Indonesia has been the jewel of investments in the past few years. The government has done a tremendous job in making sure that it is investor friendly by adopting the right strategies to attract investors. The Indonesia Invest ment Authority (INA), Indonesia’s new sovereign wealth fund, was launched by the Indonesian government in 2021. It is a unique fund that has been specifically mandated to invest in profitable projects as well as attract both global and local coinvestors. With these efforts, it is expected to speed up the growth of some of the main infrastructure sectors in Indonesia. In a recent interview with DealStreetAsia at the Asia PE-VC 2023 Summit, Stefanus Ade Hadiwidjaja, Chief Invest – ment Officer, INA, discussed the massive opportunities in different sectors that the investors could look at within Indonesia. Excerpts…

“INA intends to speed up the growth of some of the main infrastructure sectors in Indonesia”

Growth of INA In terms of deployment, the INA has deployed slightly more than $3 billion in around eight to nine deals in the last two and a half years. It has done a lot of collaborations with top global investors, ranging from pension funds from developed markets, sovereign wealth funds like the United Arab Emirates (UAE) Abu Dhabi Investment Authority and Abu Dhabi Growth Fund, and partnerships with GIC and other strategic investors. In total, it can deploy more than $20 billion through different collaborations. More importantly, it has built a decent reputation, which helps receive interest from corporations and investors themselves to explore new possibilities in Indonesia.

Key investment areas

The INA aims to be consistent with its investment practices and its main focus is on four key areas. These are transportation infrastructure and logistics ranging from toll roads, seaports, airport cargo modern warehouses, etc., healthcare, energy transition and digital infrastructure. At present, the INA primarily invests in these sectors as they are of keen interest to investors. In the healthcare space, many global investors are eyeing investment opportunities in Indonesia right now. Consequently, the sector is very important from the country’s perspective; it also offers some attractive investment opportunities. Currently, the spending per capita in the sector and the number of doctors per capita is quite low in Indonesia as per various statistics. Therefore, the exciting aspect of the INA is the high growth opportunity, given Indonesia’s big healthcare market.

Furthermore, the healthcare market is very fragmented with only a bunch of big hospital chains. Even the market share of the largest chains in terms of the number of beds is as low as a single-digit figure. There is a lot of opportunity to invest for a change in this scenario. As the demand in the sector grows, healthcare retail chains like laboratories, primary clinics and world-class hospitals will also get a push. Currently, the INA is working on a deal for one of the largest chains of hospitals in Indonesia with 70 branches and more than 4,000 beds. Half of it is owned by the INA while the remaining is managed by it. In the next year, the INA intends to invest further in energy transition including renewable energy, early retirement of power plants, nature-based solutions and the electric vehicles (EV) market. It has made one investment in a geothermal plant with Masdar, one of the largest renewable players in the UAE. In the early retirement of power plants, it has two or three active projects at present.

Similarly, EVs have been a very important part of Indonesia’s economy in the past few years and the government has made the right decision to push investors to go downstream in this market. Besides, the INA looks at the whole value chain of the EV market and has built a collaboration with Contemporary Amperex Technology Co. Limited (CATL), one of the largest EV battery players in the world. A fund has been jointly set up to invest across the value chain. Given the expertise of CATL, the INA is focusing on and reviewing related deals along the value chain, especially upstream. However, no investments have been made so far. It is hoping to set up a battery manufacturing unit with CATL along with investing in some of the already established manufacturing companies along the value chain. Moreover, given the importance of this sector for the country and the climate, it will also invest in downstream projects like setting up two-wheeler EV charging facilities. There are a few live deals that it is looking at in this space from end to end.

INA has deployed slightly more than $3 billion in around eight to nine deals in the last two and a half years.

PPP and collaborations

The INA has built different public-private partnerships (PPPs) and has collaborated with several pension funds from the UAE, Europe, Korea, China and Singapore, since its inception. One of the key things that it seeks from these collaborations is not only capital investment but smart capital as well. The aim is to benefit not only from funding but also their expertise. For example, the INA has collaborated with the British International Investment and Investeringsfonden for Udviklingslande (IFU), one of the sovereign wealth funds from Denmark. The IFU’s mandate and expertise are specifically on green investments. Similarly, European investors have the most advanced knowledge and experience in this space. It is also exploring the healthcare and EV space with Chinese investors like CATL.

Further, it has recently set up a collaboration with GDS Holdings Limited, one of the largest data centre companies in the world. GDS has built a data centre ecosystem all over Indonesia. The INA wants to make Batam one of the data centre hubs in Indonesia, with the key component being smart capital. These are very specific areas of expertise. However, in cases like toll roads what matters is long-term capital. To this end, the INA partners with pension funds like the APG from Netherlands depending on the asset class, the investment and the expertise that it requires.

The way forward

The economic slowdown in China and globally due to high interest rates affects commodity exporters. However, the INA believes that Indonesia, being a domestic economy, has not much to worry about as it has quite well managed the inflation as compared to other countries. Its interest rates have been quite stable and it is foreseen that these rates will come down further quite soon. Additionally, investors are more cautious, especially in sectors like technology that can raise billions of dollars at massive valuations. The INA looks at the fundamentals of investing in a company. It assesses a company based on whether it has a strong and profitable business model instead of its tech or non-tech nature. If the company can achieve good valuation, the INA invests in the company