A New Chapter Of Investment: Under The LPI Flag Supervised By Sri Mulyani And Erick Thohir And Partners

JAKARTA - The management of investment funds in Indonesia entered a new phase with the establishment of the Indonesia Investment Authority (INA) or previously known as the Investment Management Institution (LPI). Most recently, President Joko Widodo (Jokowi) has just appointed the LPI Supervisory Board which consists of Minister of Finance Sri Mulyani, Minister of State-Owned Enterprise (BUMN) Erick Thohir, and three professional elements.

In fact, the efforts made by the state are a strategic step to enlarge the investment niche in the country through the FDI (foreign direct investment) mechanism. With an investment of IDR 15 trillion, Sri Mulyani and partners are ready to focus their attention on picking up investment balls.

Not only that, the LPI is also said to be supported by stock capitalization and cash capital from a number of BUMNs worth IDR 75 trillion in order to smooth out this strategic step.

The President himself has signed four legal bases for the establishment of this Sovereign Wealth Fund (SWF) institution. First, PP No.73/2020 concerning LPI Initial Capital. Second, PP No.74/2020 concerning LPI Governance. And the last two are presidential decisions related to the position of the supervisory board. The four regulatory umbrellas are believed to continue to grow along with the development of institutions that were born after this omnibus law.

As if rolling out a red carpet, Jokowi even gave LPI privileges to be exempted from taxation in the early days of operational activities. This was directly emphasized by the Deputy Minister of Finance (Wamenkeu) Suahasil Nazara during a working meeting with Commission XI DPR-RI.

In his explanation, the Deputy Minister of Finance revealed that this special treatment was in the form of tax elimination so that LPI could foster reserves of 50 percent of the initial capital it owned.

When the 50 percent balance is reached, the government then requires the LPI to pay taxes according to the applicable regulations.

"The scheme itself is designed so that LPI can immediately contribute to depositing its dividends to the state," he said Wednesday, January 27.

Meanwhile, for the operational activities of infrastructure and asset management that are cooperated, the government still provides tax payment obligations to third parties, and not to LPI.

"So it is as if we didn't tax from the start, but we let LPI work first. If there are many projects attached, then we take the tax from the management of the LPI and the assets," said Suahasil.

As an initial stage, the government has injected IDR 15 trillion into the LPI from the total planned capital of IDR 75 trillion. In this capital support scheme, a mechanism for the participation of State-Owned Enterprises (BUMN) and BMN shares is also embedded in order to smooth out LPI's business activities.

Quoting the official statement of the Investment Coordinating Board (BKPM), investment realization throughout 2020 reached IDR 826.3 trillion. This rate is claimed by the government to exceed the initial target set at IDR 817.2 trillion.

The Head of BKPM Bahlil Lahadalia said that this achievement also answered the doubts of a number of parties that the realization of investment last year would collapse due to the COVID-19 pandemic.

"I need to say, life is not too pessimistic. There are problems, but don't face them with pessimism," he said some time ago.

Meanwhile, for the 2021 investment target, the government has set a target of not less than IDR 900 trillion.

Separately, the Minister of Finance for the 2013-2014 period Chatib Basri agreed with the steps made by the government. According to him, the most effective way to gain investment resilience is through direct investment schemes or FDI.

"Because it is impossible for them (investors) to invest in Indonesia by building a factory, then there is a shock, they immediately took it home. It is different if the investment is a portfolio, when there is a slight shock, they can run away with the money," he said.

"Well, the task of the government is how to attract more direct investment into the country. How? By creating a competitive business climate so that foreign investors do not flee to other countries," said Chatib.

It is interesting to wait the progress of an institution with a Sovereign Wealth Fund style with the name Indonesia Investment Authority, aka the Investment Management Institution in guarding investment activities in Indonesia.