JAKARTA • The Indonesian government is preparing 75 trillion rupiah (S$6.9 billion) in capital to set up a sovereign wealth fund to attract investments and support the economy.
Global heavyweights from the United States to the United Arab Emirates have expressed interest to join in.
The establishment of the sovereign fund, which will be called the Indonesia Investment Authority, is included in the Job Creation Law.
Finance Minister Sri Mulyani Indrawati said 30 trillion rupiah of the capital would be in cash, while the remaining would be in the form of shares of state-owned enterprises and other state assets.
The fund is aimed at attracting 225 trillion rupiah in investment, with foreign funds from the UAE, Japanese conglomerate Softbank and the US International Development Finance Corporation already lining up to invest, officials have said previously.
It remains unclear where the wealth fund will be invested.
Dr Sri Mulyani mentioned a combination of a development fund and a stabilisation fund.
Officials have previously mentioned projects in sectors including infrastructure, healthcare, energy and resources, tourism and technology.
Other sovereign wealth funds elsewhere invest in financial markets as well.
"We are currently formulating the government regulation as the President has asked to prioritise this," Dr Sri Mulyani told reporters on Wednesday.
"We are hoping to get strategic and reputable partners so that we can develop the fund to better attract investment."
The Job Creation Law has met with widespread protests and criticism from labour unions and civil groups over the potentially negative impact it could have on labour rights and the environment
The government, on the other hand, sees the law as a means to attract investments, boost economic growth and create jobs.
The wealth fund will have a supervisory council led by the finance minister, with members including the state-owned enterprises minister and three more professionals, according to the law.
The board of directors will include five professionals to oversee the fund's operation, including to formulate the fund's policy and work plan, among other things.
The government can inject more money into the fund should its capital decline significantly, the law states.
Indonesia would follow the model of the Russian sovereign wealth fund as it would raise the required funds from private investors instead of the country's reserve funds, Deputy State-owned Enterprises Minister Kartika "Tiko" Wirjoatmodjo said earlier this year.
The Russian Direct Investment Fund has invested and committed 1.9 trillion roubles (S$33.5 billion), of which 1.7 trillion roubles came from co-investors, partners and banks.
It has also attracted over US$40 billion (S$54 billion) in foreign capital into the Russian economy through long-term strategic partnerships since its establishment in 2011.
Although the Indonesian fund could act as alternative financing sources to boost economic growth, the government must ensure that the fund should be transparent and independent, said Permata Bank economist Josua Pardede.
He told The Jakarta Post: "Both the supervisory council and board of directors must be independent, transparent and far from political interest to mitigate the risk of corruption."
THE JAKARTA POST/ASIA NEWS NETWORK