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Jakarta, CNBC Indonesia – The Government has complied with two implementation rules derived from the Employment Creation Law (UU Ciptaker Omnibus Law) and a Presidential Decree (President) in the protection of the establishment of perpetual funds (Sovereign Wealth Fund) Investment management institution that will be an alternative financing for the development of infrastructure projects in Indonesia.
A total of two derived regulations, namely, Government Regulation (PP) No. 73 of 2020 on seed capital for investment management institutions and Government Regulation No. 74 of 2020 on Investment Management Institutions (LPI).
Both are implementing regulations of Law Number 11 of 2020 on Job Creation, especially in the investment sector.
The Presidential Decree is Presidential Decree Number 128 / P of 2020 on the Establishment of a Selection Committee for the Selection of Candidates for the Supervisory Board of LPI among Professional Elements.
Coordinating Minister for Economic Affairs Airlangga Hartarto said the two PPs aimed to respond to structural challenges on the investment side where domestic financing capacity was not sufficient to finance future economic development.
In addition, the Government also needs strong strategic partners from a legal and institutional point of view to attract investment from global investors.
“LPI will manage investment funds from abroad and from the country as an alternative source of financing and at the same time reduce dependence on short-term funds,” said Airlangga Hartarto, in an official statement, quoted on Thursday (12/17).
The LPI functions to manage investment and aims to increase and optimize the value of investments that are managed over the long term to support sustainable development.
He said this PP would help optimize the value of government investment by increasing alternative financing through direct investment, while at the same time fostering improvements in the investment climate.
“The alternative financing provided can also be used to encourage financing for infrastructure projects, in line with future policy directions,” he added.
LPI is an Indonesian legal entity wholly owned by the Indonesian government. Through PP No. 73 In 2020, LPI received initial capital support of 15 trillion IDR, equivalent to around US $ 1 billion.
“The government will provide support in the form of initial capital participation of the 2020 State Budget in accordance with the applicable regulations,” said the Coordinating Minister of the Economy.
LPI capital fulfillment will take place gradually until it reaches IDR 75 trillion or the equivalent of US $ 5 billion in 2021, as stated in PP. 74 of 2020.
This capital support is expected to assist LPI in the performance of its functions and duties, in accordance with the six powers granted, namely:
– Placement of funds in financial instruments;
– Carrying out asset management activities;
– Cooperate with other parties, including trust fund entities;
– Determine possible investment partners;
– Granting and receiving of loans; and
– Asset Management.
“LPI is expected to have flexibility in investment management, professional and independent, and be capable ofcapture appetite investors, “said Airlangga’s coordinating minister.
The LPI structure is Two levels filled by a combination of government and professionals.
The Oversight Board composed of the Minister of Finance, the Minister of BUMN and 3 (three) professionals from the elements, will provide an accountability report to the President.
Meanwhile, the Board of Directors made up of 5 (five) people from the professional element will deliver the Annual Report and the Accountability Report to the Supervisory Council.
Through a strong institutional and management structure, LPI will work closely with investment partners in the commercial sector, which is important for development and job creation.
As you know, at the end of November 2020, the US DFC (the U.S International Finance Corporation for Development) has signed a letter of interest to invest US $ 2 billion in LPI.
The investment commitment also came from JBIC (Japan Bank for International Cooperation) which has committed to investing 4 billion dollars.
As for the structure presented by Airlangga, details are included in the Presidential Decree. So, with this regulation, the Selection Committee (Pansel) can immediately work to obtain candidates for the LPI Supervisory Board from the professional element that will then be presented to the President.
The composition of Pansel’s membership is Sri Mulyani Indrawati as chairman and member, as well as four other members, namely BUMN Minister Erick Thohir, Deputy Finance Minister Suahasil Nazara, BUMN Deputy Minister Kartika Wirjoatmojo and Finance Minister 2013-2014 and the economist Muhamad Chatib Basri.
Registration for members of the Professional Elements Supervisory Board will be open from December 21, 2020 at 12 noon WIB until December 27, 2020 at 5 p.m. WIB. Registration can be done online through the website https://seleksi-dewas-lpi.kemenkeu.go.id.
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