19 September 2025 (closed)
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Debut in Indonesia's Bond Market: Danantara Gets AAA Rating from Fitch
Investment holding company Danantara Investment Management, which manages various types of investment portfolios and financial assets for Indonesia's soevereign wealth fund Danantara, received an AAA (idn) rating from Fitch Ratings Indonesia.
Fitch Ratings Indonesia is a domestic credit rating agency that is fully owned by the Fitch Group, a globally recognized financial services firm. For Danantara this is great news as it is preparing its debut in the domestic bond market through the issuance of Patriot Bonds valued at a whopping IDR 50 trillion (approx. USD $3 billion).
The AAA (idn) rating is a great validation considering Danantara has been operating for less than one year while also having no prior investment track record. Danantara's management stated that the AAA rating marks the beginning of the firm's journey and reflects Danantara's strong governance, strategy, and management reputation, which are the company's main assets.
In short, an AAA rating means that Fitch is convinced that the issuer (Danantara) has the lowest expectation of credit risk and the highest capacity to meet its financial commitments, signaling to the financial world that the borrower is as safe as it gets. In Fitch’s rating system, the AAA (idn) category is the highest level in Indonesia. Below it are AA (idn), A (idn), and BBB (idn) for medium quality, and BB (idn) down to D (idn) indicating speculative up to default. An assessment is conducted again annually.
Danantara stated that the plan to issue the Patriot Bond is part of its long-term funding strategy to support the economy. Chief Investment Officer of Danantara, Pandu Sjahrir, said that every financing initiative is directed at supporting long-term economic transformation and strengthening the role of the business community in national development.
“The Patriot Bond is a strategic financing instrument that is commonly used in various countries, such as Japan and the United States, to strengthen national financial self-reliance,” Sjahrir said in an official statement.
What Is the Danantara Patriot Bond?
The Danantara Patriot Bond is a specific fixed income mutual fund (Reksa Dana Pendapatan Tetap) managed by Danantara Investment Management. It is not a literal bond issued by the company, but rather an investment product that pools money from many investors to purchase a diversified portfolio of debt securities.
The fund aims to provide stable returns primarily through interest payments (coupons) from the bonds it holds. By regulation, this type of fund must invest at least 80 percent of its assets in fixed-income instruments. These instruments typically include: government bonds and corporate bonds.
The Patriot Bond is expected to be suited for investors who are looking for returns higher than those offered by bank deposits but who want lower risk compared to equity (stock) funds.
Danantara - Golden Opportunity or a Risky Affair?
On 24 February 2025, Indonesian President Prabowo Subianto launched Danantara, Indonesia’s new sovereign wealth fund. it took a bit longer than expected to launch Danantara as this fund had to be imbedded in the regulatory framework. This particularly involved the issue of the fund assuming certain state-owned enterprise (SOE) management functions, which required an amendment. However, following the third amendment to Law No. 17 of 2003 on State-Owned Enterprises, these hurdles were cleared.
In essence, Danantara will function as an investment vehicle (similar to Singapore's USD $288 billion state-owned multinational investment firm Temasek) sourcing a large chunk of its funds by consolidating the assets of seven big Indonesian SOEs.
In the first stage, Danantara becomes the super holding for these seven SOEs, but at a later stage all state-owned assets will become managed by Danantara (including dividends that – so far – were categorized under non-tax state revenues in the annual state budgets). This would involve a total of 47 Indonesian SOEs, valued at around USD $909 billion. Eventually, Danantara will oversee operations, dividend distribution, investments, and asset management of all these SOEs. So, this is a huge and unprecedented step taken by the Indonesian government.
Considering Danantara will have huge financial resources at its disposal, it becomes vital to have the best checks and balances and monitoring in place to make sure the funds do not go to waste due to mismanagement, corruption or bureaucracy.
After all, many may remember the 1Malaysia Development Berhad scandal, which is often referred to as the 1MDB scandal. This scandal is an ongoing corruption, bribery and money laundering conspiracy in which funds of 1Malaysia Development Berhad (1MDB), which is Malaysia’s sovereign wealth fund, were systematically embezzled with assets diverted globally by the perpetrators of the scheme. This 1MDB scandal is often described as one of the world's greatest financial scandals.
And closer to home, many might remember the ‘Jiwasraya scandal’ which refers to a huge financial scandal involving state-owned life insurance firm Asuransi Jiwasraya. The case exposed some serious flaws in the company's governance and investment practices between 2008 and 2018, as well as instances of corruption and fraud. It has had a significant impact on public trust in state-owned financial institutions in Indonesia.
What Are the Risks of Danantara?
However, there is room for criticism and concern. Andry Satrio Nugroho, researcher at the Institute for Development of Economics and Finance (or Indef), views the dual role of the operator and regulator in the Danantara structure as a serious flaw in the supervision and accountability of this institution. In the current structure, it is the State-Owned Enterprises Minister (in the Supervisory Board) who will supervise the Vice Minister of State-Owned Enterprises (Danantara’s Chief Operating Officer) and the Investment Minister (Chief Executive Officer). One could certainly wonder whether this is the best structure as conflicts of interests may arise considering the Ministry of State-Owned Enterprises is present as both operator and supervisor at the same time.
Meanwhile, companies like Pertamina and Perusahaan Listrik Negara (PLN) have to carry out public service obligations (PSO) as they have to supply affordable fuel and electricity to Indonesian society. In fact, particularly for PLN it is very hard to post net profit without capital injections from the government as the PSO mandates PLN to sell electricity below market prices to dozens of millions of people. Some fear that these companies are tempted to use their strategic assets for investment purposes, instead of focusing on the public services that are aimed at improving public welfare.
Obviously, there is also the risk of political influence affecting investment decisions taken by those who are in charge of Danantara, which may lead to investments being driven by political agendas rather than sound economic/financial principles. This is always quite fertile soil for mismanagement (or even corruption).
One could also view Danantara as another layer of management on top of the state-owned enterprises, potentially leading to an increase in bureaucratic inefficiencies, while slowing down decision-making processes. Already, Indonesia is burdened by weak coordination/cooperation between separate government institutions.
Meanwhile, in the foreseeable future, hundreds of trillions of rupiahs (equivalent to dozens of billions of US dollars) are to be cut from the central government’s annual state budgets to be injected into Danantara. Ideally, this involves unproductive funds that turn into productive funds when managed by Danantara. However, there is no guarantee that Danantara will use those funds more productively than the ministries would. In fact, there might be the risk that those funds become less productive under Danantara’s management. Therefore, this would risk missed opportunities for social and economic development of Indonesia.
Concluding Remarks
Danantara is established as a public vehicle to manage and optimize the public assets of Indonesia in order to raise economic growth. It’s quite similar to INA but has more power and more assets at its disposal.
However, we have to remember that ‘with great power comes great responsibility’. And, this is where there is serious room for concern. The list of mismanagement and corruption in the public sector of Indonesia is long, and gets longer each year as new cases are added.
And so, one can be concerned about those state-controlled companies that are listed on the Indonesia Stock Exchange, like Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI), but also those that are part of the MIND ID group such as Aneka Tambang (Antam), Bukit Asam and Timah. Typically, listed entities show improved corporate management because they are required to comply with various stricter regulatory requirements. This can enhance their credibility with customers, suppliers and partners, and thus strengthens the company’s value through portfolio investors. However, when a new layer of management is placed on top of the listed, state-controlled entities, then the operators in that higher layer likely serve different interests. The focus shifts from the individual listed, state-controlled company to the big investment programs it now starts serving. So, net profit that one year ago would be reinvested in the company (for example, for further business expansion) might now be transferred to one of Danantara’s investment programs.
At the same time, some SOEs may actually see a decrease in financial strain. Under President Joko Widodo (2014-2024) several SOEs were turned into so-called ‘agents of change’. The best examples are the construction companies that had to focus on Widodo’s infrastructure push, such as Adhi Karya, Hutama Karya and Wijaya Karya. They had to engage in (often) non-profitable infrastructure projects (that were not attractive for the private sector), which caused financial difficulties for the company (despite regular capital injections from the state budget). But the amended SOE law now mandates that government-commissioned projects must be fully state-funded to prevent financial imbalances within SOEs. So, we expect that Danantara will play a big role here, possibly giving some financial breathing space for some SOEs.
Something else that can be regarded a positive matter is that the government does not overly eye external money for its investment appetite. If it were to rely on foreign funding (mostly loans and debt) to materialize ambitious investment projects, then it is bound to raise public debt, which can reduce international confidence in fiscal management at a certain point. Currently, public debt of Indonesia remains at a safe level (at 38.4 percent of the country’s GDP at the end of 2025).
Moreover, by gaining access to the combined profits of SOEs, it is estimated that the Danantara fund can get around USD $20.9 billion in capital, each year, excluding the funds injected by the central government.
But, again, whether centralization of that capital at the top political level is a positive matter for Indonesia remains to be seen. Indonesia’s track-record is certainly not that great, so we won’t become too optimistic too soon.