Panicked investors should give Indonesia a second look

Indonesia has just pulled off something rare in global finance: it has named serious, heavyweight figures to the advisory board of its new US$900 billion sovereign wealth fund, Danantara.

Yet, despite the caliber of the appointments—Ray Dalio, Jeffrey Sachs and others—markets reacted with sharp skepticism. Jakarta’s benchmark index fell by as much as 4.7%. That’s not just a surprising reaction. it’s a mistake.

These appointments should be seen for what they are: an encouraging sign that Indonesia is serious about professionalizing and globalizing its approach to sovereign wealth. Investors worldwide ought to welcome this development—not recoil from it.

Ray Dalio is one of the most respected investors of our time. Jeffrey Sachs has spent decades advising governments on sustainable development and sustainable economic policy. Both have signed up as unpaid advisors.

This alone speaks volumes about the seriousness of the mission and the stature of the initiative. It’s a clear sign that Indonesia wants world-class thinking and isn’t afraid to be held accountable by those who operate at the highest level.

There should be more of this across Asia. The region is home to several state-linked funds and conglomerates that are ripe for reform—but too few have made credible efforts to embrace transparency or international oversight. Indonesia’s move is a model worth replicating.

Of course, the market’s unease is rooted in genuine questions. Danantara, created by President Prabowo Subianto and launched in February, consolidates state-owned enterprise (SOE) assets and reroutes their dividends—$5.4 billion last year—away from the national budget and into the fund.

It’s a big shift in fiscal policy. It also puts immense power in the hands of the president, who will directly oversee the fund. Investors are right to be alert to any signs of overreach or opacity, particularly in a region that birthed Malaysia’s 1MDB state development fund, characterized by some as the biggest heist in financial history.  

But to assume from day one that this effort is doomed or dangerous is to misread the bigger picture. Indonesia is confronting two structural economic challenges. First, its SOEs—sprawling, cash-generating giants in banking, energy and telecoms—are under-optimized.

With over $900 billion in assets, they’re too important to remain fragmented and politically tethered. Second, the country faces a slowing economy and budget pressures, exacerbated by new spending commitments like Prabowo’s $28 billion annual free lunch program. These are real concerns.

Danantara is designed to address both. Consolidating SOEs allows for more coordinated investment, particularly in critical industries like minerals, AI, energy and food security.

With stronger governance, it could transform Indonesia into a more strategic and efficient allocator of capital, shifting from passive dividend collection to active value creation.

That is precisely why the appointments matter. You don’t bring in Dalio and Sachs—men who do not need the prestige or the paycheck—unless you’re serious. The inclusion of respected domestic leaders, such as former presidents Joko Widodo and Susilo Bambang Yudhoyono, adds legitimacy and continuity.

The broader message to the world should be clear: Indonesia is not lurching toward autocracy or fiscal recklessness. It is trying to leapfrog into a new era of strategic state capitalism, where professional management and public interest are not mutually exclusive.

Investors too often demand change but recoil when change looks unfamiliar. Yes, channeling SOE dividends through a new structure may be unconventional—but the status quo was unsustainable.

And while the fund’s structure still needs more detail, the early signs suggest the government is open to scrutiny and external guidance. That’s a good thing.

For Asia more broadly, this should be a wake-up call. Many countries in the region are sitting on vast pools of state assets—often mismanaged, underleveraged or politicized. They could benefit enormously from bringing in external advisors.

Markets got it wrong this week. They mistook ambition for instability, reform for risk. That’s a costly error.

With proper governance and international collaboration, Danantara could become a blueprint for a new kind of sovereign wealth fund—one that’s invested not just in assets, but in the future.