Sovereign Wealth Fund (SWF) has been used globally for the purpose of generating national wealth for future generations.
Indonesia recently forms its own SWF, i.e. Indonesia Investment Authority or INA. The INA will invest primarily in infrastructure assets. The RPJMN (National Medium Term Development Planning) 2020 – 2024 estimate that funding of approximately IDR 6,500 trillion (USD 450 billion) will be needed for the infrastructure investment.
Some recently built (or to be built) infrastructure hinges on the capability of Construction and other SOEs (State Owned Companies) to self-fund the projects. However, the balance sheets of these SOEs (e.g. ADHI, WIKA, WSKT, PTPP) have been extremely stretched; thus limiting their ability to fund more major projects in near future.
With SWF in place, Construction SOEs should benefit from:
- Improve liquidity in their balance sheet (by offloading the infrastructure assets to SWF).
- Reduce their cost of debt (lower debt will improve credit ratings).
As for the INA / government, the benefits are:
- Recurring income (PNBP) from these assets (e.g. tariffs on toll roads).
- Foreign investment inflow.
- Additional assets that can potentially be securitized to access more funding.
The SOEs have done exceptional job in recent years. Hence, it might be the right time for the SWF to share the burden in building the nation.