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Dealmaking done well: A discussion with the Indonesia Investment Authority's Chief Investment Officer

The “pandemic” years have been a learning experience for both investors and business. While growth prospects for the Indonesian economy remain promising, global investors appear to be moving towards a more cautious investment strategy. 

And, on the ground, Indonesia's start-up companies are looking for a more sustainable business model in the coming year, varied to match the profile of each sector and business strategy. 

Hiswara Bunjamin & Tandjung managing partner Tjahjadi Bunjamin and corporate partner Stephanie recently talked with Stefanus Ade Hadiwidjaja, the Indonesia Investment Authority’s (INA) Chief Investment Officer. Together they discussed Indonesian M&A activities and trends, INA’s investment focus, and the positive impact of business licensing reforms. 

Read the highlights of their discussion below, or listen to the full podcast.


INA’s investment philosophy, investment model and opportunities

INA is Indonesia’s first sovereign wealth fund. Launched in February 2021, it has rapidly become a recognised gateway for international long-term strategic investment in infrastructure and other development projects, a market previously dominated by Indonesian investors. 

The authority's strategy is to accelerate economic and social development by becoming a leading investor in assets that generate optimal risk-adjusted returns in its priority sectors.

To date, INA has attracted investors all over the world to participate in various development projects in Indonesia, and is becoming the preferred investment partner for any global investor turning their attention to Indonesia. 

Stefanus noted that between 30% and 40% of INA’s funding for the next year will be in transportation and related infrastructure, although it is also targeting the healthcare, digital infrastructure, renewables and tourism sectors. 

INA co-invests through long-term strategic partnerships with strategic investors and infrastructure funds, sovereign wealth funds, global pension funds and private equity firms, all of whom have already shown interest in partnering with INA on strategic projects.

Transportation dominates infrastructure investment

Stefanus noted a number of projects in the authority's infrastructure pipeline.  The authority is collaborating with CDPQ, Abu Dhabi Investment Authority (ADIA) and APG to explore substantial investments in the Trans Java and Trans Sumatra toll roads. It is also considering investments in seaports across Indonesia, including a potential collaboration with DP World. 

Investment improving healthcare access

Most Indonesians are now enrolled in the state social security and healthcare system (BPJS), which has substantially improved access to the national healthcare system – a government priority. 

Over the last five years, healthcare facilities and doctors have both almost doubled in number, evidencing the government’s commitment to expanding the reach and quality of the country's healthcare facilities. 

The Bali Sanur Project typifies this commitment. This government project involves 42 hectares of land categorised as a special economic zone for world-class healthcare facilities, including cardiology, oncology and neurology. INA has been actively looking to invest in the healthcare sector, including pharmaceuticals, hospitals, and diagnostic facilities. Recently, INA signed a strategic partnership with China’s Silk Road Fund to invest in Kimia Farma, one of Indonesia’s largest and fully integrated healthcare service providers.

Younger generation drives digital innovation

Indonesia has seen significant growth in digital payment services in the consumer sector, especially in e-commerce and supporting activities like warehousing and logistics. 

Stefanus and Stephanie noted that Indonesia's younger generation has been very creative in devising new business models in the tech space, closely tied to the end-to-end services that can now be achieved through digital infrastructure. 

INA has also been investing in the hard digital infrastructure that supports this innovation, such as telco towers, data centres and fibre optic cables. 

Licensing reform eases the investment process

The Indonesian government's investment drive has been backed up by practical reform, particularly the Risk-Based Assessment Online Single Submission (RBA OSS) licensing regime, launched in August 2021.

The new regime underlines the government’s commitment to facilitate and simplify investment in Indonesia, whether the funding is sourced locally or overseas.  

The RBA OSS system assesses business activities as low, medium-low, medium-high, or high risk, with each category requiring a different and appropriate set of licences in order to begin business operations. 

It's part of a practical approach to investment that helped Indonesia to achieve impressive GDP growth of 3.69% in 2021, despite the global pandemic.

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