SwF cup climbing

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Danantara, the new sovereign wealth fund in Indonesia, is a project to overcome ambition. With the accommodation of $ 900 billion in public assets, about 0.6 percent of GDP annually from the state budget for investment in business plans such as mines, batteries and data centers – priorities for President Prabo Subanto – with complete freedom and how to publish it to the capital. Within a few years, he should become a player in the global capital market. Remember the name: Danitara. You may hear it a lot.

The most skeptic is whether the project’s ambition is to match its wisdom. Danantara does not have a macroeconomic purpose. Instead, it is one of the new SWFS Cup – like the National Wealth Fund in the United Kingdom and a possible American fund from the Trump administration – was largely created for obtaining it. Everyone wants sovereignty. Everyone wants wealth. Although the box is a great way to show them, it is not, unfortunately, a reliable way to create them.

Consider many cases where the sovereign wealth box is logical. First, to provide sudden gains from natural resources such as oil to external assets, and thus spreading benefits over time and preventing the exchange rate from estimating, with the destruction resulting from other economic sectors by the so -called “Dutch disease”. The Norway Fund, the largest in the world, is the clear example.

Second, to provide volatile revenues from commodities when the times are good and spend when the times are bad, with the so -called stability box. Chile has such a car.

Third, to support the funded public pension system. The countries that, wisely, have accumulated actual assets to support their retirement promises may create an investment vehicle abroad and increase revenues. The government pension investment fund in Japan is one of the same.

Fourth, and more suspicious, is to take care of currency revenues less than value. A country that maintains its work is cheap in following the growth -led growth growth to sterilize the resulting surplus and accumulate excessive foreign drainage reserves. Adherence to SWF is the polite thing to do and the huge origin of China.

Fifth, the total economic environment motivated in 2010, with chronic interest rates decreased, a set of ideas for SWFS. Economist Roger Farmer UK Fund suggested It would seek to stabilize the volatility of asset prices. I am free Suggested money This would borrow at low rates prevailing to invest in productive assets. Nothing ever set on the ground but they were solutions to specific problems.

It is difficult to find a macroeconomic logic in the latest repetitions. The UK Fund says its goal is to “open” billions of pounds of private financing, which gives the game away: it’s not really SWF, but it is a camouflage development bank. There is nothing wrong with development banks. The clear British state has had an ideological sensitivity to the assets contract since the days of Margaret Thatcher, however, anyone who expects the net value to accumulate will be disappointed.

Danantara may also turn into a development bank. Its purpose, according to the largest investment employees Pando SijahirIt is “Corporatise in full all state -owned institutions in Indonesia”, after it took control of its sprawling wallets from the government ministry. It may work, not work or not work better. There will be a lower government bureaucracy and a lower government purchase. It is worth noting that it will be quite possible for Denantara to oversee the state -owned companies from being allowed to re -invest their profits.

This is where Danantara falls. The stock market, which has minority shares in many companies within its portfolio, is concerned about their supervision. Indonesia’s economy is fluctuating, with Ruby falls Last week, to its lowest level since the 1998 Asian financial crisis, partly due to concerns about Brabu’s fiscal policy. The president cuts out public spending, partly to provide a space for SWF, however, this is not an effort in the Chinese way to fill savings for a development state, because it is also following an expensive free school meals program. On the network, it is not clear that Danantara will collect investment in Indonesia at all. The country has already become good in infrastructure.

This leaves a sixth reason to create SWF: It is good to have a box, especially a box with a lot of money. The creation of the box is an achievement that a politician can refer to. It is exciting for people who get it. The fund can be used to solve problems, political, economic, etc. The box can be benign-there is a future as Danantara helps smart and uninterrupted in the long run to make Indonesia a more prosperous place. Or the box can turn into a malicious, as in the case of 1MDB, the Malaysian Fund, which has been embezzled from billions of dollars.

The difference between the result is governance. Bando pledged that Danitara will meet the highest standards of transparency and appointed a group of grandparents, including Bridgewateer Associats, who linked their good name and reputation. Those involved now bears a heavy responsibility to ensure that public funds are well invested. As for the conversion of the Indonesian economy, you do not expect much.

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