Why is China being left out of Indonesia’s US$20 billion wealth fund?
- Indonesia Investment Authority plans to launch soon, but it faces questions about its funding sources, make-up and intentions
- Although the fund has US$9.8 billion in firm or soft commitments from foreign investors, China is notably absent from the list
Indonesia plans to eventually have US$20 billion in the fund, which will be used to prime the country’s US$1 trillion economy.
Five foreign fund management entities have either firm or soft commitments to invest a total of US$9.8 billion in the INA, but China’s absence has raised suspicions that Indonesia is trying to steer clear of investments from the world’s second-largest economy on fears that Beijing could eventually assert control over key Indonesian infrastructure, said Kevin O’Rourke, author of the Indonesia-focused newsletter Reformasi.
“Although never acknowledged, there is reason to suspect that a deep-seated reason for strenuous efforts to keep infrastructure activity under state ownership has been a latent fear that critical projects would be under the ownership – and, thus, control – of China,” O’Rourke said
“In any event, private ownership of assets faces scepticism, especially for infrastructure, especially given that the bulk of the private capital available for such projects would be foreign,” he said in the newsletter.
The Japan Bank for International Cooperation, which has committed US$4 billion to the INA, and the US International Development Finance Corporation, at US$2 billion, lead the list of foreign investors.