Indonesia is setting up a state investment agency that will manage government holdings in some of the country's biggest firms, after parliament on Tuesday approved the vehicle which is intended to operate like Singapore's investment arm Temasek.

Indonesia has amended a law governing the Southeast Asian nation’s powerful state-owned enterprises, laying the legal foundation for a new agency to manage billions of dollars in state assets while seeking investments domestically and potentially overseas.

Indonesia' government will set up a state investment agency to manage holdings in some of the biggest state companies after parliament passed a bill on Tuesday approving the body, which is intended to operate like Singapore's investment arm Temasek.