On February 24, 2025, Indonesia officially launched Daya Anagata Nusantara Investment Management Board (“Danantara”), a new sovereign wealth fund (SWF) designed to accelerate Indonesia’s economy into the future by consolidating control over the country’s state-owned enterprises (SOEs), with the stated goal of raising GDP growth from 5% to 8% by 2029. With expected assets under management (AUM) of around $900b, Danantara is positioned to become one of the world’s largest sovereign wealth funds. On February 24, 2025, Indonesia officially launched Daya Anagata Nusantara Investment Management Board (“Danantara”), a new sovereign wealth fund (SWF) designed to accelerate Indonesia’s economy into the future by consolidating control over the country’s state-owned enterprises (SOEs), with the stated goal of raising GDP growth from 5% to 8% by 2029. With expected assets under management (AUM) of around $900b, Danantara is positioned to become one of the world’s largest sovereign wealth funds. February 24, 2025 February 24, 2025 positioned positioned However, Danantara could also become a major conduit for Chinese strategic influence in Southeast Asia’s digital infrastructure and governance. However, Danantara could also become a major conduit for Chinese strategic influence in Southeast Asia’s digital infrastructure and governance. China has rapidly expanded its footprint in Indonesia, becoming the second-largest source of foreign direct investment (FDI) after Singapore. This expansion, largely driven by the Belt and Road Initiative (BRI) alongside Chinese sovereign wealth funds like the China Investment Corporation (CIC) and the Silk Road Fund, has enabled Chinese investment to flow into Indonesia’s digital and infrastructure sectors, among others. China has rapidly expanded its footprint in Indonesia, becoming the second-largest source of foreign direct investment (FDI) after Singapore. This expansion, largely driven by the Belt and Road Initiative (BRI) alongside Chinese sovereign wealth funds like the China Investment Corporation (CIC) and the Silk Road Fund, has enabled Chinese investment to flow into Indonesia’s digital and infrastructure sectors, among others. second-largest second-largest largely driven largely driven investment investment Now, through co-investment opportunities and strategic partnerships with Danantara, Chinese capital could further embed itself deeper into Indonesia’s Web3 and digital ecosystems. This raises a broader question of how sovereign wealth funds are used globally, not only as economic tools but also as instruments of soft power within the realm of strategic competition. Now, through co-investment opportunities and strategic partnerships with Danantara, Chinese capital could further embed itself deeper into Indonesia’s Web3 and digital ecosystems. This raises a broader question of how sovereign wealth funds are used globally, not only as economic tools but also as instruments of soft power within the realm of strategic competition. Sovereign wealth funds as instruments of strategic competition Sovereign wealth funds as instruments of strategic competition Sovereign wealth funds, as defined by the International Forum of Sovereign Wealth Funds (IFSWF), are state-owned investment funds that are owned by the government, include investments in foreign financial assets, and are managed with financial objectives. In contrast to traditional wealth funds, SWFs are primarily used to stabilize national economies, support development projects, and invest in global markets for the benefit of future generations. Recent years have pointed to SWFs being not only financial vehicles, but also strategic tools in geopolitical rivalry. International Forum of Sovereign Wealth Funds International Forum of Sovereign Wealth Funds The United States signaled this shift in February 2025, when President Trump issued an executive order to create an American sovereign wealth fund. In Southeast Asia, the Philippines launched its own Maharlika Investment Fund in 2023, most recently announcing a partnership in February 2025 with Thai conglomerate CP Group to establish a $1b private equity fund focusing on digital innovation, renewable energy, and other key investment areas in the Philippines. This follows on the heels of Maharlika‘s first-ever investment in January 2025, where it announced a 20% acquisition stake in a local electricity grid operator, a strategic infrastructure play with potential geopolitical ambitions February 2025 February 2025 2023 2023 February 2025 February 2025 January 2025 January 2025 Danantara, modeled in part after Singapore’s Temasek, exemplifies Indonesia’s effort to consolidate SOEs and attract foreign capital while boosting institutional efficiency. Danantara’s initial plans include assuming management of seven major SOEs, including three state-owned banks, two energy companies, the mining giant Pertamina, and Telkom Indonesia. modeled modeled This centralization opens doors for foreign co-investment while also raising concern about how foreign influence could take shape within a country’s digital infrastructure. In this case, Telkom Indonesia holds over 50% of market share in Indonesia’s telecommunications sector, with this being a critical component of Indonesia’s Internet connectivity and ensuring inclusive digital access. 50% 50% WIth this in mind, the nature of foreign partnerships becomes particularly significant on a geopolitical level, particularly when these partners are Chinese state-owned enterprises. SOE-to-SOE diplomacy and China’s influence architecture SOE-to-SOE diplomacy and China’s influence architecture Chinese SOEs such as the State Grid Corporation of China, China National Petroleum Corporation, and China Mobile, bring deep experience in large-scale infrastructure and industrial modernization. Their direct alignment with Danantara’s key focus areas such as green energy, telecommunications, and digital infrastructure, ensures that these Chinese SOEs are natural partners for co-investment and technology transfer. Joint ventures between Chinese and Indonesian SOEs could result in embedding Chinese technical standards and technologies into Indonesia’s economic fabric. Moreover, financial collaboration could extend through co-investments, such as the one signed between CIC and Danantara in May 2025, the Silk Road Fund, or even through lending from state-owned banks, such as the China Development Bank. As seen in previous BRI projects, such financial entanglements often come with conditions that favor Chinese firms and supply chains, granting Beijing soft leverage over host country policy and project execution. embedding embedding May 2025 May 2025 conditions conditions Furthermore, Danantara’s focus on sustainable energy and infrastructure aligns directly with China’s own green finance strategy, particularly through initiatives like the BRI. May 2025 saw Danantara revealing that four Chinese companies were seeking to build electric vehicle (EV) manufacturing plants in Indonesia. Examples such as these highlight how China’s influence in Indonesia-specific investments could be expanded through Danantara, whether this be through the growth of Chinese firms’ existing footprints within Indonesia, or through the portrayal of China as a benevolent strategic partner. May 2025 May 2025 existing footprints existing footprints This model reflects a gray zone tactic of influence in economic statecraft, with the combination of SOE partnerships, financing, and standard-setting playing a huge role in a company’s ability to grow and flourish in the long-term. As a result, the fund could become a strategic node in China’s broader regional strategy, enhancing Beijing’s sway over Indonesia’s digital development trajectory within the realm of Web3 and beyond. Indonesia, Web3, and Danantara Indonesia, Web3, and Danantara Indonesia has expressed its desire to modernize its economy in the digital realm by pursuing Web3 as a vehicle for growth. The Indonesian government introduced taxation for digital assets in 2022, collecting over $20m in taxes related to cryptocurrency trading activities in the first six months of 2024 alone. Indonesia also completed a second stage proof-of-concept trial for a wholesale central bank digital currency (CBDC) at the end of 2024, demonstrating the government’s desire and eagerness to participate in the Web3 ecosystem. 2022 2022 $20m $20m 2024 2024 Public interest in Web3 has surged in parallel to the Indonesian government’s participation in Web3, most notably in 2022 due to Sultan Gustaf Al Ghozali, otherwise known as Ghozali Everyday, a young Indonesian entrepreneur who made millions selling NFTs of his daily selfies. 2022 2022 However, for Web3 to successfully catapult Indonesia into its digital future, Indonesia will have to develop its underlying infrastructure supporting Web3 growth, which includes energy facilities for producing electricity, data centers for hosting data, and telecommunications providers for Internet connectivity. These sectors are already attractive to Chinese investors, but are also critical for enabling decentralized systems and innovation for Indonesians in the digital realm. The ability for Danantara to co-invest with Chinese SOEs into digital infrastructure could result in cloud services being run on Chinese hardware and standards, and blockchains favoring permissioned and centralized control, as is the case with China’s Blockchain Service Network, as opposed to the open-source, decentralized nature of Web3. the case the case Given Web3’s foundational principle of decentralization and empowerment of local developers, Danantara’s Chinese partnerships could create invisible chokepoints removing these opportunities, making Indonesia’s digital future highly dependent on external actors. Examining the governance risks surrounding Danantara Examining the governance risks surrounding Danantara Danantara’s success will depend on the integrity of its governance structure, with this being of particular focus in light of a recent corruption case alleging $12b in fuel import fraud from 2018 to 2023 by five top Pertamina executives, one of the SOEs that Danantara aims to take over. As the government consolidates its SOEs under new structures like the Danantara fund, ensuring transparency and robust oversight will become increasingly important domestically and internationally. corruption case corruption case To this extent, Danantara’s Temasek-based governance model will hopefully prevail, with a clear focus on transparency and accountable governance. The proposed board initially included key global figures such as Ray Dalio and Jeffrey Sachs to bolster international credibility. However, in a blow to the Indonesian SWF, Ray Dalio has since withdrawn from his advisory role. transparency and accountable governance transparency and accountable governance withdrawn withdrawn Web3 tools could offer a new, novel layer of accountability as well. Blockchain-based auditing, smart contracts for conditional funding, and decentralized identity (DID) could reinforce transparency across Danantara’s flow of funds. However, as foreign interest intensifies, these reform-oriented measures will certainly be tested. Without stringent oversight, Indonesia risks replicating patterns seen in other BRI recipient states, where strategic infrastructure has fallen under disproportionate Chinese control. Therefore, robust internal controls and multilateral engagement will be crucial for Danantara to strengthen its guardrails, enabling it to serve Indonesia’s interests versus foreign ones via clear policy interventions. Policy options for Danantara to safeguard its sovereignty Policy options for Danantara to safeguard its sovereignty If Indonesia is looking to successfully leverage Danantara as a catalyst for economic modernization while still safeguarding it from external influence, it must implement specific policy suggestions to ensure it can fulfill its national mission. Two specific courses-of-action for Danantara include utilizing a national investment screening mechanism as well as mandating open-source standards in specific emergent technology projects. Establishing a foreign investment screening process into strategic sectors would greatly help Indonesia evaluate specific investments and ventures based on factors such as national security and long-term technological dependencies. Similar programs include the United States’ Committee on Foreign Investment (CFIUS) and the European Union’s FDI Screening Regulation. A similar process involving specific government agencies such as Indonesia’s parliament could help oversee this process, ensuring that foreign capital supports, rather than adversely shapes, Indonesia’s national interests. Additionally, Indonesia could also mandate open-source standardization in its projects specific to things like Web3. Mandating such standards would enable it to not only promote transparency and ensure digital sovereignty, but also prevent undue technological dependency. This approach could also potentially attract support from partners specifically focused on leveraging open digital infrastructure, thus driving further growth to Danantara initiatives. Policy options such as these could help strengthen Danantara’s institutional integrity while simultaneously supporting Indonesia’s technological and digital sovereignty. In the case of Danantara, Indonesia has a unique opportunity to become a model for balancing growth, governance, and autonomy in today’s era of digital globalization. Conclusion Conclusion All in all, Danantara marks a bold new chapter in Indonesia’s economic strategy. By centralizing SOEs and inviting foreign capital, it aims to fast-track growth and institutional reform. However, in an era where economic and digital tools are increasingly used for strategic ends, the fund also presents a geopolitical dilemma. Whether Danantara becomes a launchpad for Indonesian Web3 innovation or a potential avenue for foreign control will depend on how Danantara executes its governance structure and partnerships. Therefore, as SWFs evolve into instruments of digital influence, Danantara could either empower Indonesia’s digital future or potentially entrap the archipelago nation into new dependencies that undermine its sovereignty. Image Source: Reuters Image Source: Reuters

Indonesia’s Web3 Ambition Risks Colliding With Beijing’s Playbook

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