The United States International Development Finance Corporation is considering investing up to $2 billion into Indonesia’s planned sovereign wealth fund.
DFC Chief Executive Officer Adam Boehler presented a letter of interest to Indonesian Coordinating Minister for Maritime Affairs and Investment Luhut Pandjaitan during his visit to Washington last week, following their meeting with President Donald Trump at the White House.
The White House has provided no details of the Oval Office meeting, which according to a readout and photographs provided by the Indonesian government, also included White House advisers Ivanka Trump and Jared Kushner, who is Boehler’s former college roommate.
DFC is the development finance institution of the United States federal government, which helps facilitate private financing for development projects in lower and middle-income countries. A sovereign wealth fund is a government-owned investment pool of foreign currency reserves.
Opaque investment funds in the region have come under greater scrutiny since the Malaysian government’s disastrous 1MDB sovereign wealth fund scandal, which saw the country’s former prime minister found guilty of corruption this past July. The plundering of billions of dollars in assets in one of the largest financial scandals in history involved 10 countries and the American multinational investment bank Goldman Sachs.
Building a $15B investment fund
While some Indonesian media have reported the U.S. already has agreed to invest in the soon-to-be-launched fund, DFC said in a statement that the letter is “a preliminary step.”
“We applaud Indonesian President Jokowi’s emphasis on regulatory reform and improving Indonesia’s investment environment, and believe it presents an important opportunity to expand economic relations between the United States and Indonesia,” the DFC statement said.
Indonesia’s sovereign wealth fund, officially called the Indonesia Investment Authority, was created under the country’s recently passed Omnibus Law, a controversial legislative framework designed to increase foreign investment and create jobs. The framework amends 79 laws and repeals thousands of regulations to help attract outside investment and boost the economy.
The mere promise of $2 billion from Washington is a welcome boost for Jakarta as it seeks to raise $15 billion for the fund. But it will also bring more scrutiny.
“When someone makes an equity investment, they're going to say we're going to watch how you invest those funds,” said Marc Mealy, senior vice president for policy at the U.S.-ASEAN Business Council.
In recent meetings hosted by the council, Indonesian government officials briefed American business executives on plans to develop the sovereign wealth fund. “There's going to be an expectation of how well the government invests those funds,” Mealy said.
Mealy added it will be key to know who will manage the fund and whether they will work transparently to ensure no inappropriate actions are taken. Not much has been disclosed about the Indonesia Investment Authority’s management structure since the Omnibus law was signed in early November.
Unannounced Trump meeting
Pandjaitan met with Trump in the Oval Office on Nov. 17, a meeting that was not announced on the president’s public schedule. The White House declined to provide comment in response to VOA’s query about the meeting, which came at a time when Trump has had few publicly announced meetings as he and his campaign pursue lawsuits challenging President-elect Joe Biden’s victory in the November presidential election.
“In a vacuum, this move from the DFC could make sense because the U.S.-Indonesia relationship is an important one,” said Anthony Nelson, Senior Director of the East Asia and Pacific practice at Albright Stonebridge Group, a global strategic advisory and commercial diplomacy firm. “But doing it now during the transition is something that raises some eyebrows.”
Boehler has visited the Indonesian capital Jakarta twice this year to discuss the sovereign wealth fund, including a January meeting with President Joko Widodo (Jokowi).
In February, following a meeting with Boehler and Kushner in Washington, Pandjaitan told VOA’s Indonesian Service that plans for DFC’s investment in the sovereign wealth fund were being finalized with a preliminary agreement set to be signed last March during the U.S.-ASEAN Summit, which had been scheduled to be hosted by Trump in Las Vegas.
Pandjaitan said that during the meeting, Kushner expressed “serious interest” in Indonesia’s plan to relocate its capital to Kalimantan, in the Indonesian portion of the island of Borneo. “He (Kushner) said that President Trump loves it so much. It’s possible that in the meeting, one of the agenda is a discussion between President Jokowi and Trump about the new capital,” Pandjaitan told VOA.
The White House canceled the March Las Vegas summit following the outbreak of the coronavirus pandemic. The Indonesian government’s plans for its capital relocation have also been postponed due to COVID-19.
In an Instagram post earlier this week, Pandjaitan said that for the past two years he has “communicated intensively” with Kushner and Boehler, whom he characterized as Trump’s “right-hand” men. “It is because of this closeness that the US $2 billion DFC letter of interest was signed,” Pandjaitan said.
It is unclear whether Boehler, a Trump appointee, will remain in his post as DFC CEO following Biden’s inauguration Jan. 20.