The government issued a regulation allowing Danantara to use the State Budget, increasing its risk.
DANANTARA is straying further and further from its original founding concept. The holding company for state-owned enterprises (SOEs) was initially touted as a model similar to Singapore’s Temasek. However, it is increasingly resembling Malaysia’s Khazanah, with even greater political interference. Temasek serves as Singapore’s state investment management agency across various companies, while Khazanah manages government assets and carries out social development functions.
Danantara has surpassed Khazanah after Government Regulation No. 19/2026 was issued as a revision to Government Regulation No. 10/2025 on the Organization and Governance of the Daya Anagata Nusantara Investment Management Agency (Danantara). Under the new regulation, Danantara is placed entirely under state control.
This new regulation also expands Danantara’s authority to manage SOE assets while making clear its institutional relationship with the SOE Regulatory Agency (BP BUMN) as the regulator. The government argues that the new regulation paves the way for more investment holding companies. The problem is that the change deviates from Danantara’s original blueprint, thereby increasing the risks.
Article 31A of the new regulation allows Danantara, as the investment holding company, to undertake public service obligation (PSO) projects while simultaneously receiving state capital injections sourced from the State Budget. This provision collapses the boundary between corporate risk mitigation and state finances. This is because all financial risks borne by SOEs automatically become a direct burden on the State Budget. Flagship projects that are commercially unviable are now required to be undertaken by Danantara.
On the one hand, this state financial guarantee makes investing in Danantara safe. That is why Danantara’s inaugural international bond offering was a hit on the international market when it was launched last week. Subscription orders exceeded US$4.6 billion, surpassing the US$1 billion target. Investors feel secure placing their money in Indonesian government securities.
On the other hand, Danantara is increasingly vulnerable to being exploited to serve the political interests of those in power. The substantial funds from the bond sale could be squandered by being used to finance the ruling party’s populist projects, which are wasteful and have no impact on the economy. If that happens, the line between investor confidence and poor governance becomes very thin. Capital owners who demand stability will inevitably flee as a result.
Indonesia’s debt-to-gross domestic product ratio and credit rating will also be affected. International rating agencies will include all SOEs’ liabilities and debt in calculating country risk. If government debt is combined with the total liabilities of all SOEs, Indonesia’s debt-to-GDP ratio will skyrocket. Until now, the government has always boasted of a debt-to-GDP ratio of just 40 percent. If combined with SOE debt, the ratio rises to 50 percent—a level that warrants caution.
The increase in the debt-to-GDP ratio will automatically cause Indonesia’s credit rating in global markets to decline. As a result, both the government and Danantara will have to spend more to pay higher yields because Indonesian bonds are considered riskier.
The government needs to re-examine the Danantara blueprint. The rupiah exchange rate is struggling due to wasteful projects and unclear fiscal management. When compounded by Danantara’s poor governance in managing Rp15,000 trillion in SOE assets, the turbulent fiscal situation would be further exacerbated by reckless policies.
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