The United Arab Emirates (UAE) has taken a decisive step in renewable energy investment with its USD 10 billion commitment to Indonesia’s newest sovereign wealth fund (SWF), Daya Anagata Nusantara (Danantara). This partnership will finance the development of a 10-gigawatt renewable energy project, focusing on solar and wind power infrastructure across Indonesia. Beyond strengthening economic ties, the initiative highlights the UAE’s strategy to expand its clean energy portfolio and strengthen its presence in Indonesia. Other Middle Eastern nations should consider similar investments, as Southeast Asia’s renewable energy sector offers not only strong financial returns but also strategic influence in a region with rising energy demand and a growing focus on sustainability.
Danantara, recently launched by President Prabowo Subianto, manages up to $900 billion by consolidating key state-owned enterprises (SOEs). With its launch, Indonesia now has two sovereign wealth funds, alongside the Indonesia Investment Authority (INA), though they operate under different models. Unlike INA, which functions as a co-investment fund, Danantara has three pillars: sovereign wealth management, development investment, and asset management. It also oversees seven SOEs, plus INA, making it the world’s sixth-largest SWF by assets under management.
Modeled after Singapore’s Temasek Holdings and Malaysia’s Khazanah Nasional, Danantara aims to maximize SOE value and channel investments into strategic industries. Its success hinges on attracting foreign capital and expertise—making Middle Eastern nations key partners. With deep experience in sovereign wealth fund collaborations and renewable energy, Middle Eastern investors have a unique opportunity to shape Danantara’s growth while expanding their economic influence in Southeast Asia.
For Middle Eastern investors, Danantara presents multiple advantages. Unlike conventional infrastructure projects, which are often fragmented and vulnerable to policy shifts, Danantara centralizes SOE assets, ensuring a stable regulatory framework and long-term investment security. This structure mitigates risks that have previously deterred foreign capital. Additionally, Danantara’s financial structure means its losses are not considered state losses, providing Middle Eastern companies with greater flexibility in their investment strategies while reducing exposure to legal complexities within Indonesian state courts.
With assets exceeding USD 982 billion under management, Danantara offers a secure investment landscape backed by institutional stability. This minimizes market uncertainties for Middle Eastern firms pursuing large-scale projects. Moreover, Danantara integrates key Indonesian SOEs, including Mining Industry Indonesia (MIND ID) and Indonesia’s State Electricity Company (PLN), eliminating bureaucratic hurdles and improving coordination—particularly in industries like nickel-based battery production, where synergy between energy suppliers and mining operators is essential.
To further attract investment, Indonesia is exploring special tax incentives for Danantara, balancing them with the global minimum tax of 25%. The government seeks to create an appealing investment climate without relying on direct tax holidays. Additionally, Danantara’s emphasis on renewable energy and infrastructure aligns with Middle Eastern countries’ green finance agendas. Through Danantara, Middle Eastern investors can expand their presence in Indonesia’s solar, wind, and battery storage sectors, reinforcing their global reputation as leaders in renewable energy while meeting international environmental, social, and governance (ESG) expectations.
Indonesia’s vast renewable energy potential makes it a prime destination for foreign investment. The country aims to add 75 gigawatts of renewable energy capacity by 2040, leveraging solar, wind, hydro, and geothermal power. To achieve this goal, Indonesia requires an estimated USD 235 billion in investment. Danantara provides a strategic gateway for foreign investors seeking long-term, high-impact projects. The UAE’s swift move to establish a joint venture with Danantara underscores the credibility of Indonesia’s investment climate and the growing confidence in its sovereign wealth fund.
The UAE’s interest in Indonesia’s renewable energy sector is not new. Its state-owned renewable energy company, Masdar, played a key role in developing Southeast Asia’s first floating solar power plant in Cirata, West Java. The facility is currently expanding from 192 megawatt-peak to 500 megawatt alternating current (MWAc). The UAE’s involvement in Danantara builds on this cooperation, strengthening knowledge-sharing, capital investment, and technological advancements in green energy for both nations.
The UAE’s strategy presents a clear roadmap for other Middle Eastern nations looking to expand their clean energy investments. Sovereign wealth funds such as Saudi Arabia’s Public Investment Fund (PIF) and the Qatar Investment Authority (QIA) have the financial capacity to enter Indonesia’s renewable energy sector. With the MENA region actively pursuing economic diversification and reducing reliance on fossil fuels, investing in Southeast Asia’s rapidly expanding green energy market is both strategic and timely. By backing large-scale solar farms, wind projects, and hydropower developments in Indonesia, these nations can secure stable long-term returns, strengthen energy partnerships in a key emerging market, and enhance their influence in the global clean energy transition.
The UAE’s proactive stance also signals a broader shift in economic diplomacy, where investments are not merely profit-driven but strategically positioned to foster long-term partnerships. Danantara enables foreign investors to form joint ventures with Indonesia’s state-owned enterprises in a transparent and efficient manner. This structure ensures that investments are well-managed, mitigating risks that often deter foreign capital in emerging markets. The opportunity to partner with Indonesia’s major SOEs—such as Pertamina, PLN, and Telkom—grants Middle Eastern investors access to critical infrastructure projects beyond renewable energy.
One of Danantara’s most significant investment mechanisms is its potential role in retiring coal plants and accelerating Indonesia’s transition to clean energy. By directing funds toward renewable energy projects instead of fossil fuel-related assets, Danantara aligns investments with global sustainability goals. Middle Eastern investors, particularly those managing sovereign wealth funds, can play a key role in this transformation by participating in blended finance instruments or purchasing debt securities issued by Danantara. This approach would not only help phase out coal but also provide lucrative investment opportunities in an emerging green economy.
However, to ensure the success of these partnerships, Danantara must adhere to strict governance and environmental standards. The success of sovereign wealth funds in the MENA region, such as Abu Dhabi Investment Authority and Saudi Arabia’s PIF, has been largely attributed to their strong corporate governance frameworks. For Indonesia to attract more Middle Eastern investments, Danantara must operate with transparency, remain free from political interference, and adhere to international best practices in ESG standards.
The UAE’s decision to invest in Indonesia’s renewable energy sector through Danantara highlights its long-term vision for global energy security. Other Middle Eastern nations should recognize the strategic benefits of following suit. Investing in Indonesia’s renewable energy sector aligns with their economic diversification plans while strengthening their role as global leaders in the energy transition. As Indonesia accelerates its shift toward green energy, it is imperative that more nations, particularly those in the Middle East, seize the opportunity to be part of this transformation. By doing so, they will not only secure financial returns but also contribute meaningfully to a more sustainable and resilient global energy future.
[PLTB Sidrap, a wind power plant in Indonesia. Photo by Selisik, CC BY-SA 4.0, via Wikimedia Commons]
Muhammad Zulfikar Rakhmat is the Director of the Indonesia-MENA Desk at the Center of Economic and Law Studies in Jakarta.
Yeta Purnama is a researcher at the Center of Economic and Law Studies in Jakarta.
Shafa Kalila Aryanti is a researcher at the Center of Economic and Law Studies in Jakarta. The views and opinions expressed in this article are those of the authors.
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