Indonesia's sovereign wealth fund, the Indonesia Investment Authority (INA), has raised more than US$20 billion of co-investments from other parties, according to Reuters.
Global SWF data finds that GIC represents 21% of total sovereign investor capital committed, followed by the Abu Dhabi Investment Authority (ADIA) (19%), Canada’s CDPQ (16%), the Netherlands’ APG (12%), and Singapore’s Temasek (11%). In July, China's Silk Road Fund agreed to invest up to CNY20 billion (US$3 billion) in INA.
Of the US$12 billion in commitments from sovereign investors, 75% is in infrastructure with a further 15% in venture capital, 8% in real estate, and the rest under external private equity managers.
Road infrastructure is a key target for INA and its international partners. In April, INA signed two agreements to invest US$ 2.7 billion in three parts of the Trans-Sumatra toll-road as well as in two parts of the Trans-Java toll-road. When finished, the former will cover 2,818 km across the Western island while the latter will be 1,167 km long and link the country’s (current) capital city, Jakarta. The total cost of both projects is estimated at over US$ 40 billion. The toll-road platform falls under INA’s traditional infrastructure theme, along with a seaport facilities platform, which Dubai-based DP World committed to in October 2021; and an airports platform, which is investing in the expansion of Indonesia’s busiest airport, Soekarno-Hatta. In 2021, INA set up a US$3.8 billion toll road fund with CDPQ, APG and ADIA.
The capital committed by INA does not only come from the initial injection from the Ministry of Finance, but it is part of the investment platform it formed with ADIA, APG and CDPQ in May 2021. However, the Indonesian SWF is planning to go beyond traditional infrastructure, and has defined several other key sectors for the future, including renewable energy, healthcare, financial services, consumer and tech.
The Indonesian Government has been marketing INA very aggressively, and has reportedly reached out to more than 100 different parties including sovereign wealth funds and public pension funds since it launched in February 2021. It is part of a new breed of “catalytic funds”, established with the aim of attracting foreign capital into the country (inbound), rather than investing national capital overseas (outbound). INA is probably modeled after India’s NIIF, which has a strong preference (and need) for domestic infrastructure investments.
INA’s efforts to meet its ambitions have not been without problems. Earlier this year, SoftBank’s decision to bail on Indonesia’s plans to build a new capital city in East Kalimantan prompted the country’s sovereign wealth fund to turn to peers in the Middle East for investment in the US$32.5 billion gigaproject, but to date there has been little interest. INA is the driving force behind the project to build Nusantara, a “carbon neutral and inclusive city” which is supposed to replace Jakarta as the administrative center of the world’s fourth most populous country. However, state funds are only expected to cover 20% of the cost, with reliance placed on institutional investors and foreign sovereign wealth funds.
In March, the UAE reaffirmed its commitment to the project with its US$10 billion pledged investment. A portion of the funds are set to be allocated to the new capital with the rest invested in infrastructure, food security, logistics, healthcare and the digital economy. Luhut Binsar Pandjaitan, the Coordinating Minister of Maritime and Investment Affairs, said in January that the UAE will invest around US$20 billion in Nusantara through the INA.
Saudi Arabia's Crown Prince Mohammed bin Salman recently expressed his interest in investing in Nusantara, leading to a potential capital infusion by the US$600 billion Public Investment Fund (PIF). It is leading similar domestic giga-projects, concentrated on NEOM – a US$500 billion high-tech economic zone, which is central to the country’s Vision 2030 economic diversification program and could serve as a model for Nusantara. INA is actively courting PIF to help boost the project.