AGP Executive Report

Rupiah & Market Sentiment: Indonesia’s finance minister Purbaya Yudhi Sadewa pushed back on fears of a 1997-98-style crisis, saying fiscal and economic fundamentals remain solid while the Jakarta Composite Index and rupiah weakness are driven largely by negative perceptions; he also called for tighter coordination with Bank Indonesia to support the currency. Port Congestion & Rules: Finance Minister Purbaya urged tighter, fair regulations on how long import cargo can sit at ports, after complaints that storage penalties are cheaper than warehousing—contributing to Tanjung Priok backlogs of thousands of documents and containers. Infrastructure in Papua: The Jayapura–Wamena road project is continuing in 2026, with about 50 km under development via a long-running PPP, framed as a key economic link for Highland Papua. Climate Justice & Waste: The Environment Ministry linked Indonesia’s waste crisis to climate justice, citing methane emissions from poorly managed waste and pushing a climate justice bill to strengthen environmental governance. Creative Economy Push: The Creative Economy Ministry said culture and the arts can expand Indonesia’s creative-economy ecosystem and help practitioners reach global markets through international cultural diplomacy. Energy Security (Regional): Malaysia’s finance minister said it is diversifying energy supply sources to reduce disruption risk, including coal supply expansion beyond Indonesia.

Rupiah & Capital Flows: Bank Indonesia and the finance ministry agreed to raise the attractiveness of yields on Indonesian assets to pull back portfolio inflows after the rupiah hit record lows, as foreign holdings of bonds slid to near two-decade lows. Banking Stability: Indonesia’s Financial Services Authority (OJK) said there’s no sign of a “bank rush,” citing solid capital adequacy (CAR 23.97%) and manageable non-performing loans (2.17%), while warning rupiah weakness could pressure imports and subsidies. Anti-Graft in Finance Tech: KPK launched a graft probe into alleged bribery tied to BRI and Telkom’s banking notification services (SMS/WhatsApp), with suspected state losses near Rp2 trillion, and also continues an EDC procurement case at BRI. Public Finance Watch: Indonesia’s customs and excise revenue reached Rp123.8 trillion (US$6.85bn) by end-May, while the state budget deficit was reported at Rp180.4 trillion as of May. Trade & Tariffs: Indonesia expects its final US export tariff rate under the USTR Section 301 forced-labor probe to reach 18% after a temporary 10% phase, pending US legal steps. Energy Outlook: SKK Migas expects higher oil and gas lifting in 2027, with oil at 602,000–615,000 bpd and gas up to 934,000–977,000 boe/d. Tourism Momentum: The tourism ministry said foreign arrivals rose to 1.25 million in April 2026 (+7.22% y/y), supporting foreign exchange earnings. Digital Finance Security: OJK urged stronger transaction security as cyber threats and AI-enabled fraud rise, noting a surge in digital payments.

Indonesia’s export push to Africa: Indonesia is stepping up trade and investment ties with sub-Saharan Africa to diversify markets, with current trade at about US$18.5bn (3.5% of total) and opportunities flagged in palm oil, processed foods and paper. Rupiah and funding diversification: Finance Minister Purbaya says Indonesia targets issuing yuan-denominated Panda Bonds in June to broaden State Budget financing sources, with Bank Indonesia supportive of renminbi instruments. Food price support via MBG/aid: The agriculture ministry is floating adding chicken eggs to food assistance to absorb farm output when prices fall, linking absorption to the Free Nutritious Meals (MBG) channel. Cigarette policy overhaul: Indonesia is drafting standardized/plain packaging rules for cigarettes and e-cigarettes to curb youth smoking, with a transition period of up to 12 months. Palm oil market jitters: Malaysian palm futures slid on Dalian weakness and concerns around Indonesia’s new centralised export system, which began a transition on June 1. Energy project momentum: Conrad Asia Energy’s Natuna unit booked a jack-up rig for six-well drilling at the Mako gas field, expected to start in Q2 2027. Marine protection warning: NGOs warn offshore oil and gas expansion could threaten marine biodiversity, citing overlaps with protected areas across 11 countries including Indonesia. Biodiversity-to-debt risk: A study says markets may be underpricing biodiversity loss, potentially raising sovereign borrowing costs and interest burdens. Tourism sports calendar: Bali will host the 12th Asian Open Water Swimming Championship on June 13–15, aiming to boost sports tourism beyond the island’s usual draw.

Rupiah & Markets: Indonesia’s JCI slid 2.53% on June 5 as investors stayed cautious; the rupiah edged up to about Rp18,038 per US dollar, but sentiment remains fragile. Free Meals Overhaul: The National Nutrition Agency (BGN) pledged tighter governance after corruption scrutiny, signaling a shift from hitting beneficiary numbers to improving kitchen quality and focusing new capacity on remote areas. US Tariffs—Indonesia’s Bet: Indonesia’s economic affairs minister said the USTR plans to grant 18 Section 301 tariff exclusions, while Indonesia may still face a 10% additional duty—framed as a boost for local manufacturing competitiveness. E-Commerce Rules: Indonesia updated e-commerce regulations to explicitly include ride-hailing and online travel agents under PMSE oversight. Energy Policy: Indonesia will mandate E5 gasoline blending from the second half of 2026 (starting in Java), alongside preparations for a B50 biodiesel rollout. AI for Creators: Meta launched an AI creator assistant on Facebook, rolling out first in the US, Canada, and India, plus expanded AI translation features. OECD Push: Switzerland pledged €3m to support Indonesia’s OECD accession, focusing on SOE governance, responsible business conduct, and anti-bribery alignment.

Rupiah Shock & Market Selloff: Indonesia’s rupiah slid to a historic low near IDR18,000 per US dollar, dragging the Jakarta Composite Index down about 5% to a near six-year low as investors worried about policy uncertainty, fiscal strain from higher oil prices, and the free-meal programme’s governance risks. Central Bank Support: Finance Minister Purbaya said the government has set aside IDR8 trillion to help stabilize the bond market via Bank Indonesia interventions, including repurchases of securities sold by foreign investors. Business Impact: Employers’ group Apindo warned companies are freezing hiring and cutting costs as the weaker currency raises production and financing burdens, especially for sectors reliant on imported inputs. Digital Finance Security: OJK urged banks and fintechs to harden digital transaction security as cybercrime and AI-enabled fraud rise, citing a surge in high-risk malware incidents. Free Meals Programme Reset: Indonesia’s nutrition agency (BGN) will pause new MBG kitchen construction, refocus beneficiaries, and suspend kitchens that miss priority groups, targeting frontier/outer areas and pregnant women, breastfeeding mothers, and under-fives. Energy Transition Milestone: NRE reached 17.89% of Indonesia’s electricity mix in Q1 2026, surpassing the target, though coal still dominates. Meta Creator Tools: Meta rolled out an AI-powered creator assistant inside Facebook to explain performance and suggest next steps, alongside expanding AI Reels translations.

Rupiah Under Pressure: Indonesia’s rupiah slid to a record low, breaching the 18,000-per-US dollar level as oil-price shocks from the Iran conflict tighten dollar liquidity and narrow the trade surplus, with Bank Indonesia intervention and further rate moves now in focus. Central Banking Overhaul: Indonesia’s parliament passed a sweeping bill expanding Bank Indonesia’s growth-support role and giving lawmakers more say over independent financial regulators—raising investor concerns about central-bank independence. Free Meals Corruption Crackdown: President Prabowo fired the head of the US$15bn free school meals programme after corruption allegations tied to the nutrition agency, and ordered investigations into suspected misconduct. US Tariff Threat Looms: The US proposed 10%–12.5% Section 301 tariffs on about 60 economies over alleged forced-labour enforcement failures, explicitly including Indonesia and Malaysia—adding uncertainty for regional exporters and supply chains. El Niño Food Risk: Hot, dry weather linked to an intensifying El Niño is disrupting crop planting across Asia, threatening yields and pushing up grain and rice prices. Industrial & Tech Partnerships: Indonesia is looking to BRICS tech partnerships to move from consuming to producing technology, while Indonesia’s energy transition push highlights the race to build a domestic battery industry. Blue Economy Push in Papua: Papua reaffirmed plans to grow the fisheries value chain via downstream processing and supporting infrastructure to raise coastal community welfare.

US Tariff Shock for Indonesia: The Trump administration’s USTR proposed new Section 301 tariffs of up to 12.5% on imports from 60 economies over alleged forced-labor failures, with Indonesia listed among countries facing the 10% tier—raising fresh cost and supply-chain uncertainty for regional exporters. EU Escalates Sanctions: The EU imposed restrictions on Kyrgyzstan as a sanctions “conduit” for Russia-linked re-exports of sensitive equipment, signaling tougher third-country enforcement. Markets Watch FX and Policy Risk: The ringgit slid on renewed US tariff concerns, while Indonesia’s rupiah also weakened past key levels in regional trading—highlighting how tariff headlines are feeding into currency volatility. Indonesia’s Finance Pipeline: Fitch and S&P assigned a ‘BBB’ rating to Danantara Investment Management’s proposed global bond programme, while Alpha JWC Ventures targets up to $300m for a new fund—both pointing to continued capital-market activity. AI Infrastructure Push: BDx Data Centers secured 1.2GW of power agreements with PLN across Jakarta and West Java, underscoring Indonesia’s data-center buildout momentum. Energy and Climate Backdrop: WMO expects El Niño to return (80% chance by mid-year), while Indonesia and partners keep debating how to balance renewables with grid stability amid rising demand. Human Capital Spending: Prabowo reiterated support for the Free Nutritious Meals (MBG) programme as a long-term investment in nutrition and village economic growth.

US Trade Pressure: The U.S. Trade Representative proposed new Section 301 duties of 10% or 12.5% on imports from 60 economies, including Indonesia, after finding forced-labor import bans are not effectively enforced; hearings run July 7 and comments close July 6, raising fresh tariff uncertainty for regional exporters. Rupiah & Markets: Indonesia’s rupiah slid to another record low and the Jakarta Composite Index fell sharply to a five-year low as higher oil prices and a shrinking trade surplus fuel investor worries about fiscal strain and inflation. Digital Rules for Youth: Indonesia rolled out a sweeping under-16 social media ban, forcing major platforms to rapidly deactivate accounts and redesign services, with compliance already reshaping app features and access. Local Enforcement & Governance: The Presidential Staff Office (KSP) carried out 81 field checks on 2026 priority programs, covering food, energy, health, education, anti-corruption, and digitalization. Security & Resources: Indonesia’s military and task forces intercepted vessels in Riau Islands waters carrying raw minerals with illegal rare earth metals and radioactive elements, targeting customs and export violations. Diplomacy & Defense Industry: Turkish FM Hakan Fidan arrived in Jakarta to push trade and defense cooperation, while Indonesia and Qatar advanced a defense-industry joint venture via Republikorp and Barzan Holdings. BRICS DRR Meeting: BRICS disaster risk reduction talks began in Puri, Odisha, with Indonesia among participants focused on resilient infrastructure and DRR financing.

Trade & FX: Indonesia’s trade surplus shrank to the lowest in six years in April as the rupiah slid, lifting import costs amid higher chip prices and Iran-war-related pressures. Legal & Business: Gojek founder Nadiem Makarim pleaded not guilty in his graft case, arguing prosecutors are forcing a link between Chromebook procurement and Google’s investment in Gojek. Energy & Climate Risk: The WMO says El Niño is developing with an 80% chance for June–August 2026 and near/above 90% odds it persists to at least November, raising risks of extreme weather. Infrastructure & Mobility: Whoosh added six daily trips, taking services to 68 per day to handle post-holiday demand on the Jakarta–Bandung route. Agri & Human Capital: Indonesia will provide 5,000 palm oil scholarships this year via BPDP to expand skilled plantation talent. Property Market: JLL reports Jakarta’s CBD office recovery continues, with occupancy stable around 72% and demand up strongly in Q1. Regional Trade Policy: Malaysia is unlikely to lose palm-oil edge despite Indonesia’s EU FTA progress, with analysts pointing to Malaysia’s strength in higher-value certified and refined products.

Inflation Watch: Indonesia’s May inflation quickened to 3.08% y/y (from 2.42% in April), nudging closer to Bank Indonesia’s 1.5%-3.5% target as food and transport costs rose; the rupiah’s slide to a record low also keeps imported inflation risks in focus. Monetary Policy: Bank Indonesia’s bigger-than-expected May rate hike (50 bps) aims to keep inflation contained through 2027, even as currency pressure persists. Rupiah & Insurance Costs: A weaker rupiah is raising alarms for insurers over higher health-claim costs as imported medicines, devices and consumables get pricier. Resource Export Overhaul: Indonesia’s coal exports fell 6.7% y/y in Jan-Apr to 114.54m tonnes; meanwhile, business groups back the state’s push toward a centralized export monopoly via DSI, targeting about $66bn in annualized resource revenues. Palm Oil Outlook: Palm oil fresh fruit bunch prices may recover as farmers get assurances that the single-channel export policy’s “shock effect” will fade once technical rules are finalized. Corruption Case: Gojek founder Nadiem Makarim pleaded not guilty in a Chromebook procurement corruption case, arguing the Chrome-based approach saved the state 3.9tn rupiah. Skills & Jobs: The government will offer 15 certification tracks for MagangHub interns, covering areas from digital marketing and web development to financial reporting and data analysis. Digital Economy & Payments: Mastercard and TikTok launched a shared SEA music loyalty programme in Indonesia and Thailand, while Google expanded virtual try-on across key APAC markets including Indonesia. Tourism Push: Indonesia urged investors to look beyond Bali, with a plan to verify online accommodation licensing via an API-based system. Regional Policy Spillover: Malaysia began enforcing a ban on independent social media accounts for children under 16, with platforms facing major fines for non-compliance.

Inflation Watch: Foreign banks are warning Indonesia’s inflation could overshoot the central bank’s targets, citing expiring price freezes and incomplete pass-through from food prices, with Deutsche Bank flagging faster electricity cost growth. Digital Public Infrastructure: Indonesia and Papua New Guinea joined the 50-in-5 campaign, linking digital identity, payments, and data exchange to speed trusted, interoperable public services. Halal Trade: Indonesia logged a $51.17bn halal product trade surplus in 2025, with palm derivatives leading exports and Q1 2026 halal exports rising. Wealth Management Expansion: DBS plans to open 18 new Asian wealth centers and upgrade 36, including in Indonesia, as affluent demand stays resilient. Food Security & Prices: Officials said no edible-oil supply pressure is expected, pointing to stable stocks and ongoing imports from Indonesia/Malaysia and other suppliers. Export & Logistics: Cebu’s exports grew despite peso weakness, underscoring how exporters are adapting to higher input costs and supply-chain frictions. Online Fraud Crackdown: Indonesian police named foreign suspects in a pig-butchering romance-and-investment scam, targeting victims via fake crypto trading platforms. BRICS Disaster Risk Meeting: 11 countries will meet in Puri, Odisha (June 3–5) on BRICS DRR financing and resilient infrastructure, with Indonesia among attendees. Malaysia Youth Online Rules: Malaysia began enforcing a nationwide under-16 social media ban with age verification and penalties for non-compliance, adding regional pressure on platform safety policies.

Pancasila Economics Push: President Prabowo used Pancasila Day to argue Indonesia’s growth must be guided by religious, humane, unity and welfare values—not just GDP—citing nutrition, farmer support, fishermen market access and worker protections. Danantara Export Overhaul: Indonesia issued a presidential decree to expand Danantara Sumber Daya Indonesia (DSI) into a development investment arm under the sovereign wealth fund, while Finance Minister Purbaya said DSI’s centralized export proceeds reporting via CEISA 4.0 should curb under-invoicing and improve transparency, potentially lifting listed exporters’ profitability and dividends. Social Aid Data Reset: The government pledged to overhaul social assistance beneficiary databases after findings that a large share of aid recipients may be mistargeted, consolidating data under DTSEN to improve accuracy. Youth Social Media Crackdown (Malaysia): Malaysia began enforcing an under-16 social media ban with age verification for platforms with 8m+ users, with fines for non-compliance—joining Indonesia and other countries tightening online safety. Regional Market Signals (DBS): DBS said it will open 18 new wealth centres and upgrade 36 across Asia-Pacific by 2027, including Indonesia, as it targets affluent client growth with more face-to-face advisory. Geopolitics & Trade Risk: China conducted “law enforcement” patrols east of Taiwan amid Japan-Philippines maritime delimitation talks, adding to regional uncertainty.

Export Governance Overhaul: Indonesia will require natural-resource exporters to report export activities to PT Danantara Sumberdaya Indonesia (DSI) starting June 1, using the CEISA 4.0 system, beginning with coal, palm oil and ferroalloys; firms get a transition period while the government evaluates the first three months, with full rollout targeted by Jan 1, 2027—aimed at curbing under-invoicing, transfer pricing and export-proceeds leakage. FX Incentives: Finance Minister Purbaya Yudhi Sadewa said compliant exporters that place 100% of foreign exchange proceeds into the domestic financial system can receive 0% income tax incentives on the placement, with rules varying by commodity and holding period. Market Oversight: The IDX added PT Transcoal Pacific Tbk to the High Shareholding Concentration list after 94.1% of shares are held by a small group, while the exchange notes listing doesn’t automatically mean a rule breach. Trade Expansion: Indonesia expanded fishery export access to China after GACC approved eight more processing units, bringing the total to 638; 2025 exports to China hit 491,528 tons worth US$1.04bn. Tourism & Currency: Indonesia’s tourism ministry said a weaker rupiah could make the country more affordable for foreign visitors, supporting longer stays as promotions intensify.

Rupiah Pressure: The rupiah slid past Rp17,880 per US$ and some banks sold dollars above Rp18,000 as markets weighed global and domestic headwinds, with Trimegah Sekuritas noting BI’s 5.25% rate move helps signal stability but fiscal follow-through is key. Currency Supply & Tech: Indonesia’s SIM registration will start using facial biometric recognition from July 1, with Komdigi/Dukcapil verification targeted to take under a minute on average. Food Prices Watch: The Agriculture Ministry is monitoring live chicken prices after reports they fell below the reference Rp19,500/kg in several regions, meeting industry groups to stabilize farm-level pricing. Trade & Logistics Corridor: Indonesia’s Belawan, Penang and Perlis ports signed an MoC to create a shorter 388km route to move Sumatra commodities (palm oil, coffee, cocoa, tea) into northern Malaysia and beyond. Industrial Inputs: BASF began operating a new 2-ethylhexyl acrylate storage tank in Merak to boost supply reliability for downstream paints, coatings and adhesives. Regional Defence Deals: India’s Defence Secretary said a BrahMos deal with Vietnam is already signed and Indonesia’s pact is in final stages, underscoring India’s growing defence exports into ASEAN.

Indonesia–France Business Push: President Prabowo wrapped up a Paris visit and returned to Jakarta, after talks with Emmanuel Macron that produced four commercial deals worth US$3.5bn across energy security, trade and defense, plus a new France–Indonesia High-Level Business Council to deepen investment and downstream cooperation. Fuel Subsidy vs Currency Shock: Indonesia will keep subsidized fuel prices unchanged through year-end despite the rupiah’s historic slump, with officials citing secure stockpiles above minimum thresholds. Resource Nationalism Meets Investor Friction: Indonesia is tightening export controls and using state-linked marketing and FX deposit rules to capture commodity rents, while exporters signal exemptions and face regulatory bottlenecks and leakage concerns. Bulog Rice Export Pricing: Bulog says rice exports to Malaysia will be priced above Indonesia’s domestic ceiling to protect farmers and state revenue, with talks planned after Eid al-Adha. Digital Infrastructure Risk: A Sumatra blackout has raised alarms for Indonesia’s data center buildout, with industry urging PLN to improve grid reliability and publish transparent post-incident fixes. Palm Oil Export Probe Watch: Wilmar says it has not received formal notice in an alleged CPO under-invoicing/transfer-pricing probe, even as market sentiment wobbles. Health Tech Expansion: AstraZeneca and Roche Diagnostics plan to expand AI pathology for breast and lung cancer across nine Asian markets including Indonesia. Security Burden Sharing: At Shangri-La Dialogue, US Defense Secretary Pete Hegseth urged Indo-Pacific allies to raise defense spending to 3.5% of GDP, warning of a “clear shift” in how business is done with non-compliant partners.

Indonesia–France Talks: President Prabowo met France’s Emmanuel Macron at the Élysée Palace, with both sides pushing defense cooperation and reviving a long-stalled Indonesia–EU trade deal (IEU-CEPA), alongside a new France–Indonesia high-level business council. Renewables & Industry: Indonesia inaugurated key facilities in Batam for its first large-scale wind-to-electricity conversion project supporting the Tennet 2GW HVDC plan, with officials citing thousands of jobs during construction. SME Sustainability: ASEAN and East Asia business groups partnered to help SMEs adopt circular economy practices, including a “circular business check” tool piloted in Indonesia, Thailand and the Philippines. Trade & Commodities: Indonesia’s trade deficit widened as imports accelerated and exports slowed, while the government clarified that PT Danantara Sumberdaya Indonesia will not profit from the new CPO export centralization system during a June–Aug transition. Enforcement: Batam–Barelang police raided an online gambling center linked to a multinational network, seizing cash and funds and detaining suspects. Energy Planning: Indonesia is preparing land on Java for the 100 GW solar program, targeting an initial 17 GW phase with grid and substation readiness.