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Jakarta, CNBC Indonesia – The government’s plan to establish a national endowment fund or a sovereign wealth fund (SWF) will soon be carried out. The green light for their training has been given through the new Employment Creation Law approved earlier this week, Monday (05/10/2020).
In the management of state funds in this institution, there are two things that are in the sights of the market actors and observers. Second is the placement of the investment for these funds and the supervision of the institution to ensure that it does not happen. fraud which in the end will be detrimental.
The executive director of the Institute for Economic and Financial Development (Indef), Tauhid Ahmad, said that it was undeniable that the formation of this type of financial institution could generate a conflict of interest.
It depends on the parties involved in this institution.
“The biggest risk is to say conflict of interests, of special interest in interns. Later, either professional or there are certain goals whose interests are in charge of the institution, “Ahmad told CNBC Indonesia on Thursday (8/10/2020).
He said that this would be related to the placement of the investment fund. Because the risk profile of each portfolio must be carefully measured to ensure that the placement of funds is profitable.
Yusuf Rendy, an economist at the Center for Reform in Economics (Core Indonesia), revealed that the formation of sovereign wealth funds is considered to have a positive impact on domestic economic conditions. Since after this pandemic the poverty rate will increase.
“… It will depend on the instrument selection strategy going forward. However, with the market conditions, especially after the pandemic ends, this uncertainty will remain full of uncertainty, which then becomes a difficult challenge to choose. the appropriate instrument to achieve the objective of fund management, “he explained.
Another thing that is in the spotlight is the supervision of this institution later because this institution will not only manage public funds but will also attract foreign investment to invest in the country.
Yusuf said that the principle of supervision should be the same as that of other government institutions that should also be supervised by the Higher Audit Agency (BPK) and to be stricter it should also involve the Commission for the Eradication of Corruption (KPK).
“The reporting system should also involve institutions such as the Bank of Indonesia and the Ministry of Finance, which already have experience with information related to sovereign wealth funds,” he explained.
One of the concerns of market players is the case that occurred in Malaysia some time ago related to the SWF Malaysia scandal, namely 1MDB.
The institution, which is dedicated to investing its funds in many places, has a debt of up to US $ 11 billion. After tracking it down, it turned out that a lot of funds were lost.
This case later became the center of attention of many world news after being highlighted by the Wall Street Journal. It was also noted that the then Prime Minister of Malaysia, Najib Razak, was also involved in the case.
Managing Director of Political Economy and Policy Studies (PEPS) Anthony Budiawan added that the supervision of sovereign wealth funds should also engage the public with regular reporting so that fund management is seen as more transparent.
“Any supervision will be difficult if the application of the law does not go well. Investments must be transparent, open to the public. Including how many returns are obtained periodically, for example per quarter. So that the public can follow suit,” he explained.
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