In early 2025, Indonesia launched Danantara, a newly established sovereign wealth vehicle designed to reposition the state’s role in capital stewardship. At its core, Danantara represents a national experiment: an effort to evolve from fragmented state ownership into a unified, commercially driven investment entity capable of advancing long-term development goals for the betterment of the country.
For domestic and foreign investors, policy observers, and legal advisors alike, this moment invites deeper engagement, not only with the opportunities Danantara offers, but also with the legal and institutional scaffolding upon which it stands. This note offers early reflections on Danantara’s establishment, drawing from comparative frameworks and legal principles that matter when public ambition meets private capital.
- The Vision: Danantara as a Strategic Engine
Sovereign wealth funds (“SWF”) are widely used by countries to manage state assets more effectively, invest for the long term, and support national development goals. They allow governments to shift from simply owning assets to managing them with a more strategic, commercial mindset which will in turn enable the furtherance of attracting private investment along the way.
Danantara builds on Indonesia’s earlier efforts to strengthen its sovereign investment capacity, following the establishment of the Indonesia Investment Authority (“INA”) in 2021. While INA focuses on co-investing in large-scale projects with global partners, Danantara takes a complementary role: consolidating and managing selected state-owned assets to drive long-term value creation. Its mandate and objective is to turn underused or scattered state assets into productive investments. By reshaping ownership and investing in key areas like infrastructure, clean energy, and industry, it shows Indonesia’s continuing push to manage public assets in a more business-like and efficient manner.
While still in its early stage, Danantara signals a strong step forward. It shows how the government is evolving from traditional state ownership models toward a more modern, strategic approach.
- Legal and Governance Design: Independence or Influence?
How sovereign wealth vehicles are governed often matters just as much as what they invest in. Across different jurisdictions, successful state-owned investment entities tend to follow a few key principles: operational independence, strong oversight, professional board composition, and clear lines between political direction and commercial decision-making.
Danantara’s structure, at this early stage, raises important governance considerations. For instance, under Definition 23 of Article 1 of Law No.1 of 2025, and for the purposes of this article, the term Body (Badan) is used to refer to Danantara, although in practice it would be more accurate to consider Danantara as a super-holding investment body under Indonesian law, with senior executives and supervisory roles held by Ministers and other high-ranking government officials. Danantara’s advisory board includes prominent international financial experts, appointed to enhance the fund’s credibility and attract global interest. Notable advisors include Ray Dalio (Founder of Bridgewater Associates, one of the world’s largest hedge funds), Thaksin Shinawatra (former Prime Minister of Thailand), and Jeffrey Sachs (renowned economist and Columbia University professor). Their extensive experience and global networks are expected to strengthen the fund’s strategic direction, bolster investor confidence, and provide critical insights into global development trends to help in aligning Danantara’s mandate with Indonesia’s long-term economic policy goals.
While this structure helps ensure alignment with national policy goals, it may raise questions about the balance between public oversight and commercial decision making. Particularly for private or institutional investors who value operational independence and clear governance boundaries.
Another notable feature is the legal protection provided to Danantara’s board and management with the newly incorporated aspect of the “business judgment rule” within the newly revised State-Owned Enterprises (“SOE”) Law. The regulation provides that Danantara’s board and management cannot be held personally liable for investment losses, as long as the decisions are made in good faith and in accordance with the law. While this legal immunity is designed to support bold, long-term decision-making, it also raises warranted concerns. In the absence of robust and transparent oversight mechanisms, co-investors may question whether there are sufficient safeguards in place to prevent misuse of discretion and ensure accountability in high stakes investment decisions.
Weak governance in sovereign investment vehicles can carry broader risks, ranging from financial losses and public criticism to legal challenges. These are often the result of the lack of proper oversight or a lack of transparency. The case will not be any different for Danantara, or so it is hoped so. Without strong checks and clear accountability, it could potentially face similar challenges down the line, potentially shaking investor confidence, disrupting markets, or raising concerns about the state’s credibility.
As a newly established entity, Danantara is still in the early phase of building its institutional framework. Whilst Danantara has introduced various governance bodies including a dedicated external supervisory body, managing board, advisory board, and oversight committee and so forth, the critical question remains: what level of oversight, or checks and balances, will be exercised by the Audit Board of Indonesia (Badan Pemeriksa Keuangan, or “BPK”) and other Law Enforcement Agency such as Corruption Eradication Commission (Komisi Pemberantasan Korupsi, or “KPK”)?
Under Article 3K of Law No. 1 of 2025 on the Third Amendment to Law No. 19 of 2003 on State-Owned Enterprises (“Law No.1 of 2025”), provides that the examination of financial management of Danantara will be carried out by BPK.
However, it remains unclear in practice the extent to which BPK will be given access and right to audit Danantara, or whether Danantara will resort to primarily internal controls, or if Danantara it will mature into a governance model that embraces greater transparency to established government agencies and market-tested practices. As it begins managing substantial state assets, how transparency and accountability will be ensured remains a key question for local and international stakeholders and investors alike.
- Transparency and Market Trust
For a sovereign investment vehicle like Danantara, transparency is more than good governance. It is a strategic necessity. Clear communication, open disclosures, and timely reporting will be vital in building trust with investors, partners, and the public, especially when managing state assets.
So far, Danantara’s legal framework offers only a broad outline. Key details such as how assets will be valued, what reporting standards will apply, and how compliance will be managed remain unclear. This raises important legal questions: Will Danantara follow state-owned enterprise rules, adopt public accountability standards, or develop its own hybrid disclosure model? How will oversight and reporting be handled once it begins deploying capital?
Under Article 3E of Law No.1 of 2025, Danantara is wholly owned by the Government of Indonesia. This ownership structure raises critical questions, such as who bears the burden if Danantara incurs financial losses from its investments? While investors may take comfort in the prospect of the government absorbing such losses and guaranteeing their investments, this effectively means the financial burden could ultimately fall on the citizens and taxpayers of Indonesia.
Moreover, an equally pressing concern lies in the potential personal liability of Danantara’s board members, management, or officers. Could they be held accountable under anti-corruption or state finance laws, even when making commercially reasonable decisions? In the absence of clear legal boundaries, the distinction between legitimate business risk and legal liability remains uncertain, raising the risk that well-intentioned decisions could later be scrutinized as breaches of duty or mismanagement.
Establishing a clear and transparent legal and institutional framework from the outset is essential to earning investor trust and securing Danantara’s long-term credibility in the global investment landscape.
- Looking Ahead: Legal Evolution and Strategic Opportunity
Danantara’s establishment reflects Indonesia’s ambition to play a more active role in managing state assets and attracting long-term investment. As with any new sovereign investment entity, its long-term success will depend not only on the strength of its capital base, but also on the clarity of its legal foundation and the integrity of its governance. Take Singapore’s Temasek for example. Temasek has demonstrated how strong governance and clear legal separation from political influence, such as through its independent board structure and commercial mandate. This enabled the enhancement of investor confidence and global credibility. Through the approach of transparency, including annual public reporting and adherence to international accounting standard, this facilitated a compelling model for building trust and institutional strength.
This moment offers a strategic opportunity to shape Danantara into a vehicle that not only aligns with Indonesia’s national priorities but also embodies international best practices. Embedding legal certainty, transparency, and professional independence early on will be key to gaining the confidence of investors and reinforcing the credibility of Indonesia’s broader investment ecosystem. Positive models such as Singapore’s Temasek and Government of Singapore Investment Corporation (GIC), as well as Norway’s Government Pension Fund, offer valuable lessons in effective governance, operational independence, and long-term value creation. Equally important are the cautionary lessons from should be learnt from are Malaysia’s 1MDB, Libya Investment Authority, Venezuela’s FONDEN, and Kazakhstan’s Samruk-Kazyna which highlight the consequences of weak oversight, political interference, and lack of transparency.
How the legal and regulatory framework evolves in the coming months and how it is implemented in practice, will signal much about the government’s commitment to institutional strength, accountability, and investor trust.
- Private Participation: Legal Structures and Strategic Alignment
One of the more ambitious aspects of Danantara is its goal to integrate private and institutional capital alongside state assets. While this is a bold move, it also presents challenges. In practice, things can and will get complicated. The private sector will not only seek alignment with government priorities, but will also want clarity on the legal mechanics: how risks are shared, how decisions are made, and whether governance can withstand commercial scrutiny.
In other jurisdictions, as was previously mentioned before in Point D, sovereign investment vehicles thrive when they achieve a delicate balance, staying true to national interests while providing a clear, credible framework that private investors can trust. That is the benchmark Danantara will need to meet. Key questions will arise: Will investment deals be structured through joint ventures or through fund platforms familiar to institutional investors? Will there be enforceable minority protections and dispute resolution mechanisms? And will commercial logic consistently outweigh political considerations?
A further concern lies in Danantara’s impact on the broader state-owned enterprise (“BUMN”) ecosystem. With its government backing and perceived lower risk profile, Danantara may be seen as a more attractive investment vehicle than traditional BUMNs. This could result in a crowding-out effect, diverting private capital away from other BUMNs and concentrating it within Danantara. If not carefully regulated, this dynamic may undermine the financial sustainability and competitiveness of other state-owned entities, creating unintended structural imbalances within the public sector investment landscape.
The legal framework and investment architecture must speak the same language as global investors: predictability, fairness, and commercial discipline.
- Key Considerations Moving Forward
Danantara represents a bold step in Indonesia’s investment and development strategy, bringing together state capital and private partnerships within a unified institutional platform. While its potential is substantial, the long-term success of the initiative will hinge on the strength of the legal and governance foundations being laid today.
As the vehicle begins to take shape, several legal questions remain open. How will Danantara manage potential conflicts of interest when senior government officials serve both as regulators and investment decision-makers? Will there be clear procedures for recusal or safeguards to ensure independence and transparency in decision-making? What legal structures will be introduced to prevent regulatory discretion from being influence, directly or indirectly, by Danantara’s own strategic interests?
Other core issues also await clarification. How will “state loss” (kerugian negara) be interpreted in the context of commercial risk-taking? Will Danantara’s executives be personally exposed under anti-corruption or public finance laws for decisions made in good faith, or will they be immune? What regulatory framework will govern its reporting and oversight obligations? Will a hybrid legal model be developed to reflect its unique character?
These concerns are far from theoretical. Danantara holds the potential to become a strategic anchor for Indonesia’s economic future, however realizing that potential will require more than capital. It will demand credibility. And that credibility begins with legal clarity, institutional transparency, and a governance framework that meets the expectations and speaks the same language of global and domestic investors alike.
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