JAKARTA - 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.
"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 interests in joining, he added.
Speaking in a webinar on Friday (Oct 23), Mr Seto said the initial capital for the Indonesia Investment Authority would be US$5 billion (S$6.8 billion). Technical teams at the enterprise and finance ministries have been drafting detailed implementing regulations, he added.
The Indonesian government wants to attract more foreign funds for 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 country's first SWF is stipulated in the Job Creation Law ratified by Parliament on Oct 5, which was met with days of labour street protests. The so-called omnibus law simplifies the country's complex legal system and bureaucracy to encourage investment.
While the government said 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 in Indonesia, bringing the estimated total of the unemployed to 10.6 million, or nearly 8 per cent of the 133 million workers in the country.
US International Development Finance Corporation CEO Adam Boehler arrived in Jakarta on Friday for 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 that the agency is interested in investing in Indonesia's maritime zones, including in the Natuna Islands.
When asked by The Straits Times in a doorstop interview after he met President Joko Widodo in January, Mr Boehler said: "We are gonna 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 (EEZ) near the Natunas.
During the webinar organised by the Jakarta Foreign Correspondents Club, Mr Seto also responded to concerns that the omnibus law would hamper efforts to protect the environment, saying that there were misconceptions by various parties about the legislation.
For example, there is conjecture that projects could start without the owner receiving an environmental and impact assessment (Amdal), or an equivalent to an environmental permit, he said.
He stressed that the law clearly and firmly 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 and do certain activities that do not impact the environment such as land procurement, staff recruitment, purchases of machinery, but they cannot start building physical facilities, commence operation of the project without an Amdal," said Mr Seto.
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.
He 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.