The projected slowdown in national GDP growth, coupled with global uncertainty stemming from trade tensions and geopolitical developments in the Middle East, as well as continued commodity price volatility, are among the key factors shaping Indonesia’s fiscal outlook for the second half of 2025. These valuable insights were highlighted in the recent research report “Indonesian Economic Outlook: Navigating the Risks, Gaining the Momentum” published by the Chief Economist Office of Bank Mandiri (23 June 2025).
While the recent ceasefire between Israel and Iran – announced by the current President of the United States of America – may temporarily ease tensions, its long-term implications remain uncertain.
For Indonesia, these ongoing dynamics could place additional pressure on fiscal space and affect the investment climate. In this context, there is even greater urgency for Danantara Indonesia to step up its role: identifying and executing commercially viable projects, attracting institutional co-investment, and supporting economic momentum through strategic capital deployment.
In light of the aforementioned research report, we have prepared the following update on Danantara Indonesia’s positioning, recent developments, and emerging priorities.
Engaging Global Investors
In May 2025, Makes & Partners hosted a strategic forum, Makes Indonesia Economic & Strategic Update 2025,[1] featuring key figures behind Danantara Indonesia’s formation and rollout. One of the highlights was a keynote update by Danantara Indonesia’s Chief Investment Officer, who shared insights from a series of international roadshows aimed at attracting global fund managers and institutional investors.
The message was clear: Danantara Indonesia is seeking co-investment partnerships. It envisions itself as an anchor investor capable of de-risking strategic projects and attracting foreign capital into Indonesia’s priority sectors.
The roadshows have reportedly garnered significant interest, particularly from investors looking for emerging market exposure with government backing and long-term policy alignment.
Capital Deployment Incoming
As the country moves into the second half of 2025, Danantara Indonesia is expected to deploy up to USD 5 billion in capital investment, derived from approximately USD 7.5 billion in dividends received from SOEs under its portfolio. The timing is critical. Indonesia’s economy has recently shown signs of moderate growth, and household consumption – long considered the backbone of the economy – has been on a downward trend.
There is growing pressure on the state to stimulate investment, particularly in sectors with high employment potential and multiplier effects. With fiscal space tightening, Danantara Indonesia’s capital could become a much-needed instrument of economic stimulus.
Following this initial deployment of SOE dividends, private capital is also expected to participate in selected SOE initiatives. Danantara Indonesia is reportedly assessing the performance of various SOEs and is considering measures such as mergers and consolidations to improve efficiency. The review, expected to be completed by October this year, may also help identify SOEs that are suitable for private investment as part of broader capital restructuring efforts.
Strategic Sectors for Investment
For investment, Danantara Indonesia has identified its sectoral priorities,[1] which closely align with Indonesia’s long-term economic agenda. These include:
- minerals and downstream processing (e.g., nickel, copper, EV supply chains);
- renewable energy and low-carbon transition investments;
- digital infrastructure, including data centres and fibre optics;
- healthcare services and medical infrastructure;
- financial services to support financial inclusion and digital payments;
- industrial estates, transportation infrastructure and logistics hubs to improve supply chain efficiency; and
- food security, including agriculture and cold storage networks.
In light of the current economic slowdown, Danantara Indonesia may face increasing political pressure to allocate investments toward financially distressed companies, including SOEs and publicly listed entities. Responding to such demands – particularly in cases involving legacy companies with structural issues – could affect Danantara Indonesia’s commercial discipline and long-term financial performance.
As Danantara Indonesia commences its investment mandate under public scrutiny and potential political pressure in identifying investments, maintaining good corporate governance principles will be paramount. Therefore, maintaining a consistent commitment to its investment mandate and adherence to the good governance principles will be essential for preserving public confidence in the institution.
What’s Next for Danantara Indonesia? Lessons from Regional Precedents
By examining Danantara Indonesia’s statutory mandate and early operational steps, we can gain insight into its likely strategic direction. At a glance, Danantara Indonesia appears to take inspiration from Singapore’s Temasek. This comparison was highlighted during the Makes Indonesia Economic & Strategic Update 2025 in May, which featured the CEO of Temasek. Temasek was established to manage and operate state-owned assets independently, enabling the government to concentrate on policy formulation. Danantara Indonesia seems to follow a similar model by allowing Indonesia’s Ministry of SOEs to shift its focus to policymaking.
It is also important to note that, as with Temasek, Danantara Indonesia does not manage the country’s foreign reserves – these remain under the purview of the Indonesian Central Bank (Bank Indonesia), just as Singapore’s reserves are managed by GIC. Understanding this framework is important for anticipating the types of projects Danantara Indonesia may offer to institutional investors in the future.
Legal Takeaways
As lawyers, investors, and global stakeholders engage with Danantara Indonesia-related transactions, a few legal considerations are critical to keep in mind:
- The Statutory Mandate Must Remain Clear. Danantara Indonesia’s authority is derived from the amended State-Owned Enterprise Law, which allows it to act as a holding and co-investment vehicle. Any deviation from this foundation could expose future transactions to legal or political scrutiny. This is especially relevant for investments in higher-risk areas – such as the technology sector, overseas markets, or ventures beyond the traditional practice of SOEs – which must be pursued with strict adherence to good governance principles.
- Apply Prudential Principles, Not Just BJR. While the new SOE Law reaffirms the Business Judgment Rule to protect directors making good faith decisions, it does not shield against criminal or corruption charges in cases where losses are linked to negligence, conflict of interest, or abuse of discretion. Decision-makers must document their investment process thoroughly and ensure that proper due diligence and compliance protocols are followed.
- Expect Further SOE Restructuring. Danantara Indonesia’s emergence is only the beginning. The market should anticipate a wave of mergers, reorganizations, and holding formations involving SOEs and their subsidiaries. Some news also mentioned the potential involvement of Danantara Indonesia in the restructuring of the state-owned sharia bank and several insurance subsidiaries of state-owned banks. Legal practitioners and investment officers must prepare for complex restructuring exercises, involving asset transfers, valuation adjustments, and realignment of governance responsibilities.
Strategic Counsel for Sovereign Capital
For legal and business stakeholders, the coming months will be critical, with anticipated developments such as new investment announcements, portfolio restructurings, and regulatory changes that may significantly influence Indonesia’s corporate and legal landscape.
Our firm offers deep insight into the deployment of sovereign capital – where investment strategy meets public interest, regulatory complexity, and commercial execution – enabling clients to navigate and capitalize on opportunities.
[1] To access the exclusive executive summary of the strategic forum, please contact us through: strategic.tactical.solutions@makeslaw.com.