Regulations on the establishment of Indonesia's first sovereign wealth fund (SWF) will be ready in two to three weeks, and discussions on possible joint investment with foreign SWFs in Indonesian projects have been held with the Abu Dhabi Investment Authority, Singapore's GIC, and the US International Development Finance Corporation (DFC).
"The idea is for Indonesia to create a special purpose entity that is invested by the would-be formed Indonesia Investment Authority and these potential investors," said Mr Septian Hario Seto, a deputy minister in charge of mining and investment.
Other pension funds in developed countries have also expressed interest in joining, he added.
Speaking in a webinar last Friday, Mr Seto said the initial capital for the Indonesia Investment Authority would be US$5 billion (S$6.79 billion). Technical teams at the state-owned enterprise and finance ministries have been drafting detailed implementing regulations, he added.
The Indonesian government wants to attract more foreign funds to its infrastructure projects via an SWF. It is going the extra mile to create jobs and support the pandemic-battered economy, which is South-east Asia's largest.
The creation of the first SWF is stipulated in the Job Creation Law ratified by Parliament on Oct 5, which was met with days of street protests by labour groups. The so-called omnibus law simplifies the country's complex legal system and bureaucracy to encourage investment.
While the government says the law would boost foreign investment and revive the economy, union leaders have slammed it as exploitative of workers and harmful to the environment.
The government submitted the Bill to Parliament in February for deliberation but it was set aside for review in April after labour groups stepped up street protests. Parliament revived the measure for deliberation in July.
The economic slump due to the Covid-19 pandemic has helped the government's push for the new legislation. More than 3.7 million people have lost their jobs, bringing the estimated total tally of the unemployed to 10.6 million, or nearly 8 per cent of the 133 million workers in the country.
DFC chief executive Adam Boehler arrived in Jakarta last Friday on his second visit to discuss possible investments. His agency had earlier expressed interest in exploring opportunities in pharmacy, defence and security, as well as energy.
During his first visit in January, Mr Boehler said the DFC is interested in investing in Indonesia's maritime zones, including in the Natuna islands.
When asked by The Sunday Times after he met President Joko Widodo in January, Mr Boehler said: "We are (going to) look at a lot of different investments in the area… fish and tourism sound really interesting."
He was referring to Indonesia's exclusive economic zone near the Natuna islands.
During the webinar organised by the Jakarta Foreign Correspondents Club, Mr Seto also addressed concerns that the omnibus law would hamper efforts to protect the environment, saying that there were misconceptions by various parties.
For example, he said, there is conjecture that projects could start without the owner receiving an environmental and impact assessment (Amdal), which is a prerequisite to receiving an environmental permit.
Mr Seto stressed that the law clearly states that any party that has not been issued an Amdal shall not proceed with the primary phase of any project.
"For practical reasons, they can go ahead with certain activities that do not impact the environment - such as land procurement, staff recruitment, purchases of machinery - but they cannot start building physical facilities or commence operations on a project without an Amdal."
He added that the granting of business licences under the omnibus law is done with a risk-based methodology. Applicants in the medium-to high-risk category of businesses - which pose potential risks to health, safety and environment - face more stringent requirements, even if they are national strategic projects.
Mr Seto argued that this new method will improve the ease of doing business in Indonesia, as businesses in the low-risk category - a significant chunk of the total - would have an accelerated process in getting a business licence.