Opening Thesis: Budgeting is Not Strategy
Einstein once said,
“Insanity is doing the same thing over and over again and expecting different results.”
That is exactly what Indonesia has done for decades. We talk about escaping the middle-income trap, about achieving 7–8% growth, yet we keep using the same budget-centric model, hoping for different outcomes.
Our economic governance is still rooted in a mindset of budget absorption, not capital allocation. The result? Indonesia has been stuck around 5% GDP growth for 20+ years. We are running the economy like an accountant — not an architect.
A budget should not function like an ATM. An ATM only dispenses cash based on pre-set instructions, with no strategic impact. Every expenditure in the state should be tied to GDP multiplier effects. In contrast to this outdated model, a Capital Compound Model (CCM) requires that every rupiah deliver at least a 2x GDP multiplier.
Budgeting must be treated as sovereign capital deployment, not just cash disbursement.
The Budget Manager Mentality: Symptoms of Stagnation
Indonesia’s fiscal operations are governed by rigid budgetary cycles. Ministries compete for annual funding. Success is measured by how much of the budget is “used,” not by the return it generates.
Debt is deployed to patch shortfalls — not to create long-term capital leverage. Investments are made without a strategic framework for capital compounding. There is no internal reinvestment loop. No institutional mechanism to identify underleveraged sectors. No feedback system to refine capital decisions over time.
This is why 5% growth has become normalized. Because the system is designed for compliance, not creation.
Enter the Capital Architect: The New Role of the State
Just like a CFO in a world-class company doesn’t simply track spending but directs capital to where it multiplies, the state must adopt a new role. Indonesia’s government must evolve from a budget handler into a sovereign capital architect.
This means:
- Designing investment logic into national priorities
- Mapping out capital gaps and inefficiencies
- Leveraging retained earnings and external funding with discipline
- Coordinating ministries, SOEs, and strategic funds into one capital system
From Capital Intelligence to Architecture: Danantara’s Moment of Truth
It’s not about how much money we have. It’s about what we do with it.
Capital intelligence is the ability to see capital as a strategic signal — to know where it flows, where it concentrates, and why it moves. It’s about using capital not only for funding, but for shaping power. This intelligence must be institutionalized.
And that’s where Danantara comes in.
Danantara must not be a passive capital receiver. It must evolve into a capital architect. Its recently announced $4 billion joint fund with Qatar Investment Authority (QIA) is a promising starting point — but the true challenge lies in what happens next.
Will Danantara allocate with a national doctrine?
Or will it simply channel safe capital into safe sectors?
Danantara’s Capital Playbook: From Jackpot to GDP Engine
- GDP-Driven Capital Allocation Danantara must prioritize investments that produce real GDP-multiplier effects with clear pathways to job creation and productive output. It should avoid speculative ventures or consumer startups that lack structural economic value. Like Samsung, which contributes 22% to South Korea’s GDP, Indonesia must develop product-based giants with tangible output. With just three GDP-driven industrial champions, we could easily surpass the 5% growth ceiling.
- Payback Period Discipline Every fund must respect time horizons. Danantara’s capital should be invested in portfolios that offer a clear and reasonable payback period. If the projected return exceeds the fund’s horizon, that portfolio should be excluded.
- Exit Strategy Embedded in Entry Logic Exit Door: If there is no clear exit plan, the investment is effectively a donation.
- Flexible Exit: If exit mechanisms are too complicated or rigid, Danantara should not proceed.
- Temasek Case Study Recent data showed Temasek returned only 1.6% in FY2024 — lower than U.S. government bonds. Prior losses and write-offs suggest a model that resembles high-risk jackpot investing. Indonesia must not follow this. Sovereign capital should not be gambling for windfalls but engineering long-term productivity.
Danantara must not chase capital — it must design it.
Call to Action: From Governance of Stagnation to Design of Growth
This is not just about budgets. This is about power.
We need to adopt a new operating system for the state. One built on:
- Strategic Economics — capital-first policymaking
- Capital Intelligence — understanding capital beyond accounting
- Capital Architecture — building institutions that allocate with purpose
Because the role of government is no longer to simply spend. It is to allocate, design, and command capital with sovereign intelligence.
Anything less is governance of stagnation.