Indonesia and the United Arab Emirates (UAE) are exploring the establishment of a sovereign wealth fund as an alternative financing method for infrastructure development or investment. Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan In a written statement in Jakarta Thursday said he had received a proposal from the UAE government for the establishment of a sovereign wealth fund (SWF).
"As a result of discussions with the Abu Dhabi Investment Authority (ADIA), the Minister of Energy, the CEO of Mubadala and several high-ranking officials in Abu Dhabi about a sovereign wealth fund, we will study this proposal soon and I hope this decision will not take long," Pandjaitan said in a meeting in Abu Dhabi, Tuesday, September 17.
The formation of the fund will be through a collection of investment funds from various countries including the UAE. In this way, investment in Indonesia could be increased gradually to US$5 billion and then to $10 billion.
The funds can be used to finance infrastructure projects or investments in general.
"The UAE officials will visit Indonesia next month to meet officials of the Indonesian Ministry of Finance and Sarana Multi Infrastruktur to discuss the schemes, and the regulations and legislation needed for the establishment of the SWF. They will also share their experiences with Indonesian officials on the formation of a similar fund with India, and Egypt," he explained.
With the concept of the endowment fund, the use of State assets managed by State-owned enterprise (SOEs) can be improved to increase people's prosperity, according to Pandjaitan.
Even though the government's share ownership is below 50 percent, with a good contract, the government can still control the fund.
An endowment fund or sovereign wealth fund is a financial institution owned by the State that owns or manages public funds and invests them in broad and diverse assets to obtain greater returns.
In addition to discussing the endowment, both parties spoke about the ADIA investment of around $1 billion in property, and real estate projects, including the development of tourist destinations and private projects.
At the meeting, Pandjaitan was accompanied by the Directorate General of Financing and Risk Management of the Ministry of Finance Luky Alfirman, and the Managing Director of PT Sarana Multi Infrastruktur (Persero) Edwin Syahruzad. (INE)
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