The Hard Road To A Clean And Profitable Danantara

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Governance and oversight weaknesses pose the most immediate risk to Danantara's mission. Unlike well-established funds such as Temasek or Khazanah, which are overseen by independent boards with rigorous checks, Danantara is ultimately controlled by the Executive Office of the President.

Its enabling law (Law No. 1 of 2025) places the fund under the president, delegated via the SOE Ministry . This centralized control has raised alarms that Danantara could become a vehicle for political patronage rather than objective investment management.

Worryingly, Indonesia's national audit body (BPK) currently lacks a clear mandate to scrutinize SOEs' books at this stage, removing a critical layer of independent oversight.

The exclusion of the state audit agency from the fund's oversight framework means billions in public assets could be managed with limited external accountability, a structural flaw that undermines transparency and investor trust. If the foundation of this institution is built on insufficient checks, the door opens to mismanagement or worse.

Closely intertwined is the risk of political interference. By design, Danantara's management answers to political authorities, which heightens the possibility of government directives influencing investment decisions.

Past governance issues in Indonesian SOEs often stemmed from political interest superseding commercial logic, and Danantara's current setup may not fully solve this.

Analysts note that the fund remains“inherently tied to the government and political influence” under the present structure. That has manifested in market fears, despite presidential assurances of open audits; there are persistent concerns that the fund could be misused for short-term political goals or the benefit of cronies .

Such interference would erode not only Danantara's profitability but also its reputation. The first week of trading after Danantara's launch vividly illustrated this: mere speculation about heavy state control was enough to send Indonesian stocks tumbling and investors fleeing .

Legal and structural uncertainties add another layer of risk. Danantara represents a radical reorganization of state assets, and not all roles and responsibilities have been clearly delineated.

Tension could emerge between Danantara and existing institutions like the Finance Ministry or the SOE Ministry over who ultimately calls the shots on strategy and budgets. Some experts warn of a potential conflict of authority that could create bureaucratic bottlenecks and confusion in managing the fund's portfolio.

Unless comprehensive legal alignment is achieved, Indonesia risks undermining the very goal of creating a more dynamic, innovative and business-friendly SOE sector. To secure Danantara's success and allay early concerns, Indonesia should swiftly implement a set of governance and integrity reforms.

First, establish independent oversight by creating a truly independent supervisory board or council for Danantara composed of reputable professionals (including international experts and domestic technocrats) who are not beholden to the current administration. This body should have the authority to oversee the fund's strategy and audit its finances as well as provide checks and balances.

Second, strengthen corporate governance and integrity to ensure Danantara and its portfolio SOEs adopt the highest standards of corporate governance, clear performance benchmarks, risk management frameworks, and zero-tolerance policies on corruption. The executives running the fund and the companies under it must be selected based on merit and insulated from political pressure.