Lupa Kata Sandi? Klik di Sini

atau Masuk melalui

Belum Memiliki Akun Daftar di Sini


atau Daftar melalui

Sudah Memiliki Akun Masuk di Sini

Konfirmasi Email

Kami telah mengirimkan link aktivasi melalui email ke rudihamdani@gmail.com.

Klik link aktivasi dan dapatkan akses membaca 2 artikel gratis non Laput di koran dan Majalah Tempo

Jika Anda tidak menerima email,
Kirimkan Lagi Sekarang

Anomalous Sovereign Wealth Fund

Translator

Tempo.co

Editor

Laila Afifa

31 October 2020 12:23 WIB

Anomalous Sovereign Wealth Fund

TEMPO.CO, JakartaWithout transparency, investment decisions are prone to manipulation. The compliance of businesspeople with the code of ethics is another determining factor.

GOVERNMENT'S initiative to establish a sovereign wealth fund seems rather like paddling upstream. At a time when many investors are lying low as a result of global economic uncertainty, the plan to establish a new body as mandated by the Job Creation Law could become a boomerang.

One factor in the spotlight is the amount of capital that the government will have to provide. As well as injecting Rp15 trillion of state equity participation, the government will in stages have to transfer state assets, including shares and obligations to state-owned enterprises, as starting capital. The total is Rp75 trillion. The technical aspects of this asset transfer must be carried out very carefully.

Without proper calculations, the management of investment partly derived from state assets could result in losses, especially since initially the new agency will still be dependent on state funding that could come from loans. This means that the government will have to recoup the capital costs originating from debts. There is also a risk of moral hazard because the management of the funds will not be audited by the state.

The next problem is how the government will be able to ensure that this new sovereign wealth fund will be able to attract Rp225 trillion of overseas investment or three times its equity -- as has been claimed. In the middle of considerable uncertainty as a result of the Covid-19 pandemic, seeking foreign investors prepared to invest funds to be managed by a new institution will not be easy.

A number of investors, such as the United Arab Emirates Crown Prince Mohammed bin Zayed, have stated their willingness to invest US$22.8 billion via the sovereign wealth fund. But these promises are only commitments and are not yet on paper.

Moreover, the sovereign wealth fund will be more dependent on flows of funds from overseas. Capital like this could easily disappear at any time if investors decide to withdraw their money. This concept is different from the similar bodies in Norway, China, and Singapore that rely on state assets such as foreign exchange reserves, accumulated trade surpluses, and revenues from exports of natural resources. These asset funds are managed commercially to provide optimal returns.

The problem is that the sovereign wealth fund operates commercially to produce returns, and this clearly carries considerable risk. There is an unbreakable law here: the higher the investment returns, the larger the risk. Temasek Holdings Singapore learned this the hard way in 2008. As a result of being too aggressive, Temasek lost US$39.91 billion. There has still been no explanation of how Temasek made these losses or who was responsible, apart from the economic crisis which is always used as a scapegoat.

In the end, everything comes down to the way a regime governs the country. A number of studies have shown that sovereign wealth fund only succeeds if they are run by people of high morals. This success is also supported by the compliance of the business world with a code of ethics and a mechanism of clean government. It is these three elements that it is difficult to find in Indonesia recently.

Without transparency, decisions about investment are prone to corruption. A concrete example is the 1Malaysia Development Berhad (1MDB). From the management of funds over many years, former Malaysian Prime Minister Najib Razak received US$681 million, while 1MDB ended up with debts of US$11 billion.

A study carried out by Bocconi University, New York University, and the London School of Economics showed that the golden age of sovereign wealth fund is over. The Covid-19 pandemic has made matters worse. The bitter experiences of sovereign wealth fund in a number of states should teach us a lesson.

Read the Complete Story in Tempo English Magazine



Family Office Plan; Luhut to Imitate UAE's Arbitration Courts

1 jam lalu

Family Office Plan; Luhut to Imitate UAE's Arbitration Courts

Economist Bhima Yudhistira urged the government to conduct more in-depth research on the proposed establishment of a family office.


Today's Top 3 News: Indonesian Police Seize 394 Packages of Marijuana Belongs to Papua-Papua New Guinea Kingpin

1 jam lalu

Today's Top 3 News: Indonesian Police Seize 394 Packages of Marijuana Belongs to Papua-Papua New Guinea Kingpin

Tempo English compiled the top 3 news on Monday, July 22, 2024.


Indonesia's Sri Mulyani Meets Singapore President, Discusses World Economic and Financial Challenges

20 jam lalu

Indonesia's Sri Mulyani Meets Singapore President, Discusses World Economic and Financial Challenges

Indonesian Finance Minister Sri Mulyani Indrawati traveled to Singapore to meet Singapore President Tharman Shanmugaratnam.


Malaysia Coast Guard Says Tanker Involved in Fire Has Left Site

1 hari lalu

Malaysia Coast Guard Says Tanker Involved in Fire Has Left Site

Malaysia says on Saturday that one of the two large oil tankers involved in a collision that led to fires had left the location of the accident.


Oil Tankers on Fire After Colliding Close to Singapore, Crew Rescued

2 hari lalu

Oil Tankers on Fire After Colliding Close to Singapore, Crew Rescued

Two large oil tankers were on fire on Friday, July 19, after colliding near Singapore, the world's biggest refueling port,


Singapore Earns Top Spot as Safest Tourist Destination

3 hari lalu

Singapore Earns Top Spot as Safest Tourist Destination

Singapore emerges as the world's safest city for tourists, according to a recent study by Forbes Advisor.


Indonesia, UAE Ink 8 MoUs on Bilateral Cooperation During Jokowi's Visit

4 hari lalu

Indonesia, UAE Ink 8 MoUs on Bilateral Cooperation During Jokowi's Visit

Jokowi's visit to UAE resulted in several agreements on bilateral cooperation between both countries.


Soekarno-Hatta Airport Sees Significant Surge Past Pre-Pandemic Passenger Numbers in First Half of 2024

4 hari lalu

Soekarno-Hatta Airport Sees Significant Surge Past Pre-Pandemic Passenger Numbers in First Half of 2024

Soekarno-Hatta Airport has experienced a significant surge in passenger traffic, surpassing pre-pandemic levels in the first half of 2024.


Malaysian Court Acquit Eight Natuna Fishers as Unauthorized Entry Allegation Unproven

4 hari lalu

Malaysian Court Acquit Eight Natuna Fishers as Unauthorized Entry Allegation Unproven

Malaysian authorities release eight Indonesian fishers in Natuna over a lack of strong evidence for unauthorized entry to Malaysian waters.


Architectural Gems; 8 Breathtaking Train Stations Around the World

5 hari lalu

Architectural Gems; 8 Breathtaking Train Stations Around the World

Train stations often serve as gateways to new adventures, bustling hubs where journeys begin and end.