Indonesia Shields Danantara Bonds Investors to Ensure Investors Willing to Purchase

JAKARTA, Jakartaweekly.com—The Indonesian government has introduced a new regulation that guarantees and protects investments in special debt instruments, Danantara Bonds, including Patriot Bonds and Merah Putih Bonds. The regulation, stipulated under Law No. 4 of 2026 amending Law No. 4 of 2023, is being viewed as a green light for investors due to the legal immunity granted by the state. 

According to Director of Economics at the Center of Economic and Law Studies (CELIOS) Nailul Huda, the government currently requires substantial funding for development projects that can no longer be fully refinanced through the state budget (APBN). As a result, financing responsibilities have been shifted to Danantara, with regulations designed to ensure investor participation through the issuance of Patriot Bonds and Merah Putih Bonds. 

“To ensure that investors are willing to purchase these bonds, the government guarantees that the fund invested will be immune from legal scrutiny,” Huda told Jakarta Weekly on Tuesday (23/6). 

Article 50A of the amended P2SK Law could be used to attract funds from the underground economy. Such policies are often designed to encourage assets held in the shadow economy or parked in offshore tax havens to enter the formal banking and financial system. 

Executive Director of the Pratama-Kreston Tax Research Institute, Prianto Budi Saptono said the regulation could be a double-edged sword. While he acknowledged the government’s urgent need for financing, he noted that such extreme measures are typically adopted when immediate national priorities outweigh long-term risks. 

“Impunity incentives are the price a country pays to attract large amounts of capital quickly,” Prianto told Jakarta Weekly on Tuesday (23/6). 

A tax analyst at the Center for Indonesia Taxation Analysis (CITA) Fairy Akbar, argued that the policy sacrifices the country’s long terms interests for the sake of attracting investors. In his view, the measure could undermine Indonesia’s fiscal sustainability in the future. 

“This is clearly disproportionate, especially since it could become a loophole for tax evaders and money launderers,” Fajry said. 

A similar concern was raised by Bhima Yudhistira, Executive Director of CELIOS. He argued that the revision of the P2SK Law effectively facilitates extraordinary financial crimes through special debt instruments by providing immunity to individuals involved in money laundering and other financial offenses. 

From a taxation perspective, the potential inflow of funds generated by these instruments may not be sufficient to offset the long-term loss of tax revenue or the reduced access of the Directorate General of Taxes (DJP) to transaction data. 

From the standpoint of tax administration and public finance, the policy represents a highly asymmetric trade-off that could ultimately weaken the government’s fiscal position.

“In essence, the government is exchanging permanent taxing rights for short-term borrowing,” Prianto added.

He further explained that the government may effectively be swapping revenue for debt. Funds raises through the purchase of these bonds constitute government liabilities, meaning the principal and interest must eventually be repaid through the state budget. By contrast, taxes are forgiven represent permanent state revenue that doesn’t need to be repaid. In other words, the government is sacrificing actual revenue merely to obtain loans. 

The policy could also create what Prianto describes as “data blindness” for the tax authority. In modern tax administrations, data is often more valuable than one-off tax revenue. By prohibiting transaction data from being used as a basis for taxation, the DJP may lose its ability to assess the true economic capacity of high-net-worth individuals (HNWIs) and large corporations. 

Moreover, the regulation could contribute to tax base erosion. Funds invested in these bonds would effectively become isolated from the tax system. If billions or even trillions of Rupiah are parked in instruments shielded from taxation and legal scrutiny, the state could lose future opportunities to tax investment returns, business activities, or consumption generated by those assets. 

“In public policy and tax administration theory, provisions that prevent transaction data from being used for tax assessment or legal evidence have the potential to reduce taxpayer compliance in the future,” Prianto said.

Fajry Akbar shared the same concern, arguing that the policy could significantly weaken tax compliance and potentially be used as taxes avoidance scheme. 

“Non-compliant taxpayers may simply buy these bonds to avoid tax exposure. Even taxpayers currently involved in tax disputes could benefit. This seriously undermines the foundations of tax law enforcement,” Fajry told Jakarta Weekly.

The anticipated decline in tax compliance is closely linked to the risk of moral hazard. If the government repeatedly provides safe avenues for funds that have not been properly taxed, taxpayers may begin to expect similar programs in the future.

The provisions are widely viewed as a variation of previous tax amnesty and voluntary disclosure programs implemented by the government.

“This may encourage taxpayers to delay reporting their assets today in anticipation of future opportunities once the implementing regulation for Article 50A of the P2SK Law is issued,” Prianto said.

Article 50A paragraph (6) may also undermine horizontal equity. A healthy tax system depends heavily on perceptions of fairness. Taxpayers who have consistently reported income and paid taxes in full may feel disadvantaged if those who previously avoided taxes are now rewarded with legal protections simply by converting their assets into special debt instruments.

“This instrument creates a legal privilege that can only be purchased by those with substantial capital. Ordinary citizens facing civil or criminal cases must still go through lengthy legal proceedings and bear the associated risks,” Prianto added.

Another concern is the weakening of the deterrence effect. Indonesia’s self-assessment tax system relies on the possibility of audits and firm law enforcement. When the government guarantees immunity, including protection from tax-related criminal prosecution, the credibility of enforcement mechanisms is inevitably weakened.

Overall, the policy presents a classic double-edged sword. On one hand, Danantara receives much-needed liquidity in the short term. On the other hand, the government may be compromising the integrity of Indonesia’s tax compliance system and fiscal sustainability for years to come.

Danantara Indonesia Issues US$1.5 Billion International Bonds

Danantara, through Danantara Investment Management (DIM), has successfully issued its inaugural international bond offering worth US$1.5 billion. Strong global investor demand was reflected in the peak order book, which reached approximately US$4.6 billion, more than three times the size of the issuance.

“The strong interest was driven by high-quality institutional investors from the United States, Europe, the Middle East, Africa, and Asia,” the company said in a statement released on June 12.

According to Danantara, the five-year bond attracted the strongest demand from investors in Europe, the Middle East, and Africa, accounting for 41% of the final order book. Asset managers represented the largest investor category, making up 82% of buyers in this tranche.

Meanwhile, the 10-year bond saw the highest demand from U.S. investors, who accounted for 52% of the final order book. Asset managers also dominated this tranche, representing 72% of investors.

The final yields for DIM’s debut bond issuance were set as follows:

• The US$750 million five-year bond was priced with a yield of 5.35%.
• The US$750 million 10-year bond was priced with a yield of 5.95%.

The bonds were priced at tight spreads relative to the Republic of Indonesia’s sovereign yield curve.

• The five-year tranche was priced at a spread of 32 basis points above Indonesia’s secondary sovereign bond curve, comprising a 22-basis-point premium above sovereign fair value and a 10-basis-point new issue concession.
• The 10-year tranche was priced at a spread of 34 basis points above the secondary sovereign bond curve, comprising a 24-basis-point premium above sovereign fair value and a new issue concession.

The transaction marks Danantara’s debut in the international bond market and reflects strong investor confidence in the institution’s credit profile and Indonesia’s broader economic prospects.