Indonesia’s Fiscal Transformation: Danantara Emerges as a New Engine of Economic Growth
By: Yusuf Rinaldi
Indonesia is entering a new phase in its economic journey, with the government emphasizing investment as the primary driver of national growth. Household consumption remains the dominant driver of economic growth, contributing more than half of Gross Domestic Product (GDP). However, the government under President Prabowo Subianto has emphasized that fiscal transformation focused on increasing investment is a strategic step to strengthen the long-term economic foundation. One key initiative in this strategy is the establishment of the state-owned enterprise investment holding company, Danantara, which is expected to become a new driver of national investment growth.
The Director General of Economic and Fiscal Strategy (DJSEF) at the Ministry of Finance, Febrio Nathan Kacaribu, emphasized that investment in Indonesia has been dominated by the private sector, which plays a key role in driving the economy. Meanwhile, the contribution of state-owned enterprise and government capital expenditure through the state budget remains relatively limited. State-owned enterprise capital expenditure (CapEx) annually contributes around 5–6 percent to GDP, with an estimated IDR 380 trillion in 2025, while capital expenditure from the state budget is estimated to reach IDR 490 trillion.
The government aims to strengthen the contribution of state-owned enterprises (SOEs) to national investment. Through Danantara, SOEs are expected to act as catalysts for increased high-value investment, particularly in the downstream natural resource sector, infrastructure, high-value-added manufacturing, and the digital economy. The SOE Capital Expenditure (CapEx) target for the Danantara consolidation was even doubled by 2026, demonstrating the government’s ambition to make SOEs stronger drivers of economic growth.
Furthermore, the government has allocated approximately IDR 200 trillion in the banking sector, including the Indonesian Banking Association (Himbara) and the Indonesian Banking Association (BSI), to strengthen investment financing. A strategic program acceleration task force was established to expedite deregulation and address investment barriers, ensuring faster project implementation. Despite the strengthened role of SOEs, private investment remains a dominant player in the national economic structure. Synergy between the government, SOEs, and the private sector is projected to drive investment growth and improve the business climate, with economic growth targets reaching 5.2 percent this year and 5.6–5.8 percent in 2026.
The shift in the direction of national economic growth is also evident in the government’s efforts to shift reliance from household consumption to investment. The current investment contribution to GDP is around 30 percent, while household consumption still dominates at around 53 percent. Increasing investment should not only increase capital but also generate high added value, create jobs, and ensure the demographic bonus is optimally utilized. This strategy is expected to reduce unemployment and maintain inclusive economic growth.
One of Danantara’s strategic projects is the Waste-to-Energy (PSEL) program, which will begin in early 2026 with the construction of the first phase of seven Waste-to-Energy Power Plants (PLTSa). Managing Director of Investment at BPI Danantara, Stefanus Ade Hadiwidjaja, explained that the tender for this project is scheduled to begin on November 6, 2025, in seven cities that are technically and administratively ready. The tender results will be announced in the first quarter of 2026, with a groundbreaking ceremony scheduled for early 2026.
The first phase will focus on cities such as Bogor, Denpasar, Yogyakarta, Semarang, and Bekasi. Danantara emphasized that every foreign technology provider is required to collaborate with domestic partners, whether private, state-owned, or regionally-owned, to facilitate technology transfer and avoid the dominance of a single consortium. This project not only drives the national clean energy transition but also provides a concrete solution to the increasingly pressing issue of waste management. Indonesia is estimated to produce 50 million tons of waste annually, but only around 40 percent is properly managed.
In addition to clean energy infrastructure projects, the performance of investment managers (MIs) under Danantara also recorded positive growth through the third quarter of 2025. State-owned MIs’ managed funds grew by double digits, reflecting investor confidence in the consistency of product performance and distribution within the SOE ecosystem. Infovesta Utama’s Head of Research, Wawan Hendrayana, assessed that this positive performance was driven by fund flows from retail investors, particularly into relatively stable fixed-income and money market mutual funds.
