Indonesia has introduced new legal protections for investors who buy bonds through its sovereign wealth fund, Danantara. The move is aimed at attracting more domestic capital to finance President Prabowo Subianto’s major projects.
Under the new law, Danantara bond purchases cannot be investigated under criminal, civil or tax laws. In fact, records of bond purchases cannot be used as evidence in court or for tax assessment purposes.
The government hopes the protections will encourage individuals and companies to bring back funds previously stashed abroad.
However, some analysts have warned that the relaxation risks attracting money of unclear origin and could damage Indonesia’s reputation with international investors.
Danantara, which manages about US$900 billion in state assets, is now one of the government’s main instruments for financing development without increasing the fiscal deficit. Indonesia also faces the challenge of increasing tax collections, which are still low relative to the size of its economy.
However, Danantara insisted that all investments remain subject to strict compliance procedures and rejected allegations that the funds were used to siphon money from dubious sources. Indonesia’s financial intelligence agency also said the law did not increase the risk of money laundering.
The move is reminiscent of Indonesia’s tax amnesty programs in 2016 and 2022 that successfully uncovered hundreds of billions of dollars in assets, but failed to achieve the government’s hoped-for targets of repatriating funds and increasing tax collections.
