By Eko B. Supriyanto, Editor-in-Chief of Infobank Media Group
THE GOVERNMENT is celebrating. President Prabowo seems to have gained new confidence. Daya Anagata Nusantara (Danantara), the Palace’s new flagship superholding company, successfully issued its inaugural global bond worth US$1.5 billion, exceeding the initial target of just US$1 billion. The global bond offering was oversubscribed by as much as US$4.6 billion. Two bond series were issued: a five-year series with a 5.35 percent coupon, and a ten-year series with a 5.95 percent coupon. The public has been fed the narrative that this is proof of the world’s confidence in Indonesia. Even more remarkable, investors were essentially “buying a pig in a poke” because Danantara has not yet published its financial statements.
But since when has debt been celebrated like a harvest festival?
It’s worth taking a step back, engaging common sense, and viewing this event not as a success story, but as a warning bell ringing softly.
Let’s set the record straight on one fundamental point: being oversubscribed is not a certificate of success. When global investors scramble to get in, they aren’t evaluating the brilliance of Danantara’s business model or the strength of our economic fundamentals. They’re chasing returns. A coupon rate of nearly six percent in dollars is a tempting figure amid a global landscape rife with uncertainty. Moreover, the market knows full well: the state stands behind Danantara. If things go south, the state budget will bail it out. This isn’t trust—it’s a rational calculation backed by layers of guarantees.
The second-semester course on the introduction to macroeconomics by John Maynard Keynes has long reminded us that financial markets are often driven by “animal spirits”—instincts, speculation, and short-term optimism that may not be well-founded. Therefore, equating the flood of bond orders with validation of Indonesia’s new economic architecture is a logical leap that goes too far. It’s overly imaginative and based on excessive self-importance (GR).
In fact, even in the simplest of economic terms, debt only makes sense if it generates returns greater than its costs. A 5.95 percent coupon in dollars means that the projects financed by Danantara must generate an internal rate of return well above that—after accounting for the depreciation of the rupiah.
But if the funds raised through this debt are eventually channeled into low-yield projects—political projects with uncertain returns—then what we’re doing isn’t building wealth. We’re piling on a burden for our children and grandchildren.
This is a fundamental issue that’s often obscured. Honestly, it’s not uncommon for raising money, managing money, and creating added value to be three distinct matters. Danantara has only completed the first phase. The next two stages—which are far more difficult—have not yet begun. Equating success in raising debt with economic success is a dangerous form of “misguided” thinking. Many development institutions have collapsed not because they lacked capital at the outset, but because they were rotten from within.
The 1MDB Ghost and the Lessons We’re Reluctant to Learn
We don’t need to be fortune-tellers to see the risks lurking ahead. History has provided plenty of examples. Malaysia’s 1MDB is a grim reminder of how a sovereign wealth fund was turned into a political cash cow, leaving behind a mountain of debt that the people ultimately had to bear. Khazanah Nasional, though more reputable, has had to restructure its failed investments time and again.
Singapore’s Temasek is indeed a success story. But Temasek was born from the accumulation of real fiscal surpluses over decades. It did not start out by piling up debt in global markets. Comparing today’s Danantara to Temasek is like comparing a newborn baby to a retired adult.
The greatest danger lies precisely here: when the line between corporate risk and sovereign risk becomes blurred, moral hazard flourishes. Management feels secure because the state budget is there as a safety net. High-risk projects can be approved in the name of “national interest.” And if they backfire, the people bear the burden. Stiglitz has long warned of this pattern: ambitious but poorly supervised state investment institutions often end up as structural burdens.
High Coupon Rates: A Market Signal That Cannot Be Ignored
A coupon rate of nearly six percent for a ten-year maturity is not cheap capital. Compare this to U.S. Treasury yields, which are well below that level. The difference is the risk premium—the price Indonesia must pay because the market perceives significant uncertainty regarding governance and substantial macroeconomic risks. The market isn’t lending money because it believes in Danantara’s capacity for innovation. It’s lending money because it wants to be paid a high price. This is trust that must be earned—not trust that’s given for free.
In market terms, this means Danantara hasn’t passed the viability test. It has only passed the high-coupon test. It would be impressive only if its coupon yield were on par with market rates.
It may be that the tendency to celebrate oversubscription figures reflects a shift from development politics to image-building politics. Raising funds is celebrated as if it were the ultimate goal, when in fact it is merely the starting point. Dani Rodrik and Mariana Mazzucato have long emphasized that the role of the state—and state-formed institutions—is to act as an “entrepreneurial state”: directing investment toward strategic sectors, creating new productive capacity, and correcting market failures. It is not merely about being a skilled borrower.
Peter Drucker once put it succinctly: “Management is doing things right; leadership is doing the right things.” Danantara’s managers must not merely focus on ensuring procedural efficiency. They must ensure that these public funds are invested in the right sectors, with clean governance, and with a careful calculation that every dollar borrowed today can be repaid with a reasonable return.
Before that USD 1.5 billion is spent, the public has the right to demand answers to basic questions: Which specific sectors and projects will be funded? What is the minimum target return required to cover these dollar-denominated coupons? What is the mechanism for independent auditing that is free from political interference? What guarantees are there that these funds will not become a tool for the oligarchy and the inner circle of power? And what key performance indicators can the public use to assess Danantara’s success or failure over the next five years?
These are not academic questions. This is the last bastion of our fiscal sovereignty.
The success of selling bonds on the global market is the beginning, not the end. USD 1.5 billion is now in hand, but it comes with a clock that keeps ticking—counting down interest and maturity dates. The market can provide money in a matter of days. But historical trust is granted only to those capable of transforming that money into prosperity that the people can actually feel.
That is where Danantara will be tested—not by investors in New York or London, but by the Indonesian people, who are the true owners of every state asset. If this institution fails to carry out its mandate with integrity and sound governance, then today’s “good news” is nothing more than a legacy of new debt that future generations will have to bear. Regimes may change—but the debt will still be paid by the next generation.
Celebrate, but don’t get carried away. Because debt always has a bad habit. It comes with a smile, but collects by force. Be careful.
