Indonesia’s sovereign wealth fund Daya Anagata Nusantara (Danantara) marked its first anniversary in February 2026 with plans to invest US$26 billion in downstream projects, equivalent to 1.7 percent of gross domestic product. While the scale is significant, questions remain about its broader economic impact amid limited state-owned enterprise (SOE) reforms and uncertainty over the implementation of its investment plans.

Danantara reflects a long-standing vision of President Prabowo Subianto to pool financial resources from SOEs and channel them into strategic national projects, inspired by ideas proposed by his father, economist Soemitro Djojohadikusumo.

However, the context surrounding Danantara’s establishment today is markedly different, as it is being built amid persistent fiscal deficits in recent decades. Despite this constraint, Prabowo has set an ambitious target for Danantara to generate a 7 percent return on assets (ROA), equivalent to roughly Rp 106 trillion ($6.28 billion) annually. This expectation has drawn comparisons with the long-term performance of Singapore’s Temasek Holdings, which has delivered similar returns over the past 20 years.

In its first year, Danantara secured Rp 86.4 trillion in dividend income from SOEs based on their 2024 performance. More than half, around 57 percent, came from SOE banks. The figure was partly driven by a sharp increase in dividend payout ratios compared with the previous year. While this strategy helped boost short-term dividend revenue, it also raised concerns about the long-term financial health of SOEs, as highlighted by Moody’s Investors Service in its recent revision of Indonesia’s outlook.

To diversify its funding base, Danantara has also sought external financing. The fund secured a $10 billion revolving credit facility from a consortium of 12 international banks and obtained equity commitments from several global sovereign wealth funds amounting to $7 billion.

Another funding instrument introduced by Danantara is the Patriot bond, which generated public debate because of its relatively low coupon rate of 2 percent, significantly below the yield of Indonesia’s 10-year government bonds, which hover around 6 percent. Despite the low return, the first issuance was oversubscribed, raising Rp 51.7 trillion against a target of Rp 50 trillion, partly because of the government’s tacit pressure on 46 conglomerates to participate.

The funds raised are intended to support several large-scale projects. In 2025 alone, four major programs were launched: waste-to-energy development (Rp 84 trillion), a caustic soda project (Rp 13.4 trillion), agricultural development (Rp 84 trillion) and data center infrastructure.

Six other projects - covering smelters, a bioethanol plant, a biorefinery, a salt-processing facility and an integrated poultry industry - have also entered the groundbreaking phase, with an estimated total value of $7 billion. According to Danantara CEO Rosan Roeslani, these projects could generate up to 600,000 jobs.

Despite these ambitious plans, several challenges remain. Danantara has set a target of Rp 150 trillion in SOE dividend income for 2025. However, this target appears difficult to achieve under current conditions. Last year, roughly 90 percent of SOE dividends came from just 10 companies, amounting to Rp 107.7 trillion, while most other SOEs contributed only Rp 1 trillion to Rp 4 trillion.

Hypothetically, reaching the Rp 150 trillion target would require dividend payments to increase by about 39 percent, implying substantial increases from major contributors. For instance, Bank Mandiri would need to raise its dividend from Rp 43.5 trillion to around Rp 60.6 trillion, an unlikely scenario given current performance.

Mandiri reported net profit growth of only 0.93 percent in 2025, reaching Rp 56.3 trillion. The bank has proposed maintaining a dividend payout ratio similar to the previous year, at around 79 percent, which would result in approximately Rp 23.1 trillion being transferred to Danantara. Other state-owned banks face even greater pressure, with BNI and BRI reporting profit declines of 6.63 percent and 5.26 percent respectively.

Efforts to restructure struggling SOEs have also faced difficulties. Plans to reform Garuda Indonesia remain uncertain after the airline recorded a net loss of Rp 3.04 trillion in the third quarter of 2025. The situation is further complicated by the government’s commitment to purchase 50 Boeing aircraft as part of a trade agreement with the United States valued at $13.5 billion (Rp 227.8 trillion).

More broadly, Danantara has yet to implement the structural reforms within SOEs that were originally expected when the fund was created. Progress on its work plan remains limited, and implementation has yet to materialize. Corporate governance improvements and plans to consolidate several SOE sectors, including construction and logistics, have been repeatedly delayed.

After its first year, Danantara has demonstrated its ability to mobilize large amounts of capital. Yet without deeper reform in the SOE sector and clearer execution of its investment strategy, the fund’s ability to deliver meaningful economic impact remains uncertain.