Indonesia appoints Dalio and Sachs as fund advisers

Indonesia has appointed billionaire investor Ray Dalio and economist Jeffrey Sachs as advisers to its new sovereign wealth fund, Danantara. This fund is expected to manage state assets worth around $900 billion. The announcement comes amid concerns from investors about the fund's governance. Along with Dalio and Sachs, the Danantara advisory council will include Chapman Taylor from Capital Group and former Thai Prime Minister Thaksin Shinawatra. Former Presidents Joko Widodo and Susilo Bambang Yudhoyono will also serve on the fund's steering committee. President Prabowo Subianto launched the Danantara fund in February to streamline state-owned enterprises (SOEs) and boost economic growth through strategic investments. However, the fund is directly controlled by Prabowo, raising questions about political interference and transparency. This has negatively impacted Indonesia's stock market, which fell by up to 4.7 percent following the recent appointments. Indonesia's SOEs hold assets exceeding $900 billion, notably in banking, energy, and telecommunications. The largest seven SOEs account for about 40 percent of the nation’s annual GDP. Investors are worried about the lack of details regarding the fund’s governance, especially as the current government’s policies appear to be more populist than those of the previous administration. Danantara aims to invest in sectors like mineral processing, artificial intelligence, energy, and food, with a targeted $20 billion investment. The funding will be supported by cutting the government's budget, which is already facing a deficit. Dividends from SOEs, previously sent to the government, will now go to Danantara, creating a potential gap in the state budget. This shift raises concerns about how the government will finance its major policies and programs, including a $28 billion initiative for free school lunches and maternal support.