Achieving the Role of LPI (Investment Management Institution) as the State Investment Management Institution through the Job Creation Act

Abstract

For the first time after 75 years of Proclamation of Indonesian Independence, the Indonesian government has started to establish Sovereign Wealth Funds (SWF) as an investment management institution, which serves as the state financial tool to represent or regulate public funds. These funds are intended for investment purposes into broad and diverse assets. This institution that oversees the financial activities is referred to as Lembaga Pengelola Investasi/Investment Management Institution (LPI). The establishment of investment management institution is commonplace in many countries, as is the case in Scandinavian countries, for example Norway. However, the Indonesian version of SWF has some considerable differences from that established by other countries overseas. Most of SWF overseas mainly serves as an institution to handle the investment of some of its foreign exchange for diverse assets as a way to allow the income from other investments to cover the declining income in the face of a risk resulting in the plummeted oil prices. In contrast to developed countries, which mainly rely their sources of investment from budget surpluses, Indonesia complies with the Russian SWF model known as the Russian Direct Investment Funds (RDIF), which derive its sources of investment from foreign exchange without limiting the investment opportunities for private investors in Indonesia.