Danantara’s High Risk Investments
Monday, May 26, 2025
Danantara is set to take on several high-cost downstream projects. The business feasibility is questionable, and there is potential for conflicts of interest.
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THE move by the government to force Daya Anagata Nusantara Investment Management Agency, or Danantara, to take over projects of dubious economic value could be dangerous in the future. Business calculations are far more important than simply fulfilling the wishes of President Prabowo Subianto to accelerate the development of downstream industries.
Danantara is to finance 18 downstream projects with a total investment of US$45 billion. One that it will soon begin working on is the coal gasification project into dimethyl ether (DME). This product will be used to replace liquefied petroleum gas, or LPG.
The government is unable to provide sufficient LPG to meet the domestic needs because more than 70 percent of the LPG requirement of around 8.7 million tons is met through imports. The government has allocated Rp87.6 trillion in the 2025 State Budget, an increase over the sum for the previous year of only Rp63.5 trillion.
But this good intention has the potential to result in huge losses for Danantara because a number of researchers have stated that this project will not be competitive, particularly if the price of coal increases. This DME project will only make a profit if the price of coal remains below US$20 per ton. However, based on a decision by the Energy and Mineral Resources Minister, the reference price for low-calorie coal for the second period of May 2025 is US$35.42 per ton, higher than the previous period, US$34.73 per ton.
The DME project uses coal with an equivalent calorie value of 3,400 kilocalories per kilogram. With currently available technology, the development cost of coal-based DME is US$294-370 per ton higher compared to LPG. As a result, in order for this project to be feasible and competitive, significant government incentives and subsidies are still needed.
Another project that Danantara will fund is the construction of an oil refinery and fuel storage facility worth US$1 billion (Rp16.5 trillion). The government is prioritizing this project to increase domestic fuel reserves from the current 20 to 21 days to 30 days.
A significant problem has arisen in these projects because there are potential conflicts of interest in their implementation. In the oil refinery project, Hashim Djojohadikusumo, younger brother of President Prabowo, is reported to have brought in the United Kingdom-based Gemcorp Group, an investment company specializing in developing countries. Established in 2014, Gemcorp has only experience of building one oil refinery using modular technology with a capacity of 60,000 barrels per day in Cabinda, Angola. In this project, Gemcorp worked with Sonangol EP, a company owned by the Angolan government.
These indications of poor governance by the investment agency and controllers of state companies have further distanced Danantara from the initial concept proposed by Sumitro Djojohadikusumo, Prabowo’s father. The idea of this well-known economist was that Danantara would only manage some of the profits of state-owned companies, which would be used to establish cooperatives.
Before it is too late, Prabowo still has an opportunity to reorganize Danantara and at the same time delay the forced implementation of projects that are uneconomical and rife with conflicts of interest. Without significant changes, Prabowo’s hope that Danantara will increase people’s prosperity will be nothing more than a pipe dream.
