Australia wants to put more of its $2.3 trillion pool of retirement savings to work in Indonesia as the government seeks to strengthen economic ties with its neighbor.
Financial Services Minister Stephen Jones, who led a trade delegation to the Indonesian capital Jakarta this week, said the underdeveloped economic relationship between the two countries needed to catch up with improving diplomatic ties.
“The area where we’ve been weak is in direct foreign investment, bilateral direct foreign investment,” Jones said in an interview with Bloomberg Television on Wednesday. “If we’re not in Indonesia, we’ve got to be asking ourselves questions.”
Australia’s Super Funds Eyeing Indonesia for InvestmentsPlay
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WATCH: Australian Minister for Financial Services Stephen Jones explains why superannuation funds are looking into Indonesia for opportunities.
Source: Bloomberg
Australia’s superannuation pension funds have been hunting more investment opportunities offshore as their assets — currently the world’s fifth largest at about A$3.3 trillion ($2.3 trillion) — are on track to almost double by the end of the decade.
The funds have traditionally sought investments in advanced markets like the US or Europe, with most of their Asian exposure confined to emerging market indexes.
Infrastructure Push
An increase in their interest in Indonesia would be a coup for President Joko Widodo, who’s trying to attract more foreign funding to develop much-needed infrastructure in Southeast Asia’s largest economy.
Jokowi, as he’s known, wants $200 billion for Indonesia’s wealth fund by April 2024 to invest in assets like new toll roads. Some funding has already been secured from pensions including Caisse de Depot et Placement du Quebec APG Asset Management.
Read: Wealth Fund May Miss Jokowi’s $200 Billion Target
Jones said pension funds needed to start looking closer to Australia for investment opportunities, adding that was where “the big growth opportunities are.” Indonesia’s central bank sees gross domestic product growth this quarter accelerating to 5.5%, while its Australian counterpart sees its own growth slowing to 3.2% by year-end from 3.5% in the three months to June 30.
The minister acknowledged there could be ESG concerns about investing in the Indonesian market, given the developing country’s heavy reliance on fossil fuel power.