Photo: Presidential Office

JAKARTA (TheInsiderStories)– Indonesia and the United Arab Emirates (UAE) are exploring plans to establish a sovereign wealth fund (SWF) which will be a pooling of investment from various countries of up to US$10 billion, officials said today (09/19). The fund can be used to finance infrastructure projects in Southeast Asia biggest economy.

“As a result of discussions with the Abu Dhabi Investment Authority (ADIA), Minister of Energy, CEO Mubadala and several high-ranking officials in Abu Dhabi, we plan to establish sovereign wealth funds. We will study the proposal soon and I hope that the decision will not take long,” said Indonesian Coordinating Minister for Maritime Affairs Luhut Binsar Pandjaitan in a written statement.

In addition, the minister went on, the UAE will also implement an ADIA investment of around $1 billion in property, real estate projects including the development of tourist destinations and other private projects in Indonesia.

“The UAE will visit Indonesia next month, meeting with the Ministry of Finance and state firm, PT Sarana Multi Infrastruktur to discuss the schemes, regulations, and legislation needed for the establishment of the SWF. They will also share their experiences in forming wealth funds with India and Egypt,” Pandjaitan said.

According to him, with the SWF concept, state assets managed by state-owned enterprises (SOEs) can be increased their efficiency, to increase the impact on people’s prosperity. Even though the government’s share ownership is below 50 percent, with a good contract, the government can still control the SOEs. While the management is expected to be more efficient because it is managed by SWF.

Besides, other investment cooperation between the two countries was also discussed, such as expanding investment in the energy sector. The Indonesian energy company, PT Pertamina and Abu Dhabi National Oil Company (ADNOC) agreed to develop cooperation in the downstream sector. Project finalization will soon be carried out so that it can be implemented soon.

Discussions include ADNOC’s participation in Refinery Development Master Plan Balikpapan, Balangan, and Dumai. Pertamina also met with Mubadala to expand the firm’s investment in the upstream sector including Mubadala’s participation in the Rokkan block.

In the agricultural sector, the UAE agreed to invest in Central Kalimantan with an area of ​​100,000 hectares of land to be planted with tropical fruits including dragon fruit.

Regarding the matter, the UAE said that if the land rental price, contract, permits, correspondence, and composition of regional shares can be agreed upon, the UAE can immediately invest within a period of two months.

The UAE has also agreed to build a 2.5-hectare mosque on Pertamina’s land in Solo, Central Java. It is expected that within three months the design has been completed, if approved, construction will be carried out by Indonesian SOEs starting in early 2020.

While the process of transferring land ownership from Pertamina and the transfer of Pertamina gas stations at the location is expected to be completed within three months. The UAE also requested the Mosque appointment overseen by the government.

The two countries agreed that the implementation of the pilot project to be immediately implemented and followed up through the e-learning program with the UAE’ Elaf system for 100 thousand students with 1000 teachers.

This will be divided 50 percent for Muslim’s Madrasas and 50 percent for public schools. In its implementation, the system used is from Elaf but the content will be developed by the Indonesian side.

Through this pilot project, it is hoped that it can improve student competency and learning effectiveness especially for Islamic schools in Indonesia. As for the funding scheme, Elaf submits either through submission to the UAE government, internal funds or other funds sources.

Two months ago, three mega projects worth of $9.7 billion has been signed by both countries companies during the meeting between President Joko Widodo and Sheikh Mohammed bin Zayed Al Nahyan, Prince of Abu Dhabi of the UAE at the Bogor Palace.

Beside business to business deals, the two countries also signed government to government agreement at investment, defense, tax treaty, industry, tourism, maritime and fisheries, also education and cultural.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com