long term to support sustainable development.

“LPI is an institution that is given a special authority (sui generis) to manage the central government investment as referred to in Law No. 11/2020 on Job Creation,” stated Article 1 of Number 1 in the Government Regulation No. 74/2020.

Also readIndonesia to Establish Sovereign Wealth Fund Soon

The newly-signed government regulation is a derivative regulation of Law No.11/2020 on Job Creation. The latter is a controversial law, causing massive protests across the country in October as the protesters feared that the law would harm laborers.

Meanwhile, according to Article 7 in the government regulation, LPI also has the authority to place funds in financial instruments, carry out asset management activities, and collaborate with other parties, including trust fund entities. Besides, the institution can determine who the potential investment partners are, provide and receive loans, and manage assets.

LPI’s supervisory board will comprise five members. These include the Minister of Finance who will act as its chairperson and Minister of State-Owned Enterprise as the deputy chairperson. The other three will be from the community of professional board members.

Also readIndonesias Sovereign Wealth Fund to Attract $6 Billion Investment This Year: Senior Minister

Once LPI’s supervisory board is established, the members will then appoint five members for the board of directors, who will be represented by the professional community.

Article 3 of Paragraph 1 in Government Regulation No. 74/2020 states that LPI’s capital comes from state capital injections (PMN) and/or other sources. The government is targeting to raise 75 trillion rupiahs ($5.3 billion) in capital to be carried out in stages until 2021. However, for the initial capital, it is expected to obtain a minimum amount of 15 trillion rupiahs ($1 billion).

The new government regulation also said that the initial capital would be in cash and in the form of other state assets. The initial capital will be obtained from the 2020 state budget.

(Writer: Fitria Chusna Farisa | Editor: Kristian Erdianto)


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