The government's decision to fund multiple downstream and energy security projects − predominantly fossil-based − through the state-managed Daya Anagata Nusantara Investment Agency (BPI Danantara), could cause significant economic risks for the country, says the Center for Education and Research in Humanitarian Action (CERAH).

Sartika Nur Shalati, Policy Strategist at CERAH, cautioned that prioritizing fossil energy projects could backfire on Indonesia. For instance, the coal gasification project to produce Dimethyl Ether (DME), initially planned by state-owned PT Bukit Asam, is projected to incur losses of up to $377 million per year, according to the Institute of Energy Economic and Financial Analysis (IEEFA). 

“The high operational costs, which are twice as expensive as importing LPG, contribute to these potential losses,” Sartika said as quoted in a statement on Tuesday, March 19, 2025.

The government has allocated US$40 billion to finance 21 downstream projects, including oil storage, refineries, coal gasification, and mineral processing for copper, nickel, and bauxite. However, no renewable energy projects are included in this first phase of funding.

Experts have warned that fossil energy projects are losing economic value as the global market shifts towards renewable energy. Funding fossil energy projects raises the risk of stranded assets, where coal mines, oil refineries, and fossil-based power plants lose economic viability sooner than expected. The global energy transition is reducing demand for fossil fuels, threatening their profitability. 

Additionally, countries like the European Union are tightening regulations on carbon-intensive imports through mechanisms such as the Carbon Border Adjustment Mechanism (CBAM).

CERAH suggested that Danantara’s financial strategy should instead focus on supporting the energy transition, including renewable energy development and the early retirement of coal-fired power plants. However, existing investment patterns continue to prioritize the fossil fuel and mining sectors, exacerbated by potential conflicts of interest. 

It also cited that many of Danantara’s top executives have strong ties to the fossil fuel industry, and their appointments lacked transparent fit-and-proper tests, raising concerns about future governance issues.

Wicaksono Gitawan, another Policy Strategist at CERAH, criticized the government’s approach, noting that the projected $11.3 billion investment for coal gasification could be better utilized to accelerate Indonesia’s energy transition. 

“The real question is whether there is a genuine willingness to push for renewable energy development,” he said.

The financial risks associated with Danantara’s fossil energy projects could also pose a threat to Indonesia’s economy. Since the investment fund is sourced from state budget efficiencies and state-owned enterprises (SOEs) assets, any financial strain or mismanagement could directly impact national economic stability. 

Several major SOEs, including PT PLN, PT Pertamina, PT Telkom, and major state-owned banks such as Bank Mandiri, BNI, and BRI, have assets managed under Danantara.

“With $900 billion under management, Danantara risks relying too heavily on long-term investment returns, potentially affecting national liquidity in times of crisis,” Sartika said. 

Additionally, SOEs may face capital constraints, potentially limiting their ability to control their own investments.

Transparency

Beyond project selection, Sartika stressed the need for robust governance in managing sovereign wealth funds (SWFs) to prevent fund misuse and political interference. Transparency and accountability measures are crucial to ensuring that Danantara does not repeat large-scale corruption scandals like Malaysia’s 1MDB.

However, concerns arise from Indonesia’s newly passed State-Owned Enterprises Law (Law No. 1/2025), which limits legal accountability for government officials and SOE executives as long as they can prove that losses were not due to negligence or personal gain. 

Sartika warned that such legal loopholes create opportunities for corruption, further undermining public trust.

“The lack of clear legal accountability makes it difficult to ensure proper oversight, especially if weak governance structures persist,” she concluded.