25 January 2021
In line with the spirit of bolstering investment from foreign investors into Indonesia with the aim to create new job opportunities as mandated by Law No. 11 of 2020 on job creation (Omnibus Law), the Government of Republic of Indonesia issued the implementing regulations of Omnibus Law for the creation of Indonesia's first sovereign wealth fund Lembaga Pengelola Investasi (LPI). LPI is officially created by virtue of Government Regulation No. 73 of 2020 on Initial Capital of LPI and Government Regulation No. 74 of 2020 on LPI. Both government regulations were issued on 14 December 2020 and came into force on 15 December 2020.
With the government regulations now in place, the LPI aspires to be a trusted investment partner for Indonesia's long term and sustainable economic development. President Joko Widodo in his recent interview described the LPI as a breakthrough for the funding needed by the government to build and develop infrastructure domestically pointing out that public debt was mounting, while state-owned entities (SOE) had a limit in their capacity to borrow funds. From media reports, we understand that LPI is targeted to commence its operation by second quarter of 2021 while at the moment the selection of supervisory board members are currently ongoing.
In anticipation of its launch this year, the United States (U.S.) and Japan have pledged US$2 billion and US$4 billion respectively to the LPI.
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Chalid Heyder, Office Managing Partner, Hogan Lovells
chalid.heyder@hoganlovells.com