Indonesia’s hopes of attracting up to $15 billion for its new IIA sovereign wealth fund were given a boost this week after the US International Development Finance Corporation (DFC) made it known that it was considering investing up to $2 billion in the state-backed investment vehicle. The fund is expected to target infrastructure projects such as toll roads and electricity networks, and will be seeded with $5bn by the government.
IIA stands for Indonesia Investment Authority and the fund officially reached the statute books on November 5 when the Indonesian government ratified its new Omnibus Law. The new Law is central to Jakarta’s efforts to boost inward investment and create more jobs. It introduces amendments to 76 existing pieces of legislation and two of its key initiatives include the introduction of provisions to simplify business licensing procedures and some controversial changes to the county’s labour laws.
In October, tens of thousands of Indonesians took to the streets in towns and cities across the country to protest against the law which they say will harm workers and the environment. Hundreds were arrested, but international reaction has been less hostile and the IIA in particular has been met with a more positive reaction overseas.
Most notably, the Indonesian Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan was last week invited to a meeting in the White House where the DFC’s Chief Executive Adam Boehler formally presented him with a letter of interest. That meeting was also unexpectedly attended by President Donald Trump, his daughter Ivanka and son-in-law Jared Kushner.
From Jakarta’s point of view, Pandjaitan’s unexpected invitation to the White House reception was the icing on the cake of a promotional roadshow arranged to allow Pandjaitan to gauge potential investors’ reaction to the IAA. His schedule also included meetings with BlackRock, EIG Partners, Global Infrastructure Partners, Stonepeak, I Squared Capital, and JPMorgan.