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Home / Insights

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OIC Economies

What will reconstructing besieged Gaza entail?

11 Apr 2025
Insight

OIC Economies
Indonesia's tech soul is on the line
10 Apr 2025
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OIC Economies
Can Indonesia’s new wealth fund lift or sink its economy?

In February 2025, Indonesia launched Danantara, a sovereign wealth fund tasked with managing $900 billion in state-owned enterprise (SOE) assets to propel economic growth.

Amid a turbulent economic landscape - marked by a weakening rupiah, a contracting equity markets space, and waning investor confidence - Danantara represents a bold bet on transforming Indonesia’s economy. 

Indonesian president Prabowo Subianto envisions it as a driver of propelling GDP growth from 5% to 8% by 2029, emulating giants like Singapore’s Temasek. Yet, public skepticism warns of governance risks and parallels to Malaysia’s 1MDB scandal. 

Potential to elevate Indonesia
Danantara’s ambitious scope - consolidating 65 SOEs, starting with seven giants like Bank Mandiri and Pertamina - offers a pathway to address Indonesia’s economic turbulence. By streamlining SOE operations, it could boost efficiency, reduce fiscal burdens, and unlock $20 billion in initial funding for high-impact sectors like infrastructure, renewable energy, and nickel downstreaming.

These investments could attract foreign direct investment (FDI), which is critical as investor confidence falters (e.g., LG Energy Solution’s $8.5 billion EV project withdrawal). 

If successful, Danantara could mirror Temasek’s role in Singapore, where state-led investments drive 5-6% annual GDP growth. For Indonesia, this could stabilize the rupiah, battered by global commodity price swings, and restore market momentum.

Beyond growth, the wealth fund could empower Indonesia to retain more economic value, addressing a longstanding issue for OIC nations often exploited by global corporations for low-value production. By investing in downstream industries like nickel processing, it could shift the country from raw material exporter to high-value producer, boosting national wealth. 

Its global advisory board, including billionaire and hedge fund manager Ray Dalio, signals intent to court international capital, positioning Indonesia as a regional economic powerhouse.

Risks that could compound challenges 
Danantara’s governance structure is a glaring concern, threatening to amplify Indonesia’s economic challenges. Unlike Temasek’s independent board, Danantara’s leadership raises fears of cronyism. National auditors (BPK, KPK) lack direct oversight, requiring House approval to probe finances. 

The appointment of Thaksin Shinawatra, Thailand’s former prime minister ousted in a 2006 coup and dogged by corruption allegations, to the advisory board further erodes credibility, calling Danantara’s integrity into question. This move risks alienating investors already wary after the Jakarta index responded negatively on the fund’s launch day.  

Weak governance could exacerbate currency volatility and capital flight, as seen in recent market trends. If Danantara bails out underperforming SOEs without reforms, it risks draining public funds - $325 trillion IDR from budget cuts is already committed. A 1MDB-like scandal, where political influence led to a $4.5 billion loss, could deepen the rupiah’s slide and deter FDI.

The Business Judgment Rule, shielding officials from liability, and optional supervisory committees heighten moral hazard, potentially turning Danantara into a political slush fund rather than an economic stabilizer.

Malaysia’s tale of triumph and tragedy
Malaysia, an OIC peer with a commodity-driven economy, offers a dual perspective on state-led investment through Khazanah Nasional Berhad and the 1MDB scandal - models of success and failure for Danantara to heed.

Khazanah, established in 1993, manages $40 billion in assets and has driven Malaysia’s economic growth (e.g., 5.6% GDP growth in 2022) by professionalizing SOE management and investing in technology and healthcare.

Unlike Danantara’s politically driven structure, Khazanah’s independent audits and professional board have attracted FDI, stabilizing Malaysia’s economy during commodity volatility. Its disciplined approach to high-return projects offers a roadmap for Danantara to boost Indonesia’s markets and rupiah. 

However, Khazanah’s early missteps, like bailing out Malaysia Airlines, warn Danantara against propping up inefficient SOEs without reforms, which could strain Indonesia’s budget amid 2025’s turbulence.

On the other hand, The 1MDB scandal, where $4.5 billion was siphoned off through corruption starting in 2009, underscores the perils of weak governance. Controlled by then-premier Najib Razak, 1MDB lacked independent oversight, leading to massive debt and a weakened ringgit. 
Thaksin Shinawatra’s advisory role in Danantara echoes 1MDB’s political entanglements, amplifying fears of elite capture.

To avoid 1MDB’s fate, Danantara must enforce rigorous audits and insulate its board from controversial figures, ensuring funds fuel growth, not enrichment.

Malaysia’s contrasting experiences highlight a clear lesson: professional governance is critical to economic success. Khazanah’s transparency offers Danantara a path to stabilize Indonesia’s economy, while 1MDB’s collapse warns of the catastrophic risks posed by political interference, which could deepen Indonesia’s currency and confidence crises.

High-stakes gamble
Danantara stands at a crossroads. If it adopts Khazanah’s professional governance and strategic focus, it could elevate Indonesia’s economy, stabilizing markets and attracting FDI to counter 2025’s turbulence. 

However, governance flaws - political leadership, Thaksin’s scandal-tainted appointment, and weak oversight - risk a 1MDB-like disaster, deepening currency woes and investor distrust. 

To succeed, Danantara needs transparent audits, a professional board free of controversial figures, and clear investment criteria, insulated from cronyism. 

As Indonesia navigates global headwinds, Danantara’s execution will determine whether it becomes a beacon of growth or a costly misstep. Policymakers must heed OIC lessons to ensure it lifts, not sinks, the nation’s prospects.
 

Rianovel Mere is a consultant and project manager at DinarStandard

06 May 2025
Insight
OIC Economies
What will reconstructing besieged Gaza entail?

It may be stating the obvious but rebuilding war-torn Gaza, after 15 months of relentless bombardment by Israeli forces, will be a massive and complex undertaking, which will entail conflating several elements such as financial aid, diplomatic engagement, humanitarian relief, and long-term political efforts.

The true ask: How can Muslim-majority countries play a critical part in this intense and long-term endeavour?

Scale of destruction

The Israel-Hamas conflict has caused nearly 50,000 deaths, displaced nearly a million people, and destroyed more than 60% of Gaza's housing stock along with much of its critical infrastructure, according to a report by the RAND Corporation.

The American research institute, which advises governments and international bodies on public policy, estimates that rebuilding housing and infrastructure could take over a decade, with costs exceeding $50 billion.

Similarly, a joint report by the World Bank, the United Nations, and the European Union found that reconstructing Gaza will require around $53 billion, with the largest portion allocated to rebuilding homes. 

Short-term recovery will need approximately $20 billion over the next three years, while long-term housing reconstruction will require an estimated $15.2 billion over the next five to eight years. Immediate recovery efforts include restoring essential social services such as healthcare and education, resuming basic utilities in the energy, water, and telecom sectors, ensuring food security, and repairing partially damaged homes. 

Additionally, a massive effort will be needed to clear over 50 million tons of rubble and debris caused by 15 months of relentless Israeli bombardment.

“The devastation by Israel in Gaza demands a response that matches the scale of reconstruction efforts seen in the aftermath of World War II, when cities like Berlin and Tokyo were rebuilt whilst preserving their communities and cultural heritage,” the Muslim Council of Britain stated in February. 

Innovative reconstruction strategies

Ahmed Fouad Alkhatib, a Gaza-born political analyst and resident senior fellow at the Atlantic Council, has proposed innovative solutions to Gaza’s immediate reconstruction challenges, including recycling its rubble to create an artificial peninsula off its central coast, which could host an airfield and a seaport. This could accord a vital, independent lifeline for the Strip’s recovery.

Additionally, Alkhatib proposes docking a floating power station offshore to supply electricity and deploying concrete breakers to process large debris. This would help clear space for temporary mobile homes, offering shelter for displaced residents as reconstruction progresses.

When it comes to providing shelter for Gaza’s displaced residents, the RAND report suggests that horizontal expansion alone cannot achieve the necessary population densities for returning communities.

Instead, the authors advocate for vertical expansion - adding floors to mid-rise buildings - as a practical solution for maximizing space in land-constrained urban areas. Additionally, vertical expansion aligns with the traditional Palestinian family structure, where generations often live in the same building, expanding upward as families grow through births and marriage, the report notes.

Muslim-countries helping rebuild Gaza

Muslim-majority countries, including Qatar, Turkey, Saudi Arabia, and the UAE, have previously provided billions in aid and may play a major role in funding Gaza’s infrastructure projects.

Qatar’s Gaza Reconstruction Committee has overseen hundreds of humanitarian projects since 2012. In 2024 alone, Qatar contributed over $49 million to the United Nations Relief and Works Agency for Palestine Refugees (UNRWA) to aid Gaza. Saudi Arabia has provided more than $5.3 billion in support for Palestinians across 289 projects, including $185 million since the latest escalation in 2023. Riyadh is now working with various UN agencies to raise $106 billion for reconstruction and humanitarian assistance.

Turkiye has supplied around $16.2 billion in aid to Gaza since October 2023, while the UAE's aid contributions to Gaza since the October war have been valued at $828 million. Egypt, too, has provided aid to Gaza worth nearly $196 million since the start of the war. 

Former USAID policy official Larry Garber notes that any effective reconstruction plan will require substantial resources in both personnel and funds. “Personnel might include security forces, civilian officials in formal governance roles, and technical advisers. The personnel also may have to meet a minimal vetting by Israeli authorities, depending on how they will be entering Gaza,” he said.

“Muslim-majority states should support locally-based and resilient reconstruction plans to ensure reconstruction actions respond to local needs and satisfy the ambitions of Gazan people,” says Abdalrahman Kittana, a postdoctoral research fellow at Finland’s Tampere University and an assistant professor of architectural engineering at Palestine’s Birzeit University.  

Beyond state-level support, Muslim populations - including doctors, engineers, and other specialists - can contribute by volunteering in Gaza. Kittana also suggests that offering remote job opportunities, particularly in the IT sector, and providing financial donations could further aid in the reconstruction process.

Egypt’s reconstruction plan

Egypt has already proposed a five-year $53 billion plan to rebuild Gaza, as an alternative to US President Donald Trump’s proposal to develop the enclave after depopulating it.

Endorsed by the Arab League and the Organisation of Islamic Cooperation (OIC), the plan envisions completing the reconstruction over the next five years. 

The proposal includes three phases, starting with the removal of rubble, construction of temporary housing, and restoration of partially damaged homes. The second phase envisions the establishment of utility networks and construction of housing units for 1.6 million people, while the third would involve completing housing for Gaza’s population, launching an industrial zone and technology hub, building fishing and commercial seaports, and developing an airport.

Egyptian businessman Hisham Talaat Moustafa, CEO of real estate developer TMG Holding, offers a more optimistic timeline. In a televised interview, he argued that Gaza’s reconstruction could be completed in three just years at a cost of $27 billion. His plan includes constructing 200,000 housing units to accommodate 1.3 million residents, with the involvement of 40 to 50 construction companies, both local and international.

Kittana believes Egypt’s proposal is impractical. While acknowledging its theoretical relevance, he argues that the plan was drafted during wartime without consulting Gaza’s local municipalities or residents, leading to critical oversights.

“The figures showing the general masterplans are out of scale architecturally and out of context practically,” Kittana explains. “The plans consider Gaza as ground zero, neglecting topographic, social, and contextual diversity as well as private ownership of the land. They deal with all of Gaza areas as if they were completely wiped out, raising questions about what they will do with undamaged or relatively sound buildings and areas.”

Furthermore, he notes that both the spatial plans and architectural typologies fail to align with Gazans’ social identity.

Kittana refers to the Gaza Phoenix Framework for the reconstruction of the strip as a more viable solution, describing it as a well-developed plan. Launched by Gaza municipalities and Palestinian grassroot communities, it encompasses fields such as urban planning, architecture, political strategies, economics, environment, and heritage.

Challenges and considerations

The success of Gaza’s reconstruction depends on multiple factors, including the stability of the three-phase ceasefire agreement and Israel’s position on material imports and border controls.

Following a renewed escalation during Ramadan last month, Egypt proposed a new ceasefire plan. 

“I don't think any country, Muslim or otherwise, has ‘committed’ any funds, which is wise on their part,” Garber says. “They should understandably wait until they can be reasonably certain that new fighting will not resume, and that the reconstruction process can proceed without impediments caused by delays in moving materials into Gaza.”

Moreover, some Muslim nations, including the UAE and Saudi Arabia, have indicated that their financial support is contingent on a clear pathway toward Palestinian statehood.

“I understand there are distinct positions even among the countries that participated in the discussions leading up to the Cairo summit,” Garber says. “My sense is that plans for trade routes should be included in the rebuilding plans, but that the initial priorities will require the restoration of essential services.”

While many Muslim-majority countries have expressed willingness to contribute, the real challenge will be sustaining long-term commitments rather than providing only short-term relief. 
 

11 Apr 2025
Insight
OIC Economies
Indonesia's tech soul is on the line

Southeast Asia’s tech landscape is bracing for a tectonic shift. Reports emerged this week that Grab Holdings Ltd., the Singapore-based ride-hailing giant, is raising capital to acquire GoTo Group, a consumer tech company and one of Indonesia’s most valuable startups. 

GoTo - born from the 2021 merger of Gojek and Tokopedia - has been a cornerstone of Indonesia’s digital economy. The GoTo ecosystem offers mobility, delivery and financial services, as well as extends e-commerce services through Tokopedia and banking solutions through its partnership with Bank Jago. 

The potential deal isn’t just a juicy headline for the daily’s business section; it’s a litmus test for the country to retain control over its technological destiny, especially after losing Tokopedia’s e-commerce arm to TikTok in early 2024 . 

At its heart lies a critical concept: platform power - the leverage a nation wields when it owns the enterprises driving its economy. 

As Jakarta weighs the implications, the stakes couldn’t be higher.

Homegrown brands feeling the heat
GoTo is no ordinary company. It’s an economic engine, contributing an estimated 2% to Indonesia’s $1.37 trillion GDP in 2023, according to World Bank figures - roughly $26 billion in annual impact. 

With two million drivers powering its Gojek arm and 14 million merchants on Tokopedia , GoTo processed ride-hailing and delivery transactions worth $3 billion in 2024 alone. The sheer scale of its business has made it a linchpin of Indonesia’s tech ecosystem, supporting livelihoods of multitudes, from urban drivers to rural sellers.

Cracks have begun to appear in its foundation, though. In January 2024, GoTo sold a controlling stake in Tokopedia to TikTok for over $1.5 billion, ceding one of its crown jewels to a Chinese tech giant after regulatory pressure forced TikTok to partner locally to resume e-commerce operations in Indonesia. 

The deal eroded GoTo’s e-commerce muscle, leaving Gojek as its primary driver. Once a symbol of Indonesia’s startup ambitions, GoTo’s reduced scope makes it a juicier target for Grab - and a stark reminder of how quickly platform power can slip away. 

As one of Southeast Asia’s rare unicorns - companies valued over $1 billion- GoTo still carries national weight, but the Tokopedia’s loss underscores the fragility of that status. 

Regional powerhouse in the making
For Grab, the acquisition makes strategic sense. Valued at $18 billion, the company reported $2.8 billion in revenue in 2024, an 18% jump year-over-year , and serves 43 million monthly users across  eight countries. Acquiring GoTo could create a $40–50 billion powerhouse, blending Grab’s regional reach with GoTo’s 60 million active users. Analysts see potential for a dominant player in Southeast Asia’s e-commerce market, projected to reach $280 billion by the end of the decade. 

The upside is tangible: expanded operations could generate thousands of new jobs, building on GoTo’s existing two million-strong driver base. 

Enhanced scale might also accelerate innovation - think AI-optimized logistics or seamless cross-border payments - positioning the combined entity to compete with global heavyweights like Amazon or Singapore’s Sea Group, which already claims 40% of Indonesia’s e-commerce via Shopee. 

For Indonesia, a stake in this regional titan could amplify its voice on the global stage, provided it retains influence post-deal.

Gig workers and national leverage at stake
The sheen fades when viewed through the lens of Indonesia’s gig economy.  

Gojek’s two million drivers are a case in point. A 2022 study in Jakarta found that 70% depend on the platform as their primary income, earning $150–$200 monthly after expenses  - near Indonesia’s minimum wage. Incentives have already shrunk amid rising competition. GoTo’s domestic roots have kept it attuned to these workers’ needs, balancing profit with local realities. 

A Grab-led future might shift that dynamic. Its track record offers clues: in Singapore, driver commissions fell, prompting protests. Extending that approach to Indonesia’s larger, less-regulated market could exacerbate pressures on an already fragile workforce. 

Platform power is a safeguard - when a platform prioritizes national interests, worker welfare potentially triumphs shareholder value. If GoTo’s ownership moves offshore, Indonesia risks losing that buffer, leaving gig workers exposed to decisions made far from Jakarta’s streets.

Shaping the future 
Indonesia isn’t powerless. Governments worldwide have tools to manage such shifts - antitrust reviews, local ownership mandates, or worker protection clauses. 

India offers a playbook: its Unified Payments Interface (UPI) processed $1.5 trillion in transactions in 2024 , bolstering domestic platforms while keeping foreign players in check. Jakarta could impose conditions on the Grab-GoTo deal - say, retaining a minority stake or mandating gig worker benefits - to preserve its power.

The country’s 2020 Omnibus Law already aims to boost digital investment - tweaking it to exert local control could be a start.

Timing matters, too. Indonesia’s digital economy is projected to reach up to $360 billion by 2030, per e-Conomy SEA 2024 Report , with GoTo as a key driver. 

Letting it slip away risks stunting that growth - or worse, ceding it to rivals. Regulators have flexed before: in 2023, they tightened rules on foreign e-commerce to protect local firms . A similar move now could ensure this merger doesn’t hollow out Indonesia’s tech ambitions.

This isn’t about blocking progress - it’s about shaping it. Platform power, in this context, is more than mere market share; it’s about sovereignty over a digital ecosystem that shapes – and funds - daily life. A handover to Grab risks diluting that influence, raising questions on the potential custodians of Indonesia’s tech future.

Solution: All stakeholders - regulators, startups, and the workforce - should be asking the same questions. And they must be aligned with national interests. 

Rianovel Mare is a consultant and project manager at DinarStandard

10 Apr 2025
Insight
OIC Economies
How can US trade tariffs impact Middle Eastern countries?

Trump threatened to impose tariffs during his election campaign, positioning protectionism as a key selling point to appease voters.

After taking up the world’s most important office, he slapped a 10% duty on Chinese imports and a 25% tariff on Mexican and Canadian goods. 

China responded with its own set of retaliatory measures, including a 15% tax on certain types of coals and liquefied natural gas, and a 10% tariff on crude oil, agricultural machinery, large-displacement cars and pickup trucks. 

Weeks into the job, he ordered a 25% import tax on all steel and aluminium entering the US, to be enforced on March 12. It is essential to remember that the US is the world’s largest importer of steel, with Canada, Brazil and Mexico as its top suppliers. 

The White House also issued an executive order on February 25, calling for an investigation into whether copper imports pose a threat to US national security.

But how do these trade tariffs and perhaps more to come, impact the wider Middle East region? The impact is multi-fold, ranging from lower trade figures and subsequent lower US and global growth.

If this scenario plays out, a delay in interest rate cuts is probable, which may impact the six-nation Gulf Cooperation Council (GCC) bloc and other Middle Eastern countries.

Dwindling trade 
The US imported $1.61 billion and $671 million worth of aluminium from the UAE and Bahrain in 2023, respectively, ranking the two GCC states among its top 10 aluminium exporters, according to ITC data. 

“For the UAE, aluminium exports to the US represent just 0.3% of the country's total exports and about 0.3% of its GDP. In contrast, Bahrain's aluminium exports to the US account for about 5.5% of its total exports and 1.5% of GDP. Therefore, while the impact on Bahrain will be more pronounced than on the UAE, it remains manageable,” said Ramona Moubarak, MENA head of country Risk for BMI, a Fitch Solutions company.

“Although discussions about imposing 25% tariffs continue, we believe that these rates might be slightly reduced, albeit not to the levels observed in 2018 when substantial concessions were granted. A compromise tariff rate between 10-15% could potentially be reached.”

The US remains the top destination for Emirati exports, with other export markets including the Netherlands, Japan, Italy, India and Turkiye. Similarly, the US is Bahrain’s top importer of aluminium products, with OIC countries such as Saudi Arabia, Turkiye, Morocco and Egypt amongst its top 10 importers.  

“A robust global demand outlook for aluminium will likely mitigate risks posed by losses in US export demand on Bahrain and the UAE, making it is easy to reroute exports to alternative markets,” adds Mubarak.

The UAE and Bahrain which have several free trade agreements, could look to reroute exports to these destinations. 

Fed rates’ blast radius 
The trade war that could potentially escalate and materialize in lower trade figures could slow overall growth. 

“We estimate that tariffs on the scale that Trump has announced will slow both US and global growth, push up inflation, and cause further delays in Fed interest rate cuts,” Eastspring Investments said in its monthly bulletin in February. 

President Trump has pushed for lower interest rates in a social media post on February 12, suggesting that monetary easing should work in tandem with tariffs. 

Since five of the six GCC countries have pegged their currencies to the US dollar, any movement in interest rate cuts will be reflected across the region, with Central Banks mirroring the move. 

The Fed decreased rates by 100 bps in 2024. S&P Global Ratings said ahead of the trade tariffs that the Fed could afford to slow the pace of rate cuts in the months ahead.

“In general, lower rates will dent the net interest income of banks in selected emerging markets in EMEA.”

For the GCC, higher lending growth and a lower cost of risk will compensate for declining margins. For Turkiye, the decline in global interest rates will help banks roll over their external debt (21% of total funding at mid-2024), with a positive impact on pricing and demand, it added. 

26 Feb 2025
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