There is something satisfying about a ranking. It takes a subject that is complicated, reduces it to a number, and gives everybody permission to stop thinking quite so hard.

• Universities can be ranked,

• Cities can be ranked,

• Passports can be ranked

…and apparently even the manners of billions of people can be compressed into a score which fits in a spreadsheet. We may not know exactly what makes a civilisation civilised, but fortunately Microsoft has a column for it.

The Digital Civility Index, produced by Microsoft, is intended to measure people’s experiences of online risks and interactions. In its 2020 edition:

• Singapore scored 59,

• Malaysia 63,

• The Philippines 66,

• Thailand 69,

• Vietnam 72, and

• Indonesia 76.

Lower is better, so Indonesia came last among the Southeast Asian countries surveyed and 29th out of 32 countries and territories overall. It is the sort of result that practically writes its own headline: Indonesia has one of the least civilised internets in the world.

Anyone who has spent time online knows that the internet can bring out a peculiar side of humanity, and Indonesia, with its enormous social-media population, is hardly immune. There are scams, misinformation, abuse and the particular species of online argument in which two people who have never met somehow arrive at the conviction that the other should be removed from society.

The index does not actually measure whether people are nice. It measures exposure to a collection of online risks, including bullying, harassment, hate speech, trolling, reputational attacks, unwanted sexual attention, doxing, scams and fraud. It is therefore partly an index of civility, but also an index of safety, vulnerability and digital literacy. The distinction matters because a country can have a perfectly ghastly comment section and a relatively safe online environment, while another can have remarkably courteous users who are being scammed by the thousand.

That makes Indonesia’s 76 neither meaningless nor quite what it appears to be. The number tells us about the digital environment Indonesians were experiencing when Microsoft conducted its survey. It does not, however, give us a scientific measurement of how civilised Indonesians are as people.

And that is where the story gets interesting.

Civility. By Microsoft. 🧴

Microsoft introduced the Digital Civility Index in 2016, partly in response to growing concern about the quality of online interactions. The idea was straightforward: ask people about the unpleasant things that happen to them online and use the answers to construct a picture of the digital environment. By 2020, the survey covered 21 different risks and involved roughly 16,000 respondents across 32 countries and territories.

Much of this methodology is sensible. If people are routinely harassed, threatened, scammed or sexually abused online, it would be strange to declare their country’s digital environment healthy simply because everyone remembers to say “please” before doing it.

The difficulty begins with the word civility.

In ordinary conversation, civility means something like manners: the ability to disagree without behaving like an enraged toddler, to treat strangers with a minimum of dignity and perhaps to resist the urge to turn every minor disagreement into a referendum on somebody’s moral worth. Microsoft’s definition is broader. A scam is uncivil in the sense that it is harmful to the victim, but it is also a crime.

That becomes especially important when looking at Indonesia because the country’s poor result was heavily associated with risks such as hoaxes, scams and fraud. Indonesian reporting on the 2020 results highlighted exposure to hoaxes, scams and fraud at 47%, while 27% of respondents reported exposure to hate speech.

Those figures should concern anyone interested in Indonesia’s digital development. But they do not necessarily tell us that Indonesians are unusually rude.

They may instead tell us that Indonesians are unusually exposed.

Imagine discovering that a particular city has unusually high levels of road accidents. There are several possible explanations.

• Perhaps its drivers are uniquely reckless.

• Perhaps the roads are badly designed.

• Perhaps traffic enforcement is weak.

• Perhaps millions of inexperienced drivers have suddenly arrived.

• Perhaps all of these things are happening at once.

It would be rather ambitious to conclude that the city’s inhabitants have a national character defect called “bad driving”.

Digital environments work in much the same way. People bring their habits and prejudices online, but the platforms, institutions, incentives and technological infrastructure influence what those people encounter and how they behave. An online environment is society put inside a machine that has its own incentives, and then given an algorithm.

The machine wants engagement.

Human beings, unfortunately, are extremely engaging when they are angry.

Indonesia, Online.

Indonesia’s digital transformation has been extraordinary. The country has developed one of the world’s most dynamic digital economies, with online commerce, fintech, ride-hailing and social media becoming embedded in ordinary life. The scale is enormous, but what is more interesting is the speed with which this has happened.

There is a tendency to treat digital adoption as evidence of digital sophistication. If somebody is constantly using a smartphone, surely they must be good at using the internet… right?

But this is rather like assuming that someone who has driven a car for ten years necessarily understands how an internal-combustion engine works. They may be an excellent driver. They may also have no idea what happens under the bonnet and would probably prefer not to find out.

Thus, someone can be perfectly comfortable using WhatsApp and still have little understanding of phishing. They can spend hours on TikTok without understanding why the platform keeps showing them increasingly provocative material. They can operate an online business without knowing how their data is collected, how scams exploit social engineering or how easily a convincing piece of false information can be manufactured.

This matters enormously in Indonesia because the smartphone has, for a large part of the population, been less the final stage of a long digital education than the entrance itself.

Older, richer internet markets had the luxury of making mistakes gradually. People learned about spam, fake websites, suspicious attachments, chain emails and online scams through a long sequence of minor humiliations. The internet was initially a strange place where someone might email you to announce that you had won a competition you had never entered. Eventually most people learned that the competition was probably not real.

Indonesia has had to acquire many of those instincts while simultaneously becoming one of the world’s largest digital markets.

That creates an unusual problem. The country can be extraordinarily advanced in digital commerce while still having significant weaknesses in digital literacy.

The presence of digital-literacy programmes is a useful reminder of this. The fact that people may need workshops on how to navigate the online world does not mean that Indonesians are technologically backward; it means that the technology has become sufficiently important, complicated and dangerous that knowing how to operate a smartphone is no longer enough.

And this is where the DCI’s Indonesian result becomes much more interesting than its ranking position suggests.

• A person who falls for a sophisticated scam is not necessarily uncivilised. They may have been poorly equipped to recognise it.

• A person who forwards a hoax may not be malicious. They may believe it.

• A person who encounters more hate speech may simply inhabit a digital environment in which such material circulates more freely.

The DCI records the bad experience.

It does not always tell us why.

That makes Indonesia’s 76 look more like a snapshot of a society undergoing an enormous technological transition, with all the usual consequences of learning a new environment while already living inside it.

Meanwhile… in Singapore.

The Southeast Asian rankings would be much easier to interpret if the countries at the top were obviously full of extraordinarily well-mannered people and the countries at the bottom were obviously full of people who communicate by throwing virtual furniture at one another.

But Singapore gets in the way.

Singapore scored 59 in Microsoft’s 2020 index, making it the fourth-best performing country globally and by far the highest in Southeast Asia. Microsoft described the result as evidence of Singapore’s strong digital civility. Its score had also improved from 63 the previous year.

There are perfectly good reasons why Singapore might perform well. It is wealthy, highly educated, technologically advanced and institutionally capable. It has strong infrastructure and a population accustomed to living in a society where rules are not optional suggestions.

But anyone who has spent much time in Singapore’s online communities may recognise a slight wrinkle.

Singaporeans can be extraordinarily civil in person and surprisingly savage behind a username.

This is especially noticeable in forums and comment sections, where the national talent for efficiency occasionally seems to extend to moral judgement. A disagreement that might in real life produce an awkward silence can online become a surprisingly detailed assessment of another person’s intelligence, upbringing and general contribution to society.

The phenomenon is not unique to Singapore, of course. Every country has discovered that anonymity is a remarkable solvent for social restraint. Give people a username and a little distance from consequences and some will suddenly acquire the confidence of a constitutional lawyer addressing Parliament… except that the subject is usually someone’s parking habits.

This is why Singapore’s high DCI score is so elucidating.

It does not mean Singaporeans are nicer online. It means they report fewer of the particular risks incorporated into the index.

A society in which people are less likely to be scammed, threatened, sexually harassed or subjected to serious online abuse is doing something right. But it is entirely possible for that same society to contain a sizeable population of people who become spectacularly unpleasant when arguing anonymously about public transport.

The DCI doesn’t capture that.

Perhaps it should. A future edition might introduce a category called “someone has disagreed with me on Stomp and I am now considering whether democracy was a mistake.”

It would probably score quite highly in every country.

The larger point is that there are two different things hiding under the word “civility”. There is digital safety, which can be measured through exposure to specific risks, and there is digital social behaviour, which includes the subtler ways people make online communities unpleasant without necessarily crossing the threshold into measurable abuse.

The second is where civilisation gets messy.

76.

It would be easy, having identified the weaknesses of the DCI, to dismiss Indonesia’s score entirely, but that would be a mistake.

The underlying problem is real. Indonesia’s respondents reported significantly greater exposure to the risks measured by Microsoft than respondents in the other Southeast Asian countries surveyed. The prevalence of scams, fraud, hoaxes and hate speech deserves attention, particularly in a country whose digital economy is expanding so rapidly.

But there is an equally serious mistake at the other end: treating the score as though it were a measurement of national character.

Survey results are shaped by culture. People have different thresholds for what counts as offensive, threatening or merely annoying. They use different platforms, participate in different communities and spend different amounts of time online. They also have different expectations about what the internet is supposed to be like.

A person who regards an aggressive comment as routine internet noise may answer a survey differently from someone who regards the same comment as harassment.

The number therefore contains a genuine indicator, but it also contains the noise generated by comparing human beings who do not all use the internet in the same way.

There is also another problem: the famous Indonesian figure is old.

The 2020 survey was conducted in April and May of that year. Microsoft subsequently produced a 2022 edition, but the country coverage changed to 22 countries, so it can’t be used as a new edition of the Southeast Asian league table.

So, when somebody quotes Indonesia’s 76 today as though a current measurement, they are effectively using a six-year-old photograph to describe a person who has since changed jobs, moved house and gotten a completely different haircut.

The internet of 2026 is not the internet of 2020.

• Generative AI has transformed the production of content.

• Deepfakes have become vastly easier to create.

• Scam operations have become more sophisticated.

• Social-media platforms have changed their incentives and audiences.

The gap between information, entertainment, advertising and political persuasion has become increasingly difficult to maintain.

A current DCI survey might show Indonesia improving.

It might show it getting worse.

It might show that Singapore’s advantage has narrowed, or that the regional hierarchy looks almost exactly the same.

We just do not have a comparable current measurement.

And that matters because rankings have a tendency to become permanent facts. Once a country receives a number, people remember the number and forget the survey.

Indonesia did have a serious digital-civility problem in Microsoft’s 2020 survey. There is no good reason to pretend otherwise. Its respondents reported greater exposure to scams, fraud, hoaxes, hate speech and other online risks than respondents in the other Southeast Asian countries surveyed, and those are problems that matter.

But it does not follow that Indonesians are inherently less civilised online.

What the evidence suggests is that Indonesia has been undergoing an unusually rapid and expansive digital transition, and that digital literacy, social norms, consumer protection and institutional capacity have not always been able to keep pace with it.

That is much more than ‘bad manners’.

It also happens to be a problem that many supposedly “digital civilised” countries have not entirely solved themselves. Singapore may have a safer digital environment than Indonesia according to Microsoft’s measures, but safety is not the same thing as grace. The internet has an ability to turn perfectly respectable citizens into tiny unpaid prosecutors… once somebody gives them a username and removes the possibility of eye contact.

This is the real lesson of the DCI.

A digitally mature society is one in which people can recognise manipulation, avoid scams, evaluate information, protect themselves, understand the systems shaping what they see and participate in online life without being routinely exploited. Being pleasant to strangers is certainly helpful, but it is not enough.

And that makes Indonesia’s position more nuanced than the league table suggests.

The country may simply be one of the places where the enormous experiment of putting human beings online at scale is still visibly under construction.

• There will be scams while the wiring is being installed.

• There will be misinformation while people learn which switches do what.

• There will be arguments.

• There will be people shouting in comment sections.

• There will be someone explaining that all of this would be solved… if everyone simply listened to him.

That last problem may require a little longer.

The internet has not yet produced a country without idiots.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

Spend any meaningful amount of time in Indonesia and you’ll begin to notice Merah Putih is everywhere.

Not just fluttering above government buildings or hanging proudly from homes every August as the country celebrates Independence Day. That is entirely understandable. Most nations reserve their flags for moments of ceremony, and remembrance. Indonesia does all of that too, and with genuine enthusiasm. But Merah Putih has transcended the flagpole, wandering into boardrooms, ministries, and branding meetings. It has become attached to village cooperatives, artificial intelligence initiatives, satellites, vaccines, media companies, investment funds, logistics projects and an increasingly eclectic collection of programmes that seem to have reached the same conclusion.

At first, it feels rather charming. Here is a young country, immensely proud of its hard-won independence, wearing its patriotism openly. Coming from a country (Britain) whose own flag is plastered across tea towels, souvenir mugs and the occasional pub during international football tournaments, I hardly arrived in Indonesia expecting to lecture anyone on restraint. National pride, after all, is not an exclusively Indonesian invention.

Yet after a while, something begins to feel a little different. The phrase Merah Putih does not only appear frequently; it appears strategically. It no longer seems confined to commemorating the nation. Increasingly, it appears to endorse things.

• Programmes become Merah Putih.

• Companies become Merah Putih.

• Bold government initiatives become Merah Putih.

That observation is not intended as criticism. It is rather… a question. Because the more one learns about the history of Merah Putih, the less surprising its ubiquity appears. Unlike many national flags, Indonesia’s did not emerge from an already established state. In many respects, it helped create one. The red and white banner became the visual language through which millions of people, separated by oceans, languages, ethnic identities and centuries of local history, began imagining themselves as members of the same nation. That is one of the great political success stories of the twentieth century.

Which is precisely what makes its modern evolution so fascinating.

This is not an article arguing that patriotism has gone too far. Rather it is asking:

• At what point does a national symbol stop solely representing the nation and begin functioning as a transferable brand?

• When does a flag cease to be simply a reminder of shared sacrifice and become, intentionally or otherwise, a source of borrowed credibility for whatever happens to be standing beside it?

The distinction may seem academic. It is anything but.

First Things First

To understand why Merah Putih appears almost everywhere in Indonesia today, one must first appreciate that Indonesia itself is, in many ways, an extraordinary historical achievement.

Unlike Britain, France or Japan, Indonesia inherited something altogether more improbable. At independence in 1945, it was attempting to transform a sprawling colonial possession into a nation. The challenge was immense. Stretching across a vast distributed geography, home to well over a thousand ethnic groups and hundreds of living languages, the Dutch East Indies had been administered as a single colony, but few people thought of themselves as belonging to a single national community.

A villager in Aceh had little reason to imagine his future as intertwined with that of a fisherman in Maluku or a farmer in Central Java. Local identities ran deep. They still do. Javanese, Sundanese, Batak, Bugis, Balinese, Dayak, Papuan and countless others possessed rich histories of their own, each with traditions, languages and cultural identities that long predated the concept of Indonesia itself. If ever there were a place where a common national identity seemed improbable, it was here.

This required more than constitutions and government ministries. Nations are not just held together by legal documents, rather they are sustained by stories, rituals and symbols.

Indonesia possessed perhaps the greatest nation-building toolkit of any newly independent state.

• There was Pancasila, an attempt to articulate a philosophical foundation broad enough to accommodate extraordinary diversity.

• There was Bahasa Indonesia, itself a remarkable political decision.

Rather than elevating Javanese, the language of the largest ethnic group, the 1928 Youth Pledge explicitly declared Bahasa Indonesia the language of unity. It was an act of linguistic pragmatism, avoiding the resentment that might have accompanied privileging one dominant culture over hundreds of others.

Then there was Merah Putih.

The flag became the emotional shorthand for an idea that was still in the process of being invented. It flew during the struggle for independence. It appeared in stories of sacrifice, resistance and national awakening. Under Sukarno, Merah Putih became woven into the very performance of statehood. Mass rallies, monuments, carefully choreographed ceremonies and the visual language of revolution all reinforced the same message: this flag represented not simply territory, but destiny.

That symbolism only deepened during the National Revolution. Independence was fought for. More than 100,000 Indonesians experienced violence, displacement and upheaval before sovereignty was finally secured. Whatever one thinks of the myths that inevitably accumulate around nations, the emotional connection forged between the flag and sacrifice was entirely genuine. Merah Putih became, quite literally, something people had died beneath.

It is difficult to overstate the importance of that historical inheritance. Merah Putih accumulated its authority slowly, through decades of shared memory. It came to represent unity, sovereignty, and a common identity without requiring Indonesians to abandon older ones. In a country where diversity was both its greatest strength and political challenge, the flag performed an extraordinary amount of cultural heavy lifting.

Viewed from that perspective, the omnipresence of Merah Putih is understandable and inevitable. If a simple combination of red and white helped persuade hundreds of millions that they belonged to the same national story, why wouldn’t later generations continue reaching for that same emotional vocabulary?

...Then Something Changed.

At some point Merah Putih appears to have undergone a change.

It became an adjective.

There is Koperasi Desa Merah Putih. There are discussions of AI Merah Putih, Vaksin Merah Putih, Satelit Merah Putih, investment vehicles, media organisations and an expanding ecosystem of initiatives carrying the same patriotic prefix.

To be clear, governments brand things. Politicians have always understood that names matter. Nobody ever proposed calling legislation the “Moderately Competent Administrative Efficiency Act”. Programmes become:

• “New Deals”,

• “Great Societies”,

• “Levelling Up”,

• “Patriot Acts”, or

• “National Missions”

…because language shapes perception.

The interesting question is why Merah Putih has become such an attractive label.

Political scientists speak of the accumulated trust, respect and emotional authority that societies invest in certain symbols over time. Symbolic capital possesses value precisely because it has been earned slowly and expended carefully. The more revered the symbol, the more valuable it becomes to anyone fortunate enough to stand beside it.

Closely related is what might be described as legitimacy transfer. If people already trust the flag, some of that trust naturally rubs off on whatever the flag endorses. Not consciously, perhaps. We assume expensive wine tastes better, that bookshelves make television experts more knowledgeable, and that a government initiative carrying the nation’s most sacred civic symbol probably deserves the benefit of the doubt.

Civil servants are patriots too, after all. Ministers genuinely believe their projects serve the national interest. Branding an initiative Merah Putih may simply reflect sincere optimism.

Even so, one cannot help wondering whether the country’s most treasured civic symbol is beginning to work rather harder than its designers ever intended.

Somewhere in Jakarta, one imagines an exhausted branding consultant cautiously clearing his throat during a meeting.

“I was just wondering,” he ventures, “whether perhaps we’ve used Merah Putih rather a lot recently.”

There is a long silence.

A few nervous glances around the room.

The consultant is never seen again. Rumour has it he now works in an office whose only responsibility is naming roundabouts.

The joke, of course, exaggerates reality.

Only slightly.

Because beneath the humour lies a genuine observation. The more frequently a sacred symbol is attached to ordinary programmes, however worthwhile those programmes may be, the more that symbol begins performing two jobs. It continues to represent the nation, while also functioning as a source of credibility for projects that have yet to earn reputations of their own.

Here's The Problem

What happens when entirely ordinary governance problems occur inside programmes carrying extraordinarily powerful national symbolism?

Every government, regardless of ideology or geography, faces the same uncomfortable realities.

• Large infrastructure projects run over budget.

• Procurement processes invite scrutiny.

• Public money attracts private interests with the reliability of moths around a porch light.

Some programmes succeed brilliantly. Others disappoint. A few descend into scandal. None of this is uniquely Indonesian; it is simply the price of asking imperfect human beings to administer very large organisations with very large sums of money.

The difference lies not in the problems themselves, but in the language surrounding them.

Imagine two identical government initiatives. They have the same objectives, the same budget, the same procurement process and the same risks. The only difference is their names.

One is called the National Village Cooperative Programme.

The other is called Koperasi Desa Merah Putih.

If questions later emerge about procurement, governance or implementation, the facts remain identical. But the presence of Merah Putih changes the context in which those questions are being asked. Criticism, however carefully framed, is no longer directed only at the programme itself; it can also be perceived as challenging something with a much deeper national significance.

This is because symbols create emotional connections that facts alone rarely achieve. Political psychologists describe this as affective framing: our feelings about a familiar symbol subtly influence how we perceive the unfamiliar object standing beside it. Marketing executives discovered this long ago. Politicians were not far behind.

Recent debates surrounding Koperasi Desa Merah Putih illustrate the dilemma rather well. The initiative is undeniably ambitious. Envisaged as a nationwide network of village cooperatives, it promises to strengthen rural economies, shorten supply chains and improve local prosperity. There is no shortage of worthy objectives. Nor should there be. Governments ought to be ambitious.

Yet ambition, particularly when accompanied by enormous public expenditure, inevitably attracts scrutiny. Even before allegations of wrongdoing emerged, Indonesia’s Corruption Eradication Commission (KPK) publicly recommended safeguards around governance, procurement and transparency, recognising that a programme of such scale naturally carried significant corruption risks. Subsequently, Indonesian Corruption Watch (ICW) questioned aspects of proposed procurement, raising concerns about potential price mark-ups and the opportunities for rent-seeking that large purchasing programmes can create.

This is precisely where patriotic branding becomes interesting.

• Questions about implementation become questions about commitment.

• Scepticism about budgets begins sounding like scepticism about the national project itself.

Nobody need explicitly accuse critics of lacking patriotism; the symbolism has already done much of the heavy lifting.

One finds similar tendencies wherever governments borrow heavily from national mythology.

• In the United States, legislation bearing words such as “Patriot” or “Freedom” has often enjoyed an immediate rhetorical advantage over opponents, who find themselves arguing against a concept rather than a policy.

• In Britain, few politicians casually propose abolishing institutions prefixed with “Royal”, because the word itself carries centuries of accumulated legitimacy.

Indonesia, however, occupies a particularly fascinating position because Merah Putih possesses an unusually concentrated form of symbolic authority. It is shorthand for independence, sacrifice, unity and the moral legitimacy of the Republic itself.

Which is precisely why it should probably be borrowed sparingly.

If Merah Putih represents the sacrifices made to establish an independent Indonesia, then surely the principles associated with it include transparency, accountability and the right of citizens to question those exercising power in their name. One could argue that programmes carrying the nation’s most sacred civic symbol should invite more scrutiny, not less. After all, if one is prepared to borrow the prestige of the flag, one should also be prepared to inherit the standards it represents.

Can You Overdo It?

The value of symbols depends almost entirely upon collective belief.

• A banknote is decorated paper until millions of people agree otherwise.

• A medal is shaped metal until society collectively decides it signifies exceptional courage.

• A national flag is coloured fabric until history, memory and sacrifice transform it into something capable of moving entire populations.

The same principle operates in reverse.

The more frequently a symbol is deployed for ordinary purposes, the greater the risk that its extraordinary meaning slowly begins to dissipate.

Imagine, for a moment, that Britain embarked upon a similar strategy.

• Royal Fish & Chips.

• Royal Broadband.

• Royal Artificial Intelligence.

• Royal Window Cleaning Services.

• Royal Office Stationery Procurement Taskforce.

Initially the word “Royal” would lend an air of dignity. After a while less so.

Or consider the fate of the word “artisan”. Once it suggested craftsmanship and unusual quality. Today one half expects to encounter artisan bottled water, artisan printer cartridges and artisan Wi-Fi routers. When every loaf of supermarket bread becomes “artisan”, the word eventually stops telling us anything at all.

That creates a particular problem for any cherished national symbol.

Its power derives partly from its rarity.

• Ceremonies matter because they are not everyday occurrences.

• Monuments command respect because they are exceptional spaces.

• Flags inspire emotion because they are associated with moments of collective significance rather than routine administration.

One begins to wonder whether Merah Putih risks becoming a victim of its own success.

To be clear, there is nothing inherently inappropriate about naming a genuinely national endeavour after the nation’s flag. Some initiatives deserve precisely that level of symbolism. The question is not whether the phrase should ever be used.

It is whether it should be used for almost everything.

Every time Merah Putih is attached to a programme, a company, an investment vehicle or a policy initiative, a tiny portion of the emotional authority accumulated over generations is invested in something considerably more temporary.

• Governments change.

• Ministers retire.

• Policies fail.

• Companies disappear.

The flag stays.

Perhaps the greatest compliment one can pay to Merah Putih is not to invoke it constantly, but to preserve the sense that it stands slightly above the everyday business of politics and commerce. Not because politics is unworthy, but because symbols capable of uniting hundreds of millions of people should probably not be required to sell quite so many press releases.

There is an old political instinct, found in almost every country, that whenever an argument becomes difficult one should stand a little closer to the flag. It is understandable. National symbols possess an authority that governments can only envy. They represent continuity where politics represents change; permanence where administrations come and go.

Indonesia’s Merah Putih deserves every ounce of that authority.

Few modern nations were required to imagine themselves into existence quite so deliberately. Fewer still succeeded as spectacularly. The flag is both a reminder of independence, and one of the instruments through which independence became psychologically possible in the first place. It helped persuade people separated by thousands of kilometres, hundreds of cultures and countless local histories that they belonged to the same story.

That achievement deserves admiration.

It also deserves protection.

Because symbols this powerful should remain larger than whichever government happens to be in office, whichever programme happens to be fashionable or whichever ministry happens to be unveiling its latest strategic initiative complete with optimistic promotional video and inspirational orchestral soundtrack.

The revolutionaries who fought beneath the Merah Putih, fought so Indonesians could govern themselves.

And self-government is an untidy business.

• It requires disagreement.

• It requires uncomfortable questions.

• It requires investigative journalists, sceptical citizens, awkward auditors and the occasional parliamentary committee that ruins everybody’s afternoon.

None of these diminish the nation. On the contrary, they reflect confidence in it.

If the flag belongs to everyone, then it must belong equally to those who applaud governments and those who criticise them. It cannot become the rhetorical property of whichever institution happens to be standing nearest the microphone. The moment questioning a programme begins feeling emotionally similar to questioning the flag itself, something valuable has slipped out of alignment.

Perhaps none of this is happening. Perhaps Merah Putih is simply experiencing an unusually busy period in Indonesia’s branding ecosystem. Symbols, after all, have survived far worse.

Then again, perhaps it is worth asking the question now, while the answer still matters.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

Indonesia has never been a stranger to overseas employment. For decades, millions of Indonesians have sought international opportunities, whether as domestic workers in Hong Kong, construction workers in the Gulf, plantation workers in Malaysia, nurses in Japan or engineers in Singapore. Economic migration is hardly a new phenomenon, nor is it unique to Indonesia. Wage differentials have always existed, and ambitious professionals have always gravitated towards places where their skills command greater rewards. Few people are surprised when a talented Indonesian software engineer accepts an offer in Silicon Valley, or when an experienced mechanical engineer builds a career in Germany. That is just the reality of an increasingly global labour market.

What is new, however, is not the migration itself. It is who has started telling the story.

Over the past two years, the language emerging from government ministries has undergone a significant transformation. Rather than speaking about overseas employment primarily as something that requires regulation and worker protection, senior officials have increasingly begun presenting it as an opportunity to be actively pursued.

• Germany has become a recurring feature in discussions surrounding skilled migration and vocational cooperation.

• Japan continues expanding pathways for Indonesian nurses and caregivers.

• Several European countries have appeared in ministerial speeches discussing labour shortages,

…while ambitious targets have been floated for sending hundreds of thousands of skilled Indonesian workers abroad over the coming years.

Initiatives encouraging students from Indonesia’s vocational high schools to prepare for global employment opportunities are increasingly common, often accompanied by the language of international certification, and global competitiveness. The idea of Indonesian talent “going global” has evolved from an individual aspiration into something that increasingly resembles a policy objective.

Viewed in isolation, none of this is particularly surprising.

• Wealthy countries face ageing populations and acute labour shortages.

• Indonesia possesses one of the youngest workforces in Asia.

• Indonesian professionals can often earn several times their domestic salary overseas, while remittances flowing back home provide valuable foreign exchange and improve household incomes.

On paper, everybody appears to win.

Yet viewed alongside Indonesia’s equally ambitious aspirations to industrialise, move further up global value chains and fully capitalise on its long-discussed demographic dividend, the narrative begins to feel more complicated. Governments usually spend decades attempting to attract and retain highly skilled workers. Indonesia, meanwhile, appears increasingly enthusiastic about preparing them for export.

Which raises a rather interesting question.

Tick Tock

Few phrases have been repeated more enthusiastically in discussions about Indonesia’s economic future than the country’s so-called “demographic bonus.” It appears in policy documents, and investment presentations with such regularity that one could almost be forgiven for believing it to be a naturally occurring national asset, rather like nickel reserves. Possess a demographic bonus, the implication seems to be, and prosperity will somehow follow.

Unfortunately, a demographic bonus is not the reward. It is the opportunity to earn one.

The concept itself is relatively straightforward. Economists often describe it through the dependency ratio: the relationship between people who are broadly of working age and those who generally depend upon them, namely children and the elderly. A country with a large working-age population and relatively fewer dependents enjoys an unusual window of opportunity. There are more potential workers available to produce goods, generate income, pay taxes and invest than there are people requiring support through education, healthcare and retirement.

The important word in that sentence, however, is potential.

Twenty-five-year-olds do not automatically generate prosperity by existing. A country can possess millions of young adults and still fail to become wealthy if those workers remain underemployed, trapped in low-productivity sectors or unable to find work that makes meaningful use of their education and skills.

This is why economists frequently refer to demographic dividends as temporary windows rather than permanent advantages. Today’s twenty-five-year-old becomes tomorrow’s sixty-five-year-old with surprising speed.

• Fertility rates gradually decline.

• Populations age.

• Dependency ratios begin moving in the opposite direction as the number of retirees rises relative to the number of taxpayers supporting them.

Across East Asia this story has already unfolded. Japan reached it decades ago. South Korea is confronting it today. China is now discovering that demographic momentum can reverse just as dramatically as it once accelerated.

Indonesia has not yet reached that point, but the window is not infinite. Much of the discussion surrounding the country’s demographic dividend centres on the period leading up to around 2030, when the proportion of working-age Indonesians is expected to peak before the population gradually begins to age.

Which raises a rather fundamental question.

If the objective of a demographic dividend is to convert an unusually large working-age population into a larger, wealthier and more productive economy before demographic ageing begins, then productive employment becomes the entire game. Not employment for its own sake, but employment that generates innovation, higher incomes, stronger businesses and, inevitably, a broader tax base capable of supporting the generations that will eventually follow.

This is why countries spend extraordinary sums attempting to educate engineers, doctors, researchers, technicians and entrepreneurs. These are economic multipliers. A talented engineer helps firms become more productive, support higher-value industries, create demand for suppliers, generate corporate profits, purchase homes, consume services and, in some cases, establish entirely new businesses. Governments are investing in the ecosystems those individuals make possible.

Which makes Indonesia’s emerging enthusiasm for exporting exactly these people a rather fascinating development.

Made in Indonesia

Germany is ageing. So is Japan. Much of Europe faces persistent shortages across healthcare, engineering, advanced manufacturing and skilled trades. These are structural demographic problems created by decades of declining birth rates and increasing life expectancy.

• Factories still require technicians.

• Hospitals still require nurses.

• Infrastructure still requires engineers.

The reality facing many developed economies is that there simply are not enough young workers entering the labour force to replace those retiring from it.

Indonesia, by contrast, finds itself in almost the mirror image of that situation. It possesses a comparatively young population, continues producing large numbers of graduates and vocational students, and faces the perennial challenge of creating enough high-quality employment opportunities to absorb them all. From this perspective, greater labour mobility appears entirely rational.

• Indonesian professionals gain access to higher wages, richer career opportunities and internationally recognised experience.

• Receiving countries address critical labour shortages.

• Families at home benefit from remittances,

• Indonesia earns valuable foreign exchange in an era where every additional euro or yen flowing into the country helps strengthen external balances.

Viewed from this perspective, the policy makes considerable sense.

If one happened to be advising the German government rather than the Indonesian one, the arrangement would probably appear close to ideal. Germany acquires skilled workers precisely when it needs them most, without bearing the full cost of raising, educating and training them from childhood. One imagines German finance officials looking at Indonesia’s vocational initiatives with the appreciation normally reserved for discovering that someone else has unexpectedly picked up the dinner bill.

The question, however, is not whether Germany benefits.

The question is what Indonesia gives up in return.

Because workers do not just earn salaries.

A highly skilled engineer who spends thirty years working in Munich is:

• Buying property in Germany,

• Consuming German goods and services,

• Supporting German businesses through value-added tax,

• Contributing to German pension systems, and

• Helping German firms become more competitive.

The same logic applies whether the destination is Tokyo, Melbourne, Amsterdam or Toronto.

Remittances undoubtedly soften that loss. Families receiving overseas income spend more, build homes, educate children and stimulate local consumption. These benefits are genuine and should not be dismissed. But remittances and productive ecosystems are not equivalent economic phenomena.

For years the country has spoken about moving beyond commodity exports, developing downstream industries, attracting advanced manufacturing, fostering innovation and climbing global value chains. Each of those ambitions depends upon one critical ingredient above all others: highly skilled people.

• Engineers do not just appear because industrial policy declares them necessary.

• Researchers cannot be mined like nickel.

• Experienced managers cannot be refined in a smelter.

Human capital accumulates slowly, often over decades, through education, experience and professional development. It is among the most expensive forms of capital any nation possesses.

Which is why the recent enthusiasm for promoting skilled overseas employment feels less like an contradiction. Can a country simultaneously aspire to become a high-income, innovation-driven economy while actively encouraging significant numbers of its future innovators to spend their peak productive years contributing to someone else’s?

See You Soon?

Whenever concerns about skilled migration arise, policymakers generally reach for the same reassuring phrase. Workers may leave, we are told, but they will eventually return. They will come back with savings, international experience, new ideas, and a renewed desire to contribute to the country’s development. Economists have a name for this optimistic scenario: brain circulation. Rather than permanently losing talent, countries temporarily export it, only to receive it back later with considerably greater value attached.

However, if large numbers of highly skilled Indonesians leave during the country’s demographic window and do not return until retirement, the economic equation begins to look rather different. The benefits of remittances remain. The value of international experience remains. But the productive decades during which those individuals would ordinarily be paying taxes, managing businesses, conducting research and helping to modernise the domestic economy are spent somewhere else.

The interesting question is: what evidence do we have that it happens at the scale the policy appears to require?

Even programmes specifically designed around return migration have encountered well-publicised challenges. Indonesia’s LPDP scholarship scheme, for example, was established with the explicit objective of developing world-class Indonesian talent before bringing that expertise home. The overwhelming majority of recipients do fulfil their obligations and return, but the programme has also demonstrated how difficult it can be to align individual career incentives with national policy objectives. If scholarship recipients with contractual commitments sometimes struggle to return or remain, it seems optimistic to assume that unrestricted global professionals earning internationally competitive salaries will routinely make the same decision voluntarily.

Migration changes identity.

An engineer who leaves Jakarta at twenty-five, by thirty-five, may have built a professional reputation, purchased a home, established friendships, enrolled children in local schools and married someone whose own career has become rooted overseas. Returning is a decision to unwind an entire life.

Even for those who genuinely wish to return, reintegration is often complicated.

• International experience does not always translate into domestic compensation.

• Skills acquired within highly specialised industries abroad may command modest salary premiums at home.

• Many returning professionals discover that they are adjusting to entirely different organisational cultures.

Anyone who has spent time speaking to Indonesians who have worked extensively overseas will recognise recurring themes.

• Performance-based promotion is often expected rather than requested.

• Decision-making may be more decentralised.

• Junior staff are encouraged to challenge ideas rather than defer to hierarchy.

• Processes become institutional rather than personal.

None of these characteristics are universally absent in Indonesia, but the contrast is frequently enough to make reintegration unexpectedly difficult.

This means that international experience can make someone simultaneously more valuable and less comfortable within certain domestic organisations. They return equipped with precisely the perspectives governments hoped they would acquire, only to discover that those perspectives are not always easily absorbed.

Family remains one of the strongest forces pulling people home. It always has been.

• Parents grow older.

• Children deserve to know their grandparents.

• Cultural identity retains a remarkable gravitational pull.

But family is not the only force acting upon internationally mobile professionals. Careers, spouses, mortgages, education systems and professional networks all matter, and those forces tend to strengthen with time rather than weaken.

Brain circulation, in other words, is not automatic.

Now the Maths

Every society operates according to a remarkably simple intergenerational contract.

1. Children consume more public resources than they contribute because they require education, healthcare and infrastructure before entering the workforce.

2. Working-age adults become the economic engine of the country, paying taxes, building businesses and supporting both younger and older generations.

3. Those workers themselves grow old, consume more healthcare, retire from formal employment and begin depending upon the productivity of those who follow them.

The demographic bonus exists because, for a limited period, the middle group becomes unusually large relative to everyone else.

That period does not last forever.

Indonesia’s policymakers understand this perfectly well, which is precisely why the demographic dividend has featured so prominently in discussions surrounding Indonesia Emas 2045. The underlying ambition has always been straightforward enough: use today’s unusually favourable age structure to build a sufficiently productive economy that tomorrow’s ageing population becomes fiscally manageable rather than fiscally overwhelming.

Which is where the current conversation about skilled migration begins to intersect awkwardly with almost every other major policy challenge confronting the state.

• Indonesia’s tax base remains comparatively narrow.

• Successive governments have sought to improve tax collection while simultaneously balancing demands for infrastructure, education, healthcare, social protection and industrial development.

• Energy subsidies have gradually become more politically contested.

• New flagship programmes compete for finite fiscal resources.

• Debates surrounding the funding of initiatives such as the Free Nutritious Meals (MBG) programme have illustrated just how difficult budget prioritisation becomes when every ministry can produce a persuasive argument for why its spending should take precedence.

None of this is unusual. Governments everywhere face similar trade-offs.

What makes Indonesia’s situation particularly interesting is that many of those future spending pressures are likely to intensify at the moment the demographic dividend begins fading.

• Healthcare expenditure generally rises as populations age.

• Expectations surrounding pension systems and old-age support tend to increase as countries become wealthier.

• Maintaining education quality remains essential because each successive generation must become more productive than the last if living standards are to continue improving.

All of these obligations ultimately depend upon one thing.

Someone has to generate enough economic value to pay for them.

This is why discussions about overseas employment cannot be separated from discussions about productivity. A highly skilled worker is part of a broader ecosystem of economic activity that generates corporate profits, innovation, investment, consumption and employment for others. Lose enough of those ecosystems and the question gradually shifts from “How many workers do we have?” to “Where is the value actually being created?”

If Indonesia reaches 2045 with a larger elderly population, rising healthcare costs, greater expectations for social protection and an economy still aspiring to climb global value chains, what does the fiscal arithmetic look like if a significant proportion of its highest-productivity workers have spent the previous twenty years building someone else’s industrial base?

Perhaps the numbers still work.

Perhaps they don’t.

But it would be reassuring to know that somebody has done the calculation.

It is entirely possible that Indonesia’s emerging strategy will prove successful.

• Perhaps the country’s vocational education system will expand so rapidly that it produces far more skilled workers than the domestic economy could reasonably absorb.

• Perhaps overseas experience will accelerate technology transfer.

• Perhaps internationally trained professionals will increasingly return to establish companies, modernise industries and strengthen Indonesia’s own productive capacity.

If that happens, today’s policy may one day be regarded as an inspired example of strategic labour mobility.

It is also possible that the opposite occurs.

• The demographic dividend may gradually narrow while a growing share of Indonesia’s internationally competitive professionals build permanent lives overseas.

• Return migration may prove less common than hoped, not because people lack patriotism but because careers, families and economic incentives become rooted elsewhere.

• Domestic industries may find themselves competing for exactly the talent they helped produce, while the fiscal burden of an ageing society continues moving steadily closer.

Governments often describe demographic dividends as though they were prizes. In reality they are closer to harvest seasons. The opportunity exists only for a limited time, and what matters is not how many seeds are planted but where the eventual harvest ends up.

From Germany’s perspective, one suspects the arithmetic is straightforward. From Indonesia’s perspective, it is rather more ambitious. Training globally competitive engineers, researchers and professionals is expensive. Encouraging them to spend the most productive decades of their careers paying taxes somewhere else may yet turn out to be an act of extraordinary strategic foresight.

Or it may become the world’s most expensive international internship programme, funded by the Indonesian taxpayer and culminating in somebody else’s balanced budget.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

There are certain occupational hazards one comes to expect when writing about economics, geopolitics and public policy. Your analysis will inevitably be accused of being too optimistic by those convinced the apocalypse is scheduled for next week, and hopelessly pessimistic by those who believe GDP growth is simply a state of mind. You will occasionally upset markets, activists and academics. Such is the price of having the audacity to suggest that reality is more complicated than political slogans would have us believe.

What generally isn’t on the job description is being retroactively enlisted into the Dutch colonial administration.

Yet that, in essence, is where we found ourselves last week. Speaking at the anniversary celebrations of Partai Kebangkitan Bangsa (PKB), the President criticised what he described as persistent pessimism about Indonesia’s future, suggesting that some journalists, NGOs, analysts and commentators had become so negative that they resembled the londo ireng of old.

The reaction was predictable.

• Journalist associations condemned the remarks as an attempt to delegitimise critical reporting.

• Civil society organisations argued that questioning government policy should not be conflated with questioning the nation itself.

Supporters, meanwhile, insisted that the President was merely highlighting a genuine problem: that parts of Indonesia’s public discourse appear more comfortable amplifying stories of national failure than recognising stories of national progress.

It was, in other words, exactly the sort of argument democracies are designed to have.

What made this episode different was the historical metaphor chosen to frame it. By invoking londo ireng, the conversation shifted from a debate about policy into something far more emotionally charged.

• Criticism ceased to be merely criticism; it became disloyalty.

• A discussion about economic strategy found itself framed as colonial collaboration.

The thing is that many (young) Indonesians, had barely encountered the phrase before it exploded back into public consciousness. Outside academic circles, its origins have long since faded from popular memory, even though its emotional resonance clearly has not. Which raises a rather obvious question.

What exactly is a londo ireng?

And more importantly, why has Indonesia suddenly rediscovered one of the more obscure expressions in its colonial vocabulary at precisely the moment it is trying to redefine its place on the global stage?

Blame the Dutch

History has an irritating habit of refusing to stay where politicians leave it. Just when one imagines the colonial era has been filed away beneath museum exhibits and commemorative speeches, it wanders back into contemporary politics.

The story of londo ireng begins as an administrative solution to a military problem.

The Java War, fought between 1825 and 1830 under the leadership of Prince Diponegoro, was one of the bloodiest conflicts in the history of Dutch colonial rule. Although the Dutch eventually prevailed, victory came at an extraordinary cost. Tens of thousands of Javanese lost their lives, thousands of colonial troops were killed, and the financial burden on the Netherlands was immense.

Convincing young Dutchmen that the pinnacle of military adventure involved several months at sea followed by tropical disease and a determined local resistance movement was, perhaps unsurprisingly, not proving an overwhelming success. The colonial administration therefore looked elsewhere within the empire.

Its answer lay on the Gold Coast, in present-day Ghana.

Beginning in the 1830s, several thousand West African soldiers were recruited into the Royal Netherlands East Indies Army, or KNIL. Officially they became known as the Belanda Hitam, the Black Dutch, serving alongside European troops throughout the Dutch East Indies. In Javanese, the phrase gradually evolved into londo ireng, literally “Black Dutchman”.

Originally, there was nothing metaphorical about it. It described exactly what people saw: African soldiers wearing Dutch uniforms in service of the colonial state.

As the decades passed, the Ghanaian recruits disappeared from living memory, but the phrase survived. Detached from the people who had first embodied it, londo ireng began to accumulate new meanings. Gradually it ceased to describe ethnicity and instead described allegiance. The emphasis shifted from who someone was to whose interests they were perceived to serve.

This transformation is hardly unique to Indonesia. Languages are littered with words that outlive the circumstances that created them. Historical references lose their specificity but retain their emotional force, becoming political shorthand long after their original subjects have vanished. Few people who describe someone as a “quisling” pause to think about wartime Norway, just as few Indonesians using londo ireng today are consciously referring to nineteenth-century Ghanaian soldiers.

Here's the Interesting Bit

The revival of londo ireng tells us far more about Indonesia in 2026 than it does about Indonesia in 1836.

The phrase has resurfaced at a moment when Indonesia is undergoing a subtle but unmistakable shift in how it understands its place in the world. That observation is neither praise nor criticism; it is simply difficult to look at the trajectory of recent policy without concluding that the country is becoming more assertive in defining its own economic and geopolitical direction. The emphasis on:

• Downstream processing of natural resources,

• Food and energy resilience,

• Strategic industries,

• Critical minerals,

• Sovereign industrial policy, and

• Participation in institutions such as BRICS

…all point towards a government increasingly comfortable with the language of strategic autonomy.

Whether one agrees with those choices is almost beside the point.

Modern political debate often struggles to distinguish between describing a trend and endorsing it. To contend that Indonesia is becoming more economically nationalist is no more an endorsement of economic nationalism than to contend that Britain drives on the left is an argument against roundabouts. But description and prescription are not the same

This matters because democracies are supposed to change direction.

• Elections are not elaborate administrative exercises designed to ensure that absolutely nothing ever changes.

• Governments campaign precisely because they wish to implement different priorities from those that came before.

Sometimes those priorities prove successful, sometimes they prove misguided, and more often than not they prove to be an mixture of both. The point is that democratic mandates are intended to produce movement, not permanent equilibrium.

Indonesia’s current trajectory reflects that reality. The country is placing greater emphasis on:

• Capturing value from its natural resources rather than simply exporting them,

• Strengthening domestic manufacturing capacity,

• Diversifying strategic partnerships, and

• Pursuing a foreign policy that sits within neither the traditional Western orbit nor China’s sphere of influence.

It is, in the language favoured by diplomats, attempting to navigate an increasingly multipolar world without becoming excessively dependent upon any particular pole.

That is a perfectly legitimate strategic choice.

It is also one that invites scrutiny.

Every significant policy shift carries trade-offs.

• Downstreaming promises industrial development but raises questions about efficiency and competitiveness.

• Resource nationalism strengthens domestic leverage while simultaneously altering relationships with international investors.

• Pursuing greater strategic autonomy may increase policy flexibility while requiring a more delicate balancing act between competing global powers.

None of these observations are inherently hostile. They are precisely the kinds of questions investors ask before allocating capital, economists ask before building forecasts, journalists ask before publishing investigations and citizens ask before returning governments to office.

Some supporters of the current administration understandably see persistent criticism as evidence that parts of Indonesia’s political class, media or international commentariat remain psychologically attached to an older model of development, in which validation from Western governments, financial institutions and international media was treated almost as a prerequisite for domestic legitimacy. That perspective is not entirely without foundation. For much of the post-Reformasi period, Indonesia deliberately integrated itself into global markets, embraced international investment and sought recognition as a stable democratic success story. Those choices helped underpin two decades of remarkable economic progress.

But history has not stopped since then.

The world has become less globalised, more fragmented and considerably more competitive.

• Supply chains have become strategic assets.

• Critical minerals have become geopolitical leverage.

• Middle powers increasingly seek room to manoeuvre rather than choosing permanent allegiance to one bloc or another.

Indonesia is hardly unique in adapting to that reality.

What would be unfortunate, however, is if recognising those changes became confused with unquestioning acceptance of every policy undertaken in their name. Democracies are healthiest when they permit citizens to support the destination while arguing over the route. Believing Indonesia should become more prosperous, more influential and more strategically independent does not automatically answer the complicated question of how best to achieve those ambitions.

Funny Thing About Confidence...

There is a deeper question lurking beneath all of this, and it has little to do with one particular speech or even one particular President. The question is why governments, particularly those that perceive themselves to be entering a new chapter of national development, become so tempted to frame criticism as evidence of something more sinister.

Countries that grow in economic strength or geopolitical importance often undergo a psychological transition. They stop asking whether they deserve a place at the top table and begin asking why everyone else hasn’t noticed that they are already sitting there. The conversation shifts from seeking approval to demanding respect. It is an entirely understandable evolution. Nations, like people, develop a sense of identity, and identity inevitably shapes how criticism is received.

A government embarking upon an ambitious national project naturally wishes to cultivate optimism. It wants investors to believe, citizens to believe, and perhaps most importantly, it wants to believe itself. Long-term industrial strategies, strategic autonomy and nation-building require public confidence because they ask societies to endure short-term uncertainty in pursuit of longer-term gains. It is hardly surprising that leaders become frustrated when every announcement is greeted with predictions of imminent collapse or declarations that the country is somehow heading in entirely the wrong direction.

That frustration is understandable.

However, once criticism becomes evidence of disloyalty, governments acquire a convenient superpower. Every uncomfortable question may simply be dismissed by questioning the motives of the person asking it. Unfortunately, reality has never shown much interest in participating in that arrangement.

• Inflation ignores patriotism.

• Bond markets remain indifferent to nationalist rhetoric.

• Economic outcomes continue to be measured by arithmetic.

History offers no shortage of examples.

• India periodically rediscovers the label of the “anti-national”.

• China frequently attributes uncomfortable narratives to “foreign forces”.

• Russia has institutionalised the language of “foreign agents”.

• Turkey has often framed criticism through the prism of external conspiracies.

Even the United States has spent much of the last decade arguing over who qualifies as “un-American”, while political opponents have cheerfully accused one another of being “enemies of the people”. Apparently no nation, however powerful, is entirely immune from the seductive appeal of explaining criticism by questioning the critic rather than confronting the criticism.

The irony is that truly confident countries rarely demand unanimous enthusiasm because they understand that disagreement is not necessarily evidence of weakness. Quite the opposite. One of the defining characteristics of mature democracies is their ability to accommodate competing ideas without assuming that every dissenting voice is secretly taking instructions from somewhere else. Confidence is demonstrated by the ability to withstand criticism.

None of this is to suggest that foreign influence never exists. It does. Governments, corporations, media organisations, advocacy groups and intelligence agencies have attempted to shape political narratives beyond their borders for as long as politics has existed.

The mistake is in assuming that because some criticism may be externally motivated, all criticism therefore becomes suspect.

Nations become influential precisely because they are willing to chart their own course. Yet the more confident they become in choosing that course, the more important it becomes that they preserve the very institutions willing to question whether they are still heading in the right direction.

So... Am I One?

Having spent several years writing about Indonesia, I suppose I should probably ask the obvious question.

Am I one?

It’s an unsettling thought. I have:

• Written enthusiastically about Indonesia’s economic resilience,

• Admired its remarkable recovery since the Asian Financial Crisis,

• Argued that it is increasingly becoming one of the world’s more consequential middle powers, and

• Suggested that its downstream industrial ambitions may ultimately reshape regional manufacturing.

I have also:

• Questioned fiscal assumptions,

• Examined demographic challenges,

• Wondered aloud whether particular policies will deliver what their architects promise, and

• Pointed out that governments are capable of making decisions which, with the benefit of hindsight, may not age especially well.

This is generally known as analysis.

It is not, despite recent suggestions to the contrary, an undercover operation on behalf of the Dutch East India Company.

The consequence of labels such as londo ireng is that they gradually cease to describe a specific type of behaviour and begin describing a state of disagreement.

• Yesterday’s collaborator becomes today’s sceptic.

• Today’s sceptic becomes tomorrow’s economist.

Before long, anybody asking for a second set of assumptions in the budget forecast begins attracting curious glances, as though requesting additional sensitivity analysis were somehow the first stage of recolonisation.

There is an important distinction here that is worth preserving.

• Analysis is not advocacy.

• Questioning is not sabotage.

• Thinking is not disloyalty.

Indeed, one might even argue that the opposite is true. Countries worthy of serious analysis are precisely those important enough to deserve it. Nobody spends thousands of words examining the long-term industrial strategy of countries they regard as irrelevant. Scrutiny, if anything, is a compliment. It suggests that what Indonesia chooses to do increasingly matters: to Indonesians, to investors, to neighbouring countries and the wider international community.

If asking balanced questions about public policy is sufficient to qualify as a Black Dutchman, then the definition has expanded so dramatically that it eventually risks including anyone who has ever opened a spreadsheet.

Which would certainly make next year’s economics conference considerably more interesting.

Perhaps the revival of londo ireng ultimately tells us something important, although not necessarily about the people to whom the label has been attached.

It tells us that Indonesia is changing.

The country is becoming more economically ambitious, more strategically assertive and more comfortable articulating its own vision of national development without waiting for external validation. Whether that vision centres on downstream industrialisation, food security, resource nationalism, strategic autonomy or a more multipolar foreign policy is, in many respects, a matter for Indonesian voters to decide. That is, after all, the entire point of democracy. Elections are not ceremonial endorsements of continuity. They are mechanisms through which societies choose different priorities, different leaders and occasionally entirely different directions.

But democracy does not end once the votes have been counted.

It requires:

• Critics as well as supporters,

• Journalists alongside ministers,

• Researchers alongside policymakers, and

• Opposition voices alongside governing ones.

Not because criticism is inherently virtuous, nor because governments are inherently mistaken, but because every administration, benefits from institutions willing to ask awkward questions. History suggests that governments become most vulnerable not when confronted by critics, but when surrounded exclusively by admirers.

Perhaps that is the greatest irony of londo ireng. The original Black Dutchmen served a foreign empire. Today’s journalists, economists, researchers and commentators are not arguing about whether Indonesia should have a future, they are arguing about what kind of future it should have. Those are profoundly different conversations.

Confusing the two may make for an effective political slogan. History, however, has an unfortunate habit of suggesting that it rarely makes for particularly good governance.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

Two and a half years ago I wrote an article that many readers interpreted as satire, a few interpreted as bitterness, and a surprising number privately admitted described something they had also noticed but had never dared say aloud.

The piece was called Classroom Cartels, and its central question was uncomfortable: why did so many of Jakarta’s startup founders, executives and investors appear to emerge from the same remarkably small collection of educational institutions? Not the same universities, but often the same handful of elite schools that had introduced future founders, executives and financiers to one another long before they had learned what a cap table was.

It was intentionally exaggerated. Satire has always worked by stretching reality just far enough that readers suddenly recognise something they had previously accepted as perfectly normal. Nobody laughs because something is ridiculous. They laugh because it is uncomfortably familiar.

In the years since that article was published:

• Money became more expensive.

• Venture capital stopped falling from the sky

• Investors who once celebrated “growth at all costs” rediscovered “profits.”

• Layoffs replaced launch parties.

• “Founder mode” gave way to “survival mode”.

The mythology surrounding startup brilliance suddenly had to survive arithmetic.

And that is precisely why revisiting the original argument feels worthwhile.

This is no longer about asking whether certain schools produce exceptional entrepreneurs. The more interesting question is whether ecosystems begin confusing selection with proof.

Healthy ecosystems understand the distinction. Less healthy ones tend to forget it.

This matters because unlike mature industries, where competence eventually becomes difficult to fake, early-stage companies operate almost entirely on expectations.

• Investors fund future possibilities rather than present realities.

• Boards hire potential rather than demonstrated performance.

• Recruiters become amateur psychologists.

Entire careers are built upon answering the unscientific question of whether someone “looks like founder material.”

Looking back today, I suspect my original article focused too heavily on the schools themselves. While schools are visible, networks are not. Yet it is the network, not the classroom, that deserves scrutiny.

The schools just happened to be where many of those networks first crystallised.

More Than an Education

One of the more amusing reactions to the original article came from readers who assumed I was arguing that certain schools possessed a mysterious entrepreneurial curriculum unavailable to ordinary mortals. As though somewhere between Year 10 economics and afternoon football practice there existed an elective entitled How to Raise Series A Funding Before Turning Thirty.

If only education were so efficient.

Imagine two students beginning life with identical intelligence, ambition and work ethic.

One spends their formative years surrounded by classmates whose parents occupy senior positions in business, finance, government and multinational corporations.

• Their school events become informal networking occasions.

• Their classmates become future investors, lawyers, executives and founders.

• Their understanding of business is shaped by textbooks and by conversations overheard at dinner tables.

The second student learns exactly the same mathematics.

Only one of them also learns the geography of power.

We often imagine inequality as something dramatic, but some of the most enduring advantages are almost invisible because they arrive disguised as ordinary friendship.

• The school reunion becomes the investor dinner.

• The debating teammate becomes the future co-founder.

• The person copied into an email already knows half the room.

None of this is corruption.

Nor is it meritocracy.

And the longer one remains inside these networks, the more valuable membership becomes.

Critics frequently attack academic standards or tuition fees, while defenders proudly point to examination results and university placements. Both sides are discussing the curriculum.

The curriculum is almost beside the point.

The real asset graduates carry away is not what they learnt inside the classroom but who left the building alongside them.

• Silicon Valley has Stanford.

• Britain has Oxbridge.

• France has the grandes écoles.

Every society develops institutions that become informal sorting mechanisms for future elites.

Indonesia is hardly unique.

Where Indonesia becomes more interesting is that the sorting appears to occur unusually early. Before university. Before careers. Before anyone has actually demonstrated the capability that later justifies the confidence placed in them.

Which brings us to the most interesting question of all.

Not whether the same names repeatedly appeared around Jakarta’s startup ecosystem, but whether the ecosystem gradually became so comfortable rewarding familiarity that it stopped asking the more difficult question every investor, board and founder should eventually confront:

“Would we have made exactly the same decision if we’d met this person for the first time today?”

The Boom Years

The Dutch had tulips. America had subprime mortgages. Silicon Valley briefly convinced itself that losing billions of dollars was simply another way of saying “playing the long game.” Indonesia, meanwhile, seemed to discover an equally fascinating proposition: that confidence itself was a productive asset.

To be fair, this was hardly an Indonesian phenomenon. From San Francisco to Singapore, venture capital spent much of the previous decade behaving like an enthusiastic uncle who had just discovered cryptocurrency after two glasses of wine.

• Growth solved every problem.

• Profitability was a detail for tomorrow.

• Governance was something one promised to think about after becoming a unicorn.

Indonesia simply adapted this global script to local conditions.

Yet every ecosystem adds its own cultural flavour to a speculative boom, and Jakarta’s contribution often appeared to be a remarkable faith in social familiarity.

• Investors naturally looked for indicators that reduced uncertainty.

• Founders sought executives they believed they could trust.

• Boards recruited people who looked capable of representing the company in front of international capital.

None of this was irrational in isolation. Collectively, however, it risked creating an environment where familiarity became a substitute for verification.

One consequence of this dynamic is that reputations begin to appreciate more quickly than experience. An impressive educational history, international exposure and the right professional references become bundled together into an attractive package labelled “leadership potential”. Sometimes that assessment proves correct. Sometimes it just reflects the fact that humans are remarkably good at mistaking confidence for competence.

Behavioural economists have spent decades documenting our tendency to rely on proxies when making decisions under uncertainty. We infer quality from prestige, credibility from association and capability from confidence because gathering complete information is expensive.

These shortcuts are surprisingly difficult to detect because almost everybody appears successful.

• Companies continue raising money.

• Salaries continue rising.

• New roles appear almost weekly.

• A founder who closes another funding round is celebrated as visionary,

• An operator moving into a senior title is assumed to be climbing because of exceptional ability not because an entire market has become extraordinarily generous.

Then money develops standards again.

• Why are margins still negative?

• Why has customer acquisition become more expensive?

• Why does every strategic review contain more adjectives than numbers?

Markets rarely expose weak judgement immediately. They wait until optimism has become habitual, then quietly remove the conditions that allowed said optimism to masquerade as strategy.

Trust as Capital

Successful startups are often described as meritocratic machines in which the best ideas naturally rise to the surface through relentless competition. It is an appealing story because it flatters everyone involved.

• Founders believe they earned their success through brilliance.

• Investors believe they identified brilliance before anyone else did.

• Employees believe they joined the winning team because they recognised greatness early.

Reality prefers messier narratives.

Imagine an ecosystem in which one entrepreneur must spend six months convincing potential investors they are credible enough to deserve a first meeting, while another begins the conversation with credibility already assumed because of relationships or overlapping networks.

Neither entrepreneur has yet proved anything.

One just starts several chapters further into the story.

Human beings constantly recycle trusted relationships because doing so reduces uncertainty, lowers transaction costs and minimises perceived risk. Economists call this information asymmetry. Sociologists call it social capital.

The unintended consequence is that ecosystems gradually become better at reproducing themselves than renewing themselves.

People who resemble yesterday’s success become easier to fund than people who might represent tomorrow’s.

Experience outside established circles is discounted because it arrives without familiar references. Different perspectives are interpreted as greater risk rather than potential advantage. Proven operators can find themselves competing against stronger narratives rather than stronger records, not because anyone intends to exclude them but because stories travel through networks faster than evidence.

This may be the least discussed cost of concentrated trust.

Entire ecosystems slowly converge on a shared mental picture of what leadership is supposed to look like.

• Certain biographies begin appearing repeatedly.

• Certain communication styles become synonymous with competence.

• Certain educational pathways acquire an aura extending far beyond anything taught in a classroom.

The network has escaped the classroom.

It now lives inside recruitment decisions, investment committees, board appointments and founder introductions.

No secret handshake is required.

Which is perhaps why the original metaphor of a “classroom cartel” still lingers in my mind, albeit for slightly different reasons than when I first wrote about it.

Classrooms appear effective at producing the one resource every entrepreneurial ecosystem prizes above almost everything else.

Not intelligence.

Not ambition.

Not even technical excellence.

Familiarity.

Choosing the Familiar

Markets, unlike social circles, have very little sentimentality. They rarely care who introduced you, who recommended you or whether your parents played golf with the chairman thirty years ago. They care, eventually, whether the business actually works.

During the years of abundant capital, however, those questions became easy to avoid.

The difficulty is that when enormous quantities of capital begin chasing relatively few credible founders, the market inevitably starts relaxing its standards. Potential begins replacing proof.

Consider two hypothetical founders.

One has built profitable businesses before, understands customers intimately and has spent years solving operational problems that never appeared on conference stages because they were too busy fixing warehouses, negotiating suppliers or managing payroll.

The other has an exceptional educational pedigree, moves comfortably in investor circles, communicates with remarkable confidence, possesses all the polish expected of modern entrepreneurship and arrives with a network that reassures everyone in the room that somebody else has probably already done the due diligence.

The question is whether they begin the race from the same starting line.

Because if they do not, the conversation has already ceased to be purely about merit.

One of the habits of startup ecosystems is their tendency to confuse visibility with rarity. The people who appear repeatedly on conference panels, podcasts and investor dinners gradually begin looking indispensable, rather like actors who become famous for playing famous people.

The irony, of course, is that genuine operating talent often looks unimpressive.

• The best logistics operator rarely gives inspiring TED Talks.

• The strongest finance leader usually possesses the charisma of aspreadsheet.

• The engineer capable of preventing catastrophic outages is unlikely to describe themselves as a “thought leader.”

Execution is deeply unfashionable.

Until it isn’t.

One suspects this explains why so many mature businesses quietly recruit seasoned operators while startup ecosystems continue searching for unicorns disguised as human beings.

Every role awarded because somebody already looked like leadership is a role not awarded to somebody who may have become exceptional had they simply been trusted with the opportunity. Every founder receiving disproportionate attention subtly reduces the attention available for others building equally compelling businesses beyond the fashionable social geography of Jakarta’s investment circles.

When possibility repeatedly flows through familiar channels, ecosystems slowly become less curious about discovering unfamiliar excellence.

That may not feel like injustice.

It should certainly concern anyone interested in efficiency.

After the Classroom

One imagines graduation as a ceremonial conclusion, a symbolic moment in which adulthood finally replaces adolescence. Caps are thrown into the air, photographs are taken, and everyone embarks upon independent lives determined solely by talent and hard work.

How charming.

Instead:

• Former classmates become future clients.

• University friends become venture partners.

• A recommendation becomes a board appointment.

• An internship becomes a co-founder.

People naturally trust those whose behaviour they have observed over years rather than months. That instinct is perfectly rational. If you have known somebody since they were sixteen, you probably possess richer information about their judgement than any interview process could ever provide.

Trust is therefore not the problem.

Overextending trust is.

Every ecosystem eventually reaches a point where personal confidence begins replacing institutional discipline.

• References become more persuasive than evidence.

• Reputation starts travelling faster than results.

• Questions become shorter because everyone assumes they know the answers.

That is usually when complacency arrives.

Healthy elites remain obsessed with identifying exceptional outsiders.

Unhealthy elites gradually become obsessed with reproducing themselves.

Once ecosystems begin converging around a relatively narrow definition of leadership, everyone outside that definition faces a burden. They must be undeniably extraordinary.

The insider is assumed competent until proven otherwise.

The outsider is required to prove competence before competence is even considered.

That difference compounds dramatically over careers.

It influences who receives mentorship, who gets introduced to investors, who becomes the obvious candidate when opportunities arise and, perhaps most importantly, who develops the confidence that opportunities belong to them in the first place.

People repeatedly trusted with meaningful responsibility tend to become more confident because experience justifies confidence. People overlooked often become more cautious, not because they possess less ability, but because repeated exclusion quietly teaches restraint.

This brings us back to the original metaphor of the classroom.

Perhaps the classroom merely represented the earliest visible manifestation of something considerably older than Indonesia’s startup ecosystem and considerably broader than venture capital.

Every society develops mechanisms through which opportunity becomes concentrated. Sometimes those mechanisms are universities. Sometimes they are military academies, political parties, consulting firms or investment banks.

Indonesia’s startup scene merely adapted its own version.

That should not outrage us.

It should interest us.

Indeed, many successful founders almost certainly deserve every achievement they have earned. Many executives undoubtedly justified every promotion they received. Many investors made genuinely thoughtful decisions based upon the information available at the time.

The more interesting question, that I didn’t ask two years ago, is whether Indonesia’s startup ecosystem occasionally became too comfortable confusing social certainty with economic certainty.

Looking back, I no longer think Classroom Cartels was fundamentally about schools.

Schools were simply the easiest part of the pattern to notice.

The deeper story was always about how ecosystems decide whom to trust before anyone has actually earned that trust in the marketplace. Every investment community develops shortcuts because uncertainty is exhausting and due diligence is expensive.

That is not uniquely Indonesian.

Yet recognising that tendency should not become an excuse for accepting it uncritically.

• Companies that once seemed unstoppable suddenly discovered that profitability matters.

• Founders celebrated for raising ever-larger rounds found themselves being judged instead on cash flow, governance and execution.

• Businesses that had mistaken momentum for resilience discovered the distinction at precisely the moment investors stopped confusing the two.

Booms flatter.

Corrections educate.

How much of success is genuinely earned, and how much is inherited through proximity to institutions, networks and assumptions that quietly pre-select tomorrow’s winners before tomorrow has even arrived?

The answer, inevitably, is somewhere between the comforting myths told by meritocrats and the cynical determinism preferred by their critics.

• Talent matters. So do networks.

• Hard work matters. So does timing.

• Execution matters. So does being invited into the room where execution is first given a chance.

Healthy ecosystems acknowledge all of these truths.

The unhealthy ones choose whichever version best flatters themselves.

Perhaps that is the lesson worth carrying forward.

The real danger was never that Indonesia’s startup ecosystem contained too many alumni from particular schools. The real danger was believing that familiar backgrounds could reliably substitute for difficult judgement; that polished narratives could stand in for proven execution; and that confidence, once wrapped in sufficient social proof, somehow became indistinguishable from competence.

History has an unhelpful tendency to mark its own homework.

Eventually every ecosystem discovers whether it invested in capability or only invested in comfort.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

Every economic cycle leaves behind its own fingerprint on the workplace.

• The recession of the early 1990s gave us downsizing.

• The early 2000s celebrated outsourcing.

• The 2010s introduced us to hustle culture, a period in management history during which employees were encouraged to mistake chronic exhaustion for professional fulfilment.

Then came the pandemic, followed by inflation, hiring freezes, geopolitical uncertainty, AI, and an employer-led labour market that shifted the balance of power back towards organisations.

Every era has its management innovation.

Our era has discovered responsibility inflation.

• The quantity of work expands.

• The complexity of the work expands.

• The accountability expands.

• The emotional labour expands.

Curiously, however, the compensation does not. Apparently everything in modern business is inflationary… except salaries.

This is not, of course, how organisations describe it.

No company has ever gathered its employees into the conference room to announce:

“Good morning everyone. We’ve decided to reduce payroll expenditure by redistributing managerial responsibilities across the existing workforce while maintaining current salary bands. Thank you for your continued flexibility.”

Instead, companies have become sophisticated storytellers. They sell opportunity. They create leadership pathways. They don’t ask you to absorb the workload of the colleague who resigned three weeks ago. They tell you they have confidence in your potential.

Perhaps that employee is you.

Congratulations.

The World’s Most Profitable Magic Trick

There is something almost beautiful about the economics of a fake promotion. Beautiful, that is, in much the same way one might admire an exceptionally well-executed bank robbery.

Imagine the case of a middle manager who resigns after accepting a role elsewhere. Then Monday arrives, and an awkward problem presents itself. The manager may have departed, but the work displays no interest whatsoever in accompanying them.

This presents organisations with two broad options.

1. Recruit another manager at roughly the same market salary, endure several months of recruitment costs, onboarding, lost productivity and all the administrative inconveniences that accompany replacing experienced employees.

2. Why not simply ask somebody already inside the organisation to “step up”?

Notice how refined the language becomes at this point. Nobody announces that payroll costs are about to decline while output remains largely unchanged. Instead, the conversation becomes one of leadership, growth and opportunity. The employee is told they have been recognised. They have earned trust. Senior leadership has noticed them. Their career is progressing.

It is difficult to overstate just how economically brilliant this arrangement can become.

Suppose a manager earning $140,000 leaves the organisation. A senior analyst earning $95,000 subsequently absorbs much of that manager’s operational responsibilities, begins supervising colleagues, attends executive meetings and becomes accountable for outcomes previously assigned to a more senior grade. Even allowing for some redistribution elsewhere, the organisation may effectively obtain tens of thousands of dollars’ worth of higher-level labour without immediately increasing payroll by anything approaching the same amount.

Finance departments tend not to describe this as labour arbitrage.

They usually call it operational efficiency.

None of this necessarily requires bad intentions. In fact, that’s what makes the phenomenon so fascinating. Many managers genuinely believe they are offering a valuable opportunity. Many organisations sincerely expect compensation to catch up when budgets allow.

Yet understandable incentives can still produce distorted outcomes.

From the employee’s perspective, the organisation has effectively renegotiated one side of the employment relationship while leaving the other largely untouched. More responsibility. More decision-making. Greater visibility. Increased risk. Longer hours. The only consistent element is the salary.

Yet corporate life possesses an ability to normalise exchanges that would appear faintly ridiculous almost anywhere else.

Perhaps that is because employment is simultaneously an economic transaction and a social relationship, which means organisations rarely negotiate solely through money. The fake promotion works because it asks people not to perform more valuable work, but to interpret that request as evidence of their own growing importance.

It is, in many respects, one of the cleverest stories modern management has ever learned to tell.

Paid in Opportunity

If fake promotions were obviously exploitative, they wouldn’t work.

Most employees are not irrational. They are not incapable of recognising when their workload has doubled, nor are they so dazzled by a new title on a business card that they completely forget how bank accounts function. If fake promotions continue to succeed, it is because organisations have become adept at constructing an offer that appears to benefit everyone, at least in the short term.

And, to be fair, sometimes it genuinely does.

• A larger title can make a CV considerably more attractive.

• Broader responsibilities can accelerate professional development in ways that no training course ever could.

• Being trusted with strategic work can expose employees to decision-making that permanently changes the trajectory of their careers.

There are countless professionals who can point to a temporary stretch assignment as the defining moment that prepared them for a far better opportunity elsewhere.

The problem is that possibility has evolved into a form of corporate currency.

The modern workplace has become remarkably sophisticated at monetising optimism. Employees are encouraged to think not in terms of what they are contributing today, but what today’s contribution might become tomorrow. It is an argument built upon deferred gratification, and in moderation there is nothing inherently wrong with that. Every worthwhile career involves periods where investment precedes reward.

The distinction, however, lies in whether there is a reasonably transparent pathway between today’s sacrifice and tomorrow’s reward.

Perhaps nowhere is this dynamic more powerful than in many Asian corporate cultures, where titles frequently possess a certain reverance. Hierarchy is social. Titles influence introductions, shape interactions, affect perceptions of authority and, in some industries, become shorthand for competence itself. To become a “Head of”, a “Director”, or a “Regional Lead” carries a degree of prestige that resonates both inside and outside the organisation.

Companies understand this perfectly.

Behavioural researchers have repeatedly shown that people care not only about outcomes, but about fairness, recognition and identity. Decades of research into organisational justice suggest employees are often willing to accept unfavourable outcomes if they believe the process itself is transparent and equitable. Conversely, when expectations quietly expand without corresponding recognition or a credible explanation, dissatisfaction grows far beyond the financial difference alone.

Compensation, after all, is one of the few objective indicators organisations possess. It says, “This is what we believe your contribution is worth.”

Which makes fake promotions psychologically fascinating.

The New Normal

Imagine somebody volunteers to cover for a departing manager while the organisation searches for a replacement. Everyone agrees it will probably last three months. The employee steps in, projects continue, clients remain happy, and quarterly targets are met.

Three months later, recruitment is proving difficult.

Could they continue helping out for just a little longer?

Six months later, the extraordinary gradually becomes ordinary. Colleagues no longer speak of the arrangement as temporary because, psychologically, it has ceased to feel temporary.

Behavioural economists refer to this as reference dependence. We judge today’s circumstances against whatever has become familiar. Yesterday’s favour becomes today’s expectation. Tomorrow’s refusal risks appearing like underperformance.

This is how responsibility inflation becomes self-reinforcing.

• A meeting here.

• Another direct report there.

• Responsibility for a regional project.

• Oversight of one more client portfolio.

None of these changes appear particularly significant in isolation. Together they produce an entirely different job.

There is another consequence that receives considerably less attention.

Senior roles are compensated differently because they carry different forms of accountability.

• Decisions become more consequential.

• Mistakes become more expensive.

• Difficult conversations become more frequent.

• Emotional labour increases.

The number of problems that arrive without obvious solutions grows almost exponentially.

From the organisation’s perspective, the arrangement may appear entirely rational.

• Hiring freezes are real.

• Budgets genuinely tighten.

• Investors do demand greater productivity.

Most organisations are not cartoon villains twirling moustaches while plotting ever more elaborate methods of underpaying.

This creates a classic management paradox.

The fake promotion succeeds precisely because the employee is talented enough to make it succeed.

Which is perhaps the cruelest irony of all.

The reward for demonstrating that you can successfully perform two jobs becomes the opportunity… to continue performing two jobs.

Opportunity or Exploitation?

There are circumstances in which accepting additional responsibility without immediate financial reward represents an entirely rational investment. Careers occasionally require taking short-term positions in anticipation of longer-term returns.

But investments should have an exit strategy.

That is where so many professionals stumble. They confuse a temporary investment with a permanent arrangement. They continue waiting for the return long after the market has quietly informed them that no dividend is forthcoming. Hope, admirable though it may be, has an tendency to become indistinguishable from inertia when left unattended for too long.

Perhaps the simplest question any employee can ask is also the one organisations seem least enthusiastic about answering.

“What has to happen for this role to be formally recognised and appropriately compensated?”

It is astonishing how often an opportunity that initially appears crystal clear begins dissolving the moment somebody requests a timetable.

This is where another truth emerges.

The biggest beneficiary of a fake promotion is frequently not the organisation offering it.

It is the organisation that hires you afterwards.

Your current employer receives a period of discounted managerial labour. Your next employer receives somebody with demonstrated leadership experience, broader responsibilities and a stronger professional profile, all of which were largely financed by someone else’s payroll strategy.

Which raises an awkward question.

If organisations genuinely view these expanded responsibilities as being worth more in the external market, why are they often surprised when employees eventually agree?

Perhaps because many organisations still imagine loyalty as a one-way investment.

Employees are expected to remain patient while budgets recover, markets stabilise and strategic priorities evolve. Yet labour markets function according to the same economic principles as every other market. When demand exists for a scarce resource, prices eventually adjust.

The scarce resource, in this case, is you.

Somewhere along the way, many employees began treating workload as evidence of worth. The more indispensable they became, the more successful they believed themselves to be. There is a certain emotional logic to this.

• Being trusted feels good.

• Being needed feels validating.

• Being told you are the only person capable of holding everything together can produce a warm glow that lasts almost until Sunday evening.

There is, however, a subtle distinction between being valued and being useful.

The two often overlap.

They are not the same thing.

Being useful simply means someone benefits from your contribution.

Being valued means that benefit is recognised in proportionate and tangible ways.

Employment has always been an exchange rather than an act of charity, despite the increasingly theatrical language organisations employ. Companies are not families. Families rarely conduct annual performance reviews before deciding whether to invite you to Christmas dinner. Companies are communities of shared commercial interest, bound together by reciprocal obligations that remain healthy only while both sides continue believing the exchange is broadly fair.

That is why fake promotions deserve more scrutiny than they often receive.

When an organisation says, “We don’t currently have the budget,” that may be entirely true.

Employees should simply remember that they are entitled to possess constraints of their own.

Those constraints are no less legitimate.

So by all means accept the occasional stretch assignment. Learn the skills. Build the experience. Take the title if it genuinely advances your career. Use every opportunity to increase your value.

Just remember to ask one question before you mistake somebody else’s cost-saving initiative for your own professional breakthrough.

Who is capturing the value created by this arrangement?

If the answer is “both of us,” you may well have found an opportunity.

If the answer is “mostly them,” then you haven’t been promoted.

At Career Candour we work 1:1 with mid-career professionals to make experience easier to understand and harder to underpay. CVs, LinkedIn, interviews, positioning, salary conversations. The whole thing needs to line up. Want this handled properly? DM us.

Every so often, a story comes along that is interesting not because of the people involved, but because of the powers it exposes.

Indonesia has had one of those moments.

In recent weeks, public attention has settled on two commissioner appointments that, taken individually, might have been dismissed as little more than another day’s political theatre. One involved the appointment of a 27-year-old to the Board of Commissioners of a subsidiary within the Pertamina group, despite widespread public questioning over what relevant corporate governance experience they brought to the role. The other concerned the appointment of the former personal assistant to Raffi Ahmad, to the Board of Commissioners of Krakatau POSCO, the joint venture between state-owned Krakatau Steel and South Korean steel giant POSCO.

The names themselves are incidental.

Dwelling too heavily on the individuals misses the point.

• They may well prove diligent.

• They may possess qualities invisible to the public.

• They may surprise everyone and become excellent commissioners.

One should always leave room for that possibility.

However, the issue is whether their appointment inspires confidence that they already possess the experience, judgment and independence expected of someone entrusted with supervising the leadership of organisations whose decisions affect millions of people, billions of rupiah and, in the case of state-owned enterprises, assets that ultimately belong to the public.

Those are rather different standards.

The predictable explanation, of course, arrived almost immediately.

• Politics.

• Loyalty.

• Relationships.

• Representation.

Indonesia has always worked this way. Some shrugged, while others argued that commissioner appointments have long served purposes extending beyond corporate governance, functioning as rewards, symbols of trust or mechanisms for maintaining political relationships.

But that explanation begins to unravel the moment one asks an awkwardly simple question.

Why does loyalty require inexperience?

These are not mutually exclusive characteristics. Indonesia is hardly suffering from a shortage of competent people who are also politically aligned. It possesses:

• Retired executives who have managed companies larger than some provinces.

• Former regulators who understand governance frameworks inside out.

• Academics who have spent entire careers studying risk, finance and public administration.

• Career civil servants who have navigated ministries longer than some recent appointees have been alive.

If political trust is the objective, surely the pool of trustworthy candidates extends rather further than those whose principal qualification appears, at least from the outside, to be proximity to power.

Once one accepts the proposition that commissioner appointments should primarily reflect political loyalty, an awkward possibility begins to emerge.

Perhaps competence becomes inconvenient once it reaches the point where it produces something infinitely more troublesome.

Independence.

That, after all, is the characteristic of genuinely experienced people.

• They develop opinions.

• They accumulate reputations that exist independently of the minister or the influential figure who appointed them.

• They become accustomed to disagreeing with people more powerful than themselves.

• They acquire the deeply irritating habit of asking questions.

In other words, they begin exhibiting precisely the qualities one might hope to find in someone responsible for supervising management.

Which raises an even more unsettling thought.

What if the controversy surrounding these appointments is not really about youth, or celebrity, or politics at all?

What if it is about the gradual redefinition of the commissioner role itself?

Because if commissioners cease to be independent supervisors and instead become extensions of the networks responsible for appointing them, then corporate governance has stopped being a mechanism for holding power accountable and started becoming another way in which power distributes itself.

What Is a Commissioner Actually For?

Indonesia’s corporate governance framework follows the Dutch two-tier board model, which deliberately separates those who manage a company from those who supervise its management.

The Board of Directors runs the business. They negotiate contracts, formulate strategy, oversee operations and attempt to create value for shareholders. If the company were a ship, these are the people on the bridge deciding where to sail.

The Board of Commissioners performs a different function. It is not there to steer the ship. It is there to stand behind the captain, making sure that everyone has looked at the map before announcing full speed ahead.

Commissioners exist to manage the managers.

Corporate governance has always been built upon a rather pessimistic assumption about human nature. Left entirely to themselves:

• Executives may become overconfident.

• Success has an unfortunate tendency to convince intelligent people that they have become infallible.

• Financial forecasts become optimistic.

Before long, someone is proposing a multi-trillion-rupiah investment supported by a hundred-page report explaining why every conceivable outcome appears favourable.

This is precisely the moment commissioners are supposed to earn their keep.

Imagine sitting around the board table at a major state-owned enterprise.

• Management has just unveiled an ambitious expansion strategy.

• The Chief Executive speaks confidently about growth opportunities.

• The Chief Financial Officer reassures everyone that the numbers have been carefully modelled.

• External advisers, who have been compensated handsomely for their expertise, confirm that the proposal is both visionary and entirely achievable.

Someone, eventually, is expected to ask the question nobody else particularly wishes to hear.

“What if we’re wrong?”

This is why commissioners around the world tend to be experienced. They are often former senior executives or industry specialists whose greatest asset is not technical brilliance but the confidence to challenge management when challenge is warranted.

Oversight, by its very nature, is not designed to be popular.

Loyalty Has Its Limits

At this point, the conversation usually reaches what has become the universally accepted full stop to almost every discussion about appointments in Indonesia.

“Yes, but politics.”

The phrase is presented though it were the explanation. Politics happens. Patronage exists. Relationships matter. End of discussion.

Except it isn’t.

If political loyalty really is an important consideration, why should that automatically result in appointments which sit some distance from conventional expectations of governance experience? Why does the conversation assume an impossible choice between loyalty and competence?

Indonesia is not a country lacking experienced professionals. Many have spent decades navigating the intersection between politics, government and commerce. Many would almost certainly satisfy any reasonable definition of political reliability while also bringing the kind of judgment that tends to emerge after thirty years of making decisions whose consequences extended further than social media.

Competence and loyalty are not opposing forces.

Which makes it difficult to avoid the suspicion that something else is being optimised.

On one side of the table sits a retired chief executive who has spent four decades overseeing complex organisations, surviving financial crises and explaining unpopular decisions to impatient shareholders.

On the other sits someone whose principal asset is that everyone already knows exactly who recommended them.

The Value of Independence

There is, however, another explanation.

Suppose the objective is not just appointing loyal people.

Suppose the objective is appointing people who remain dependent.

Someone who has spent thirty years building a career develops a reputation that belongs to them rather than to the individual who appointed them.

• They accumulate networks beyond a single political circle.

• They become financially secure.

• They become accustomed to saying things that powerful people occasionally dislike hearing.

Corporate governance relies upon these qualities.

The ideal commissioner is not someone who agrees with management. They are expected to introduce constructive friction into an environment naturally inclined towards consensus. Their value lies in possessing sufficient confidence to interrupt a beautifully rehearsed presentation with the unfashionable observation that the risks are understated and the projected returns dependent upon everything going exactly according to plan.

That becomes considerably harder if one’s own position depends upon remaining agreeable.

If an appointment leaves investors, employees or the public asking whether the commissioner possesses sufficient experience to challenge management effectively, then confidence has already begun eroding before the first board meeting has even commenced.

Perhaps this explains why institutional investors devote such extraordinary attention to board independence. Their interest has little to do with personalities. They understand something rather fundamental: executives already have people paid to support them.

The commissioner is supposed to be the person paid to question them.

Who Are Commissioners Really Working For?

If the owner of a privately held business wishes to appoint their cousin, golfing partner or the neighbour’s Labrador as commissioner, the consequences remain largely their own. Investors possess a mechanism for expressing disagreement with private governance decisions.

They decline to invest.

Public companies operate under a different social contract.

Suddenly the shareholders include pension funds investing retirement savings, institutional investors managing other people’s capital and ordinary citizens whose exposure may extend no further than a mutual fund holding shares on their behalf. Decisions made within the boardroom ripple well beyond those seated around the table.

State-owned enterprises extend this principle even further.

Here, the ultimate shareholder is the public.

Taxpayers may never attend an annual general meeting. They will almost certainly never meet the board. Yet they remain the residual owners of institutions whose success, failure and governance ultimately affect national finances, public confidence and economic development.

Commissioner appointments cease being purely internal staffing decisions and become matters of legitimate public interest.

In many mature corporate governance systems, politics may influence who enters the room, but demonstrated experience usually determines the credibility of the appointment. Former ministers, regulators, and business leaders often carry political histories. They also arrive with careers capable of surviving independent scrutiny.

This is why unusual commissioner appointments generate such disproportionate attention.

Every appointment communicates something about the values of the institution making it. It indicates what characteristics are considered important, what trade-offs are acceptable and what the organisation believes the role itself actually requires.

If commissioner positions gradually come to resemble rewards for proximity rather than appointments earned through demonstrated judgment, people stop assuming commissioners exist to supervise power.

When Institutions Lose Credibility

Organisations have always survived disappointing appointments. Equally, history is littered with people who exceeded every expectation placed upon them. Human beings are unpredictable, which is why one should be cautious about reducing any debate to a judgment upon a single person.

The larger concern lies elsewhere.

Institutions derive their strength from the confidence that the powers granted to them will be exercised in the manner society understands them to exist.

• A Supreme Court functions because citizens broadly accept that judges are expected to interpret the law rather than the political preferences of whoever happened to appoint them.

• Central banks are trusted because markets believe interest rates are set according to economic judgment rather than whoever had the most vociferous opinion over lunch.

• Auditors retain their credibility because investors assume they are inspecting the books rather than composing thank-you letters to management.

Commissioners belong to precisely the same category.

Corporate governance is, in many respects, rather like an aircraft’s emergency systems. One hopes they are never required. Yet nobody boards a plane thinking, “The emergency exits seem a little decorative, but I’m sure we’ll improvise if anything happens.” Confidence comes from believing that someone has thought carefully about what would happen if a disaster occurred.

Boardrooms are no different.

The commissioner exists for the extraordinary Tuesday afternoon when consensus has become dangerous, optimism has become contagious and someone must possess the confidence and the authority to interrupt the proceedings with a sentence beginning, “Before we approve this...”

If commissioner appointments increasingly appear to reward proximity rather than judgment, the public inevitably begins adjusting its assumptions.

• Investors become more sceptical.

• Employees become more cynical.

• Minority shareholders begin wondering who exactly is representing their interests.

Even capable commissioners appointed entirely on merit find themselves working beneath a cloud created by appointments elsewhere.

Institutional legitimacy is surprisingly fragile in this respect.

Perhaps this explains why so many annual reports devote pages to celebrating principles such as accountability, transparency, independence and Good Corporate Governance. They are promises. Public declarations about how an organisation understands its own responsibilities.

Those words matter.

At least they ought to.

It would be unfair to suggest that every unconventional commissioner appointment represents institutional decline. Some will undoubtedly perform exceptionally well. Others will develop into thoughtful, diligent and genuinely independent board members despite scepticism surrounding their appointments. Every organisation benefits when its leaders exceed expectations.

Yet that possibility cannot become a substitute for principle.

Good governance exists precisely because institutions should not rely upon optimism, goodwill or the assumption that everything will probably work out in the end. It relies upon structures deliberately designed to make poor decisions less likely and difficult questions more common.

That is why the commissioner matters.

They are, in effect, the people responsible for managing the managers.

Once that role begins drifting towards managing relationships instead, something fundamental changes.

The more experienced an individual becomes, the more likely they are to possess exactly the qualities that effective oversight requires. Those qualities make them rather more difficult to influence, less dependent upon political patrons and more inclined to ask questions.

Which brings us back to those recent appointments.

The individuals became symbols of a larger conversation about what Indonesia expects from the institutions responsible for governing some of its most important companies.

If commissioner appointments genuinely reflect the careful selection of individuals best equipped to supervise management, then the public should be able to see that logic without requiring lengthy explanations about political realities, unwritten customs or the mysterious ways in which things are supposedly done.

And if the explanation ultimately becomes, “Well, this is simply how the system works,” then perhaps the system deserves rather more scrutiny than the individuals passing through it.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

There’s a protocol that accompanies almost every major corruption investigation in Indonesia.

1. It begins with a press conference, involving tables covered in stacks of cash, luxury watches, foreign currencies and gold bullion.

2. Within hours, social media declares that this is either the beginning of a glorious national reckoning or the final collapse of the republic.

3. By the following afternoon, everyone has become an expert on constitutional law, police procedure and the internal politics of institutions that spend a great deal of time ensuring precisely nobody understands their internal politics.

The remarkable thing about last week’s events in Jakarta is not that they involved allegations of corruption. Indonesia, unfortunately, has never suffered from a shortage of corruption cases. Since Reformasi, successive governments have prosecuted ministers, governors, and senior business figures. Corruption investigations, depressing as it sounds, have become almost routine. They are no longer noteworthy because they exist. They become noteworthy because of who is investigating whom.

That difference is what transformed a large corruption investigation into something even larger.

On paper, the story appeared relatively straightforward.

1. Indonesian police announced a major investigation into alleged corruption and money laundering connected to coal procurement and state electricity contracts, carrying out coordinated searches across Jakarta and its surrounding areas.

2. Authorities reported the seizure of vast quantities of cash, precious metals and foreign currency, with estimates of alleged state losses stretching into the trillions of rupiah.

Had events stopped there, the headlines would probably have followed a familiar formula before disappearing beneath the next political controversy a few days later.

Instead, attention drifted almost immediately away from the allegations themselves and towards the institutions conducting the investigation.

Rumours began circulating that the investigation was drawing closer to one of Indonesia’s most influential prosecutors, Assistant Attorney General for Special Crimes Febrie Adriansyah. Reports suggested police activity around property linked to him. Other claims alleged that soldiers had appeared to protect his residence. Police denied rumours of a dramatic raid. The military explained that its personnel were present under existing arrangements relating to the protection of prosecutors. Anonymous accounts on X suddenly began speaking with extraordinary confidence about constitutional crises and institutional warfare.

Within forty-eight hours, what had begun as another corruption investigation had evolved into a national seminar on the architecture of the Indonesian state.

The fascinating aspect of this transformation is that almost everybody instinctively reached for the wrong set of analytical tools.

Outside Indonesia, particularly in English-language commentary, there is a powerful temptation to interpret events through familiar Western assumptions.

• Police investigate crime.

• Prosecutors prosecute crime.

• Soldiers defend borders.

• Intelligence agencies gather intelligence in the background.

• Institutions have clearly defined responsibilities.

Indonesia has never really functioned that way.

This does not make Indonesia uniquely chaotic. In fact, one of the more persistent misconceptions surrounding Indonesian politics is that it somehow represents an exotic exception to the way modern states organise themselves, when the opposite is arguably closer to the truth. Much of the world has developed institutions whose responsibilities overlap, whose relationships evolve, and whose boundaries are shaped as much by history as by constitutional theory. It is the neat institutional separation familiar to countries such as Australia, Britain or Canada that is historically unusual rather than universal.

Indonesia’s political architecture makes considerably more sense once one stops asking why it does not resemble Westminster and starts asking why it resembles Indonesia.

A Nation Built Before Its State

There is a tendency, particularly among countries fortunate enough to have enjoyed long periods of institutional continuity, to assume that states emerge first and institutions emerge second. Governments establish armies, governments establish police forces, governments establish courts, and over time each organisation develops its own professional identity before settling into a constitutional arrangement that survives for generations.

Indonesia experienced something considerably more complicated.

When independence was proclaimed in August 1945, there was:

• No mature Indonesian state patiently waiting to assume responsibility for one of the most geographically demanding archipelagos on Earth.

• No nationwide bureaucracy capable of administering distant provinces.

• No established security apparatus ready to guarantee sovereignty.

There was, instead, a declaration of independence, an occupying power reluctant to accept it, enormous uncertainty and, before long, a revolutionary struggle that would shape Indonesia’s political DNA for decades to come.

That distinction explains a remarkable amount about how Indonesia still thinks about itself.

Many Western militaries exist because their states already existed. Their primary purpose became defending established borders against external threats. Civilian institutions matured alongside them, gradually assuming responsibility for everything from taxation to disaster response, leaving armed forces to concentrate overwhelmingly on warfighting. The ideal relationship eventually became one in which soldiers remained almost invisible in everyday public life, emerging primarily for ceremonial occasions, overseas deployments or particularly catastrophic floods.

Indonesia’s experience was fundamentally different. The armed forces became one of the principal instruments through which the republic came into existence in the first place. The military was not merely protecting the state. It was helping create it.

Whether one agrees with that legacy is almost beside the point. Institutions develop identities through experience, and few experiences shape organisational identity more profoundly than believing one’s predecessors participated directly in national survival. It is therefore hardly surprising that the TNI has historically viewed itself not simply as another branch of government but as one of the custodians of Indonesian unity itself. Reformasi dramatically reduced the military’s formal political role, dismantling the doctrine of dwifungsi that had embedded it within civilian governance throughout the New Order. Yet ideas do not disappear just because legislation changes. Historical narratives have long shelf lives.

Geography reinforced those instincts.

It is difficult to appreciate Indonesia’s administrative challenge without first abandoning the comforting illusion that it resembles an ordinary nation-state enlarged to unusual proportions. Indonesia is large and fragmented by design. Administering thousands of inhabited islands, separated by seas, volcanoes, dense forests and frequently indifferent infrastructure, requires logistical capacities that many continental states rarely need to contemplate. Long before modern disaster agencies or sophisticated civilian logistics networks emerged, the military possessed transport aircraft, engineering units, communications systems and nationwide organisational structures capable of responding rapidly across vast distances.

History and geography, working together, created a military that inevitably occupied a broader space within national life than its counterparts in many Western democracies.

Whether that broader role should continue today is an entirely legitimate political question. Why it developed in the first place is rather less mysterious than it is often portrayed.

The same historical forces, however, were shaping another institution whose future relationship with the military would prove equally consequential.

By the time Reformasi arrived in 1998, Indonesia was confronting the end of the New Order and a more complicated question altogether:

How do you separate institutions that had spent decades growing together without accidentally creating several competing centres of power instead of one?

The Institutions Reformasi Built

If the New Order was characterised by the concentration of power, Reformasi represented almost the opposite instinct. The political mood after 1998 was that Indonesia needed new leaders and a new architecture of power altogether. Institutions that had previously existed beneath a highly centralised system were suddenly expected to become independent, accountable and, above all else, incapable of allowing another president to accumulate the authority enjoyed by Suharto.

The separation of the police from the armed forces became one of the defining reforms of that era. Under ABRI, the military and police had effectively occupied different rooms in the same institutional house. Reformasi handed them separate addresses and hoped they would become good neighbours.

History, however, has an irritating tendency to ignore constitutional aspirations.

Creating two powerful institutions where previously there had been one did not eliminate competition. Each organisation developed its own hierarchy, its own institutional mythology and, inevitably, its own understanding of what constituted the national interest. It was almost inevitable. Bureaucracies possess a remarkable ability to convince themselves that they alone truly understand how the entire enterprise ought to function.

Meanwhile, Indonesia continued building institutions. The Corruption Eradication Commission (KPK) emerged as perhaps the most celebrated symbol of Reformasi’s ambitions. For a time it enjoyed a reputation that anti-corruption agencies around the world could only envy. Ministers, governors, members of parliament and senior officials found themselves investigated with a frequency that suggested nobody had informed the KPK about the unwritten rule that powerful people were generally expected to remain difficult to prosecute.

The commission became something rather unusual in modern politics: an institution that ordinary citizens often trusted more than many elected politicians.

That popularity made it influential.

Influence, unsurprisingly, made it controversial.

It is difficult to find many countries where institutions accumulate significant authority without eventually encountering resistance from other institutions possessing equally significant authority. Indonesia proved no exception. Episodes such as the famous Cicak versus Buaya dispute entered political folklore because the metaphor captured how institutions were occasionally colliding with one another in full public view.

Power had become distributed.

Not equally.

But undeniably.

That distribution continued evolving over the following decade.

• The Attorney General’s Office expanded its prominence through increasingly ambitious prosecutions.

• The police developed ever broader capabilities in financial crime, cybercrime and corruption investigations.

• The KPK remained important but no longer occupied quite the singular position it once had.

• Intelligence agencies continued performing the role expected of intelligence agencies everywhere… namely insisting they were not involved in whatever everyone assumed they were involved in.

From the outside, this can appear bewilderingly untidy. From the inside, however, it increasingly resembles a negotiated equilibrium.

That phrase may sound disappointingly academic, but it describes an arrangement familiar to political scientists and corporate executives alike. When several powerful organisations coexist, each possessing overlapping responsibilities and differing institutional incentives, politics becomes less about fixed hierarchies and more about continuous negotiation.

• Jurisdictions overlap.

• Personal relationships matter.

• Informal understandings develop.

• Authority is exercised through legislation, convention, and precedent.

To imagine that Indonesia contains two perfectly organised rival camps, each patiently awaiting instructions from shadowy puppet masters, is therefore to mistake a rainforest for a chessboard. Forests are considerably more complicated than that.

Every Country Thinks It's Normal

One of the more persistent habits of international commentary is treating Western institutional arrangements as though they represent the inevitable destination of political development rather than one historical outcome among many.

This is understandable. Most observers interpret foreign countries through the constitutional traditions they know best.

• Australians assume governments look vaguely Australian.

• The French naturally believe every political problem would improve with slightly better administrative centralisation.

• Americans often conclude that any institutional challenge can be solved by creating three additional agencies and allowing them to disagree in front of Congress for several decades.

Indonesia is hardly unique in this regard. Every nation quietly imagines that history has been progressing, with varying degrees of enthusiasm, towards becoming itself.

Yet the further one travels beyond the familiar democracies of north-western Europe and the Anglosphere, the more difficult it becomes to sustain the assumption that soldiers should remain permanently invisible, police should concern themselves exclusively with domestic crime, intelligence agencies should avoid public attention and every institution should know exactly where its responsibilities begin and end.

History doesn’t back that up.

• South Korea spent decades under military influence before becoming one of Asia’s most successful democracies.

• France maintains a state tradition that accommodates multiple national security institutions beneath a powerful executive.

• Singapore developed an exceptionally capable bureaucracy in which questions of institutional effectiveness have often taken precedence over ideological debates concerning theoretical administrative purity.

Even the United States, frequently cited as the archetype of civilian governance, has accumulated such an extraordinary constellation of federal law-enforcement bodies.

The point is not that these systems are identical.

Far from it.

The point is that history leaves fingerprints on institutions, and those fingerprints rarely disappear simply because comparative politics textbooks would prefer neater diagrams.

Indonesia’s geography compounds those historical legacies. Maintaining administrative reach across an immense geography inevitably requires different assumptions about logistics, disaster response and state capacity than governing a comparatively compact continental country. When earthquakes level towns, volcanoes interrupt transport networks or remote regions require rapid deployment of engineering resources, the institutions possessing aircraft, ships, communications systems and nationwide command structures naturally become relevant. Whether that relevance should remain confined to emergencies or extend into wider civilian roles is precisely the debate Indonesia continues to have.

Supporters argue that the state should utilise its most capable institutions wherever national interests require them, provided democratic oversight remains intact.

Critics worry that temporary necessity possesses an unfortunate habit of becoming permanent habit, particularly once budgets, careers and institutional prestige begin adapting to expanded responsibilities.

The persistence of that debate may itself be evidence of democratic health. Democracies are not distinguished by the absence of disagreement. They are distinguished by their ability to keep disagreeing without anyone feeling compelled to resolve the matter with tanks.

Power Struggle or Politics as Usual?

Having travelled through seventy-five years of institutional evolution, it becomes easier to understand why last week’s events generated so much speculation.

Notice, however, that speculation is not the same thing as proof.

The confirmed facts are comparatively straightforward.

• A major corruption investigation is under way.

• High-profile searches have been conducted.

• Allegations involve potentially enormous financial losses.

• The investigation has intersected, directly or indirectly, with figures occupying influential positions within Indonesia’s legal establishment.

• Public statements have been issued.

• Rumours have travelled considerably faster than official information, as rumours generally do.

Everything beyond that requires more caution.

It is certainly possible to interpret the recent developments as evidence of institutional competition. History provides ample examples of Indonesia’s major state bodies asserting their respective authorities, occasionally in ways that become visible to the public. Observers therefore do not need vivid imaginations to suspect that overlapping investigations or competing jurisdictions might also carry institutional implications.

It is equally possible, however, to overinterpret ordinary legal processes simply because they involve unusually prominent individuals.

• Large corruption investigations almost inevitably touch powerful offices.

• Powerful offices, in turn, inevitably produce dramatic headlines.

Not every institutional interaction constitutes a constitutional confrontation.

Politics has always been conducted partly through symbolism. A photograph, a convoy, an official denial, a carefully worded statement or an unexplained deployment can influence public perception long before courts establish legal facts. Institutions understand this perfectly well. They have always understood it. Which is precisely why moments like these generate such intense public fascination.

The real story, therefore, may not be whether one institution is triumphing over another.

It may be that Indonesia has entered another period in which the balance between several powerful institutions is being recalibrated, a process that has occurred more than once since Reformasi and will almost certainly occur again.

Whether that recalibration ultimately produces stronger accountability, greater institutional rivalry or simply a different equilibrium is a question that cannot yet be answered.

It is, however, the question worth asking.

The Indonesia Still Being Built

One of the misconceptions in politics is that countries eventually arrive at a finished constitutional destination. But history dictates that States are rarely finished. They simply become different versions of themselves, each generation inheriting the previous one’s institutional compromises before adding several new ones of its own.

Indonesia finds itself at precisely one of those moments.

Whether last week’s events ultimately prove historically significant will matter far less than the broader questions they have exposed. The public conversation has drifted beyond individual allegations and towards something considerably more fundamental:

How should power be organised inside a modern Indonesian state? More importantly, who decides?

Those questions are unlikely to disappear once the news cycle moves on.

They have been asked, in one form or another, ever since Reformasi.

The difficulty, however, is that Indonesia is now confronting a very different set of circumstances from those that existed in 1998. Reformasi was, understandably, preoccupied with preventing the return of excessive concentration of power.

• Fragmentation became a feature rather than a flaw.

• Institutions were strengthened.

• New checks were introduced.

• Authority became dispersed across a range of organisations whose overlapping responsibilities reflected a deliberate suspicion of allowing any single pillar of the state to dominate the others.

Twenty-five years later, Indonesia faces a different challenge.

• Excessive centralisation risks creating institutions that become too powerful to scrutinise effectively.

• Excessive fragmentation risks producing institutions that become preoccupied with protecting their respective jurisdictions.

Somewhere between those two extremes lies an elusive equilibrium that every country claims to have discovered and almost none have managed to preserve indefinitely.

One can already discern several plausible trajectories.

1. Indonesia could continue refining what might be described as a managed institutional balance.

• The military remains influential but constitutionally bounded.

• The police continue expanding professional capabilities while remaining subject to civilian oversight.

• The Attorney General’s Office strengthens prosecutorial effectiveness without becoming an independent political actor.

• The KPK continues evolving within a broader anti-corruption ecosystem rather than standing apart from it.

Institutional rivalry persists, but largely behind closed doors where rivalries, if they are to exist at all, probably belong.

This would not produce many exciting headlines.

It would probably produce reasonably effective government.

2. Greater centralisation through a presidency that increasingly becomes the undisputed coordinator of multiple powerful institutions.

Several successful states operate under strong executive leadership combined with robust legal and constitutional constraints. The determining factor is whether that authority remains accountable, transparent and constrained by institutions capable of exercising genuine oversight.

3. Institutional competition could become increasingly visible.

That prospect understandably concerns many Indonesians, although it deserves careful explanation. Public disagreement between institutions is not automatically evidence of democratic decline. Democracies, after all, are built upon disagreement.

• Courts disagree with governments.

• Legislatures disagree with presidents.

• Journalists disagree with everybody.

The more relevant question is whether disagreements remain governed by law, procedure and constitutional norms, or whether institutions begin treating one another primarily as political competitors whose legitimacy depends upon prevailing rather than cooperating.

That distinction is enormously important.

Perhaps the greatest temptation for outside observers is to interpret every high-profile investigation as confirmation of whichever narrative they already preferred before the investigation began.

• Those convinced Indonesia is returning to authoritarianism inevitably discover supporting evidence.

• Those convinced Indonesia is simply strengthening the rule of law discover equally persuasive examples.

Human beings have always displayed an extraordinary ability to arrange facts into stories they already wished to believe.

Indonesia deserves better than that.

The country’s political development is considerably more interesting than the comforting simplicity of binary narratives. It is neither marching inexorably towards a familiar Western destination nor retreating inevitably into its authoritarian past.

Messy processes, unfortunately, rarely produce tidy headlines.

Much of the public conversation has treated Indonesia’s institutions as though they belonged to opposing football clubs whose supporters simply await the weekend fixture. One side wins. The other side loses. Transfer window closes. Everyone goes home.

States do not function like football leagues.

At least, one sincerely hopes they do not.

Institutions compete, certainly. They also cooperate, negotiate, constrain, influence and occasionally frustrate one another in ways that make clean narratives deeply appealing and profoundly misleading. The very untidiness of Indonesia’s institutional landscape is not necessarily evidence that something has gone wrong. It may equally suggest that several powerful organisations remain capable of preventing any one of them from becoming permanently dominant.

Whether that balance is sustainable remains the genuinely difficult question.

Indonesia has repeatedly demonstrated an impressive capacity for institutional adaptation. Few observers in 1998 would have predicted the democratic resilience the country has subsequently displayed. Equally, history offers no guarantee that institutional balances, once achieved, maintain themselves indefinitely. They require continual adjustment, public trust, and political restraint

Which brings us back to the corruption investigation that accidentally became a constitutional conversation.

Years from now, the individual allegations may prove legally significant or they may not. Court proceedings will establish facts that speculation never could. The personalities dominating today’s headlines will eventually retire, be replaced or discover that political prominence possesses an alarmingly short shelf life.

The more enduring legacy of this episode may be something entirely different.

It has reminded Indonesians (and foreign observers) that institutions matter at least as much as individuals.

1. Governments change.

2. Presidents come and go.

3. Attorneys General, Police Chiefs and military commanders eventually hand over their offices.

The constitutional relationships between those offices, however, endure far longer. They shape how accountability functions and how power is exercised long after today’s headlines have been forgotten.

That is why understanding Indonesia requires resisting the temptation to reduce every political controversy to heroes, villains and shadowy factions manoeuvring behind closed doors. Such stories are undoubtedly entertaining. They also possess the analytical sophistication of explaining Formula One by observing that all the cars appear to be driving in circles.

Indonesia’s political architecture is more complicated than that.

It always has been.

And perhaps that is the most valuable lesson to emerge from a week in which everyone suddenly became fascinated by how the Indonesian state actually works. The raids themselves will eventually fade into history, but questions about institutional design, democratic evolution and the perpetual challenge of balancing authority with accountability will endure.

Those questions deserve more than hot takes.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

A recent verdict involving state-linked corporate venture capital in Indonesia has turned a failed startup investment into something much larger than a failed startup investment.

The case itself will continue to belong to the lawyers. That is where it should stay for now, because most people outside the courtroom do not have the full record, the witness testimony, or the appeal arguments that may follow. What the rest of us can discuss, with some seriousness, is the message now being absorbed by people who work anywhere near state-linked capital.

That message is not complicated.

If you are asked to make a commercial decision on behalf of a public-linked institution, and the decision later goes wrong, what exactly protects you?

People in and around the startup world are already talking about it in very practical terms, and the question beneath those conversations is simple enough to be awkward.

Who will still sign?

The signature matters because, inside a large institution, it is the point where all the nice language about transformation becomes personal.

• Before the signature, everyone can speak warmly about innovation.

• After the signature, someone has taken responsibility for a decision that may be judged years later by people who know the ending.

Indonesia has spent a long time asking its state-linked institutions to modernise. They are told to become more commercial, to work with startups, to think strategically about technology, and to behave less like old bureaucracies. That is a reasonable ambition, but it comes with a problem that cannot be solved by another transformation deck. Commercial judgment involves risk, and risk does not stop being risk because the investor has a state-linked shareholder.

The state wants its institutions to act more like serious commercial actors, but many of the people inside those institutions now have reason to ask whether commercial failure can later become personal legal danger. If that fear takes hold, the result will not be better decision-making. It will be safer decision-avoidance.

Indonesia has no shortage of people who can attend meetings, endorse slogans, and admire innovation from a safe distance. What it needs are people willing to make difficult calls before the outcome is known.

That is now the real issue.

Why CVC Exists

Large state-owned institutions are not built like startups, and there is no shame in that. A bank, telco, or infrastructure company connected to the state has responsibilities that a young startup does not have. It cannot wake up every quarter with a new identity and call the confusion a pivot. It has employees, regulators, political expectations, public scrutiny, and internal procedures that exist partly because people inside the organisation know they may one day be asked to justify what they did.

That kind of institution can still innovate, but it will rarely innovate naturally. It is too large, too exposed, and too conscious of consequence.

Corporate venture capital was meant to deal with that gap. A large institution invests in startups because it wants access to ideas and behaviours it cannot easily create from within. It is an admission that the future may be built by people who do not sit inside the group structure, and that the old institution may learn more by getting close to them than by pretending it can do everything itself.

That is a sensible reason to have state-linked CVC. It is also an inconvenient one, because it requires a very large institution to accept that some of the companies it backs will disappoint it.

• Some will fail because the market was not there.

• Some will fail because the business was not as good as the story.

• Some will fail because the founder was better at raising money than building discipline.

That last sentence is not cynicism; it is simply a fact known by anyone who has spent time around venture-backed companies.

The catch, is that this risk is not a side effect of venture capital. It is part of the product.

A state-linked investor can reduce risk through process, but it cannot remove risk without removing the reason to invest in the first place. By the time a company is safe enough to satisfy everyone who might later review the decision, it is often no longer the kind of opportunity corporate venture capital was created to find.

Indonesia cannot ask state-linked institutions to access startup upside while treating startup downside as if it were evidence that somebody must have done something wrong.

The better question is whether the decision was made honestly, carefully, and with a real attempt to understand what was being approved at the time.

• If the answer is no, then scrutiny is deserved.

• If the answer is yes, then the fact that the company later failed cannot be enough on its own.

VC Is Not Lending

A lot of the confusion comes from trying to judge venture capital as if it were lending with better branding.

Credit begins with repayment as the basic expectation. Venture capital begins with a different bargain. The investor knows that the company may not return the money, and accepts that risk because the possible reward is different. This does not make venture investing clever, or immune from stupidity. It only means the activity has to be judged according to what it actually is.

A failed venture investment can absolutely be a sign of poor judgment. It can also be the result of a reasonable decision that later went badly. Those are not the same thing, and a serious system must be able to tell the difference.

The difficulty is that failure makes people feel wise.

• Once a company collapses, the warning signs look bigger than they did at the time.

• Once bad information becomes visible, earlier trust looks foolish.

• Once public-linked money is lost, the argument becomes emotionally charged very quickly.

This is why judging a venture decision after the fact requires discipline. The question is not whether the investment later looked bad. The question is whether the people approving it had a defensible basis for doing so when they approved it.

That is not a soft standard, because it requires looking closely at the process rather than simply pointing to the result. It asks whether information was tested properly, whether assumptions were challenged, whether conflicts were absent, and whether the decision-makers were acting for the institution rather than for themselves.

Where that process was fake, nobody should hide behind business judgment. If someone knowingly relied on false information or treated governance as decoration, then the language of venture risk should not save them. The public should expect better from people managing state-linked money.

But where the issue is that a risky investment went wrong, the system needs to be much more careful. Otherwise every failed company becomes a ready-made morality play, and the person who signed becomes the easiest character to punish.

That is not how to build serious investment institutions.

People close to the ecosystem understand this instinctively. In private, the frustration is not only about one case or one set of individuals. It is about whether state-linked venture capital is being judged as a portfolio activity or as a series of isolated events where the failed deal is pulled out and treated as proof of the whole story. That may be satisfying, but it misunderstands the model.

The Problem With Hindsight

The Business Judgment Rule exists because business decisions are made before the result is known. The basic idea is that a person should not be personally punished for a bad commercial outcome if they acted in good faith, took proper care, and made the decision for the company’s benefit.

This principle matters because no serious organisation can function if people are only protected when the outcome is good.

State-linked capital makes the issue more difficult because public money deserves more scrutiny than private money. People managing it should expect to explain themselves. They should be able to show why they acted, what they relied on, and how they dealt with risk. The public is entitled to expect discipline from people spending or investing money connected to the state.

The problem begins when the standard is not clear enough before the decision is made.

If people do not know what counts as enough care, they will not become more thoughtful. They will become more defensive. They will push responsibility into process, spread the signature across more desks, and make sure that any future blame is so widely shared that nobody can find the centre of the decision. It will all look very proper. It may even look like governance.

Anyone who has worked around large institutions knows the difference between real governance and paperwork designed to survive an accusation.

There is a dry joke somewhere in the fact that innovation in these environments often begins with a request to move faster and ends with everyone asking Legal whether the minutes should be revised.

If Indonesia wants serious people to work near state-linked capital, it has to give them a standard they can understand. It has to make clear that dishonesty will be punished, but that honest commercial judgment will not be treated as dishonesty just because the result later becomes embarrassing.

This is a call for predictability. People can work with strict rules if the rules are clear. What they cannot work with, at least not well, is a system where the real standard is only revealed after the company has collapsed and the public mood has turned.

What People Will Do Next

The effect of a case like this is not always visible in the place people look first. It does not begin with a formal policy change or an official statement from a fund. It begins in the private conversation where someone says the opportunity looks interesting, but they would rather not be too close to it.

People are not only debating the legal outcome. They are asking what kind of risk now comes with being involved.

A founder may still value money from a state-linked investor, especially if that investor brings access to a large customer base or a strategic partnership. But the calculation changes if the money also brings future exposure to a system the founder cannot control.

The same is true for executives and board-level professionals. A senior role near state capital may still be prestigious, and in some cases very well rewarded, but prestige has limits when the downside feels unclear. People with strong careers tend to have choices, and choices make them sensitive to risk.

People close to the matter are not only angry; they are worried about what happens next.

• They worry that startups will become more cautious about state-linked money.

• They worry that people inside CVC teams will spend more time thinking about personal protection than investment quality.

• They worry that capable Indonesians, especially those with options outside the country, will look at this and decide that coming home can wait.

That is how professional people behave when risk becomes hard to understand.

Indonesia often talks about attracting talent as if talent is a patriotic resource waiting to be activated. That is a comforting way to think, but it is not how talented people make decisions.

• They compare options.

• They look at incentives.

• They ask whether the system they are joining will protect them if they act properly.

If the answer is unclear, the country gets silence, or polite excuses.

This is how institutions lose quality before they know they have lost it.

• The strongest candidate does not apply.

• The experienced operator stays outside.

• The person who could have improved the system decides the system is not worth the risk.

No headline announces this loss, which is one reason it is so easy to ignore.

The Talent Question

Every system selects for a type of person. It may not admit this, and it may even tell itself a nicer story, but the selection happens anyway. If a system protects honest judgment, it can attract people who are willing to make difficult decisions. If it punishes exposure more reliably than dishonesty, it will attract people who know how to avoid exposure.

Indonesia should care deeply about this because state capital is being asked to do more. The country wants its public-linked institutions to become more professional and more commercially capable. It wants large pools of capital to support national development without behaving like old administrative machines.

That requires a particular kind of person. Not a reckless dealmaker, and not a passive bureaucrat, but someone who can take public responsibility seriously while still making commercial judgments before every doubt has disappeared. This person will not always be convenient.

• They may ask uncomfortable questions.

• They may slow down the wrong decision.

• They may refuse to sign something that others would prefer to push through.

That is precisely why the system should want them.

But such people need to believe that the system can tell the difference between a corrupt decision and a bad outcome. If that difference becomes blurred, the people who step back may be the very ones Indonesia needs most.

There is no shortage of people who like titles, especially titles with government juju attached. The room will not be empty. The problem is what kind of judgment remains in the room once the most careful and independent people have decided that the invitation is not worth accepting.

Foreign investors do not expect Indonesia to be easy, because nobody who has done real work here expects that. What they need is some confidence that risk can be understood before the money moves. If the boundary between commercial loss and legal danger feels unclear, capital will simply keep more distance while continuing to say all the right things in meetings.

People do the same.

They smile, they express support, they praise the opportunity, and then they choose a structure that keeps them safer. Indonesia is a sophisticated enough place that everyone knows how to say no without saying no.

That is why the question of who will still sign matters.

The court found a financial loss, and that belongs to the legal record. Public-linked capital should be governed properly, and where false information or weak process played a role, scrutiny is necessary.

The bigger question is what Indonesia now learns from the case.

One possible lesson is useful. State-linked venture capital needs clearer rules, stronger governance, and better protection against bad information. If that is the lesson, then a painful case may still lead to better institutions.

Another lesson would be much more damaging. People may decide that the safest approach to state-linked commercial responsibility is distance. They may decide that it is better to advise from outside, take private capital, avoid the board seat, or let someone else carry the signature.

That would be a serious loss.

Indonesia can recover from a failed investment. It can improve process, tighten standards, and hold people accountable where the facts justify it. What is harder to recover is the confidence of capable people once they decide that honest judgment near state capital is not worth the personal risk.

This is the part that will show up later in the quality of people willing to take important roles, in the courage of institutions asked to modernise, and in the willingness of founders to accept money from the very funds created to connect them with the state.

For a country that keeps saying it wants transformation, that should be disconcerting.

Who will still sign?

The answer will tell us whether Indonesia is serious about innovation, or only comfortable with innovation once someone else has taken the risk.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

Indonesia’s GDP number has become weirdly reliable. Whatever else is happening, it usually ends up somewhere around 5%. Not 2%, which would cause panic. Not 7%, which would raise eyebrows. Just a nice, sensible, respectable 5%.

That does not mean it is fake. Indonesia is a big economy, and big economies can keep moving even when parts of the country are clearly struggling. The issue is more basic: does the number pass the smell test?

Because when households are squeezed, while the GDP numbers says, “Actually, everything is broadly fine,” people are allowed to sniff the air a bit.

Indonesia is already using real GDP for the headline figure, so this is not a case of officials waving around the bigger nominal number and hoping nobody notices inflation. The question sits inside the real GDP number itself.

• What is holding it up?

• Which parts of the economy are doing the heavy lifting?

• Why does the final result so often look neater than the rest of the picture?

A number can be official and still deserve questioning. It can be calculated using accepted methods and still be used in a way that oversells the economy. It can be true and still not tell the full story.

What GDP Leaves Out

Indonesia reported real GDP growth of 5.11% in 2025, which is strong by global standards and useful if you are trying to tell a reassuring story about the economy. It gives officials a crisp message: growth is solid, the economy is resilient, the plan is working. Lovely. Everyone can go home.

But GDP does not tell you whether people are actually doing better. It tells you that measured output increased. That matters, but it is not the same as saying wages are rising properly, jobs are improving, or households have more breathing room at the end of the month.

This is where the smell test starts.

• A 5% growth rate driven by rising wages and healthy private demand smells one way.

• A 5% growth rate held together by big projects, trade effects, and households spending because they still have to eat smells quite different.

The problem is that public discussion often treats those two versions as if they are the same thing. The number comes out, officials describe the economy as resilient, and the conversation quickly moves on to the next press release. The actual composition of growth gets treated like something for analysts to pick over later.

But the details are the whole point.

• Private consumption matters because it is such a large part of Indonesia’s economy.

• Investment matters because it can move the headline even when households are not feeling much benefit.

• Trade matters because it can help the number in ways that sound better than they are.

These are the difference between “people are doing better” and “the spreadsheet looks fine.”

A GDP number can look impressive while the lived economy feels ordinary at best. That is because GDP is not designed to describe ordinary life. It measures output, not security. It measures activity, not whether the activity produces a better month for the average household.

That matters in Indonesia because the growth figure is often used as a broad certificate of economic health. A strong GDP number becomes proof that policy is working, that critics are exaggerating, and that any discomfort people feel is somehow separate from the real economy. This is where the number starts doing political work.

The Year-on-Year Trick

Indonesia usually puts the year-on-year GDP figure front and centre. That means the economy is compared with the same quarter a year earlier. It is a valid comparison, but it is also very good at making things look smoother than they felt at the time.

In the first quarter of 2025, Indonesia reported 4.87% growth compared with the first quarter of 2024. That sounds fine. Close to 5%. Nothing to see here. But in the same release, the economy contracted by 0.98% compared with the previous quarter. Same economy. Same release. Different smell.

Year-on-year figures are useful, but they are also very good at making a rough patch look less rough. People do not experience the economy as a comparison with the same quarter last year. They experience it through what changed recently.

That is why the choice of headline matters. If the public hears the year-on-year number first, the economy sounds steady. If the public hears the quarter-on-quarter contraction first, the economy sounds much weaker. Both versions can be technically correct, but they do not have the same political effect. And politics, as ever, has a keen interest in which technically correct fact gets the spotlight.

Then came the second quarter of 2025, when GDP growth came in at 5.12% year-on-year. That was stronger than many expected, and it raised questions because other indicators were not clearly pointing to such a strong rebound. The official data also showed 4.04% quarter-on-quarter growth, which makes sense after a weak first quarter, but the surprise still needed more explanation than “the economy is resilient.”

A strong rebound after a weak quarter is possible. A stronger-than-expected GDP print is possible. But when the number beats expectations while other indicators look softer, the proper response is to explain the gap in detail.

• Which sectors drove the rebound?

• Which components surprised?

• How much came from investment?

• How much came from government spending?

• Was trade helping because exports were strong, or because imports were weak?

The number that gets the headline is usually the one that makes things look steady. That might be technically honest, but it is also very convenient.

Inside the 5%

Once you break GDP into its parts, the 5% number becomes less mysterious. It also becomes less comforting.

Consumption is the big one because Indonesians spend a lot as part of the economy. So even if household spending grows at a moderate pace, it can still make a large contribution to GDP. Officials can point to that and say the consumer is resilient. But “resilient” can mean a lot of things. Sometimes it means confident. Sometimes it means people are still spending because life keeps sending bills.

A household can keep spending while feeling poorer. People buy cheaper brands. They delay bigger purchases. GDP still records the spending, but not the sentiment.

There is no line item for “bought it, but hated the price.”

This is one of the great tricks of consumption data. It can look like strength from above and stress from below. A family that cuts back on quality, postpones a purchase, or burns through savings still appears as part of the consumption story if money changes hands.

Investment is where the smell test gets more interesting. Gross fixed capital formation helped support growth in 2025, and in some quarters it did a lot of work. That can be good if it means productive investment that raises future income. But investment can also mean big construction projects, capital-heavy activity, and spending that lifts GDP before ordinary workers see much benefit.

This is where the “gap-plugging” suspicion becomes more understandable. If household demand is not obviously booming, investment can help keep the headline looking healthy. If domestic demand looks uneven, trade can help. If one part of the story feels weak, another part can pick up the slack.

Investment-led growth can be very good. A country needs infrastructure, productive capacity, and all the unglamorous things that make future growth possible. But it also matters who benefits, how quickly, and whether the investment creates broad income gains or simply produces a good quarterly number. A new project may add to GDP long before it improves the financial life of the average worker.

Net exports are a perfect example of why GDP can smell better than the underlying story. If exports rise strongly, great. That is real strength. But net exports can also improve when imports weaken. If imports are weaker because domestic demand is soft, GDP can still get a boost from something that is not exactly a sign of national vitality.

The 5% figure can be made up of completely legitimate components that still do not mean what the headline makes them sound like.

• Consumption can reflect pressure.

• Investment can reflect projects more than prosperity.

• Trade can flatter the result because imports are weak.

That is why the question is not whether the number is right. The more useful question is what kind of right it is. Some numbers are right in a way that clarifies. Others are right in a way that leaves the public with exactly the wrong impression.

GDP vs. Real Life

The strongest reason to question the GDP story is the gap between GDP and the indicators that usually tell us whether growth is broad-based.

Wages are the obvious place to start. Official data showed the average employee wage rising from IDR 3.04 million in February 2024 to IDR 3.09 million in February 2025. That is an increase of only 1.78%, while real GDP growth was still around 5%.

If the economy is growing at 5% and wages are rising by less than 2%, people are entitled to ask where the growth went.

• Maybe it went to capital.

• Maybe it went to sectors that do not employ many people.

• Maybe it showed up in profits, projects, or parts of the economy that do not touch average workers much.

Fine. Explain that.

But do not sell it as a simple story of national economic health.

A wage gap like that proves that GDP is saying something narrower than the public is encouraged to hear. It suggests that the gains from output growth may not be flowing through pay packets in any obvious way. That should be a major part of the story, not a footnote.

Business indicators and consumer signals have also made the picture harder to swallow at different points. When surveys soften or durable-goods demand weakens, a strong GDP print should come with a clear explanation of why those indicators are not telling the full story. Instead, GDP often gets treated like the boss number.

The Q2 2025 ‘controversy’ mattered because it made that gap conspicuous. The 5.12% growth figure beat the median analyst expectation of 4.8%, while independent economists pointed to weaker indicators in the real economy and asked for more detail… which is exactly what analysts are supposed to do.

The lazy response is to frame the debate as a choice between trusting the official number and believing in a vast conspiracy. That is a very convenient way to avoid the interesting part: reconciliation.

• If GDP is strong while wages are weak, explain the wage gap.

• If GDP is strong while business indicators are soft, explain the sector difference.

• If investment carried the quarter, say what kind of investment did the carrying.

The public can handle detail. What people distrust is the feeling that a neat number is being used to end a conversation that should be starting.

A number can pass formal checks and still fail to convince people because the surrounding evidence does not line up neatly. In that situation, the job of officials is to earn trust by making the explanation harder to dismiss.

Who Checks the Number?

Indonesia’s GDP is produced by BPS and follows recognised national-accounting standards. The data are not being made up on a napkin behind a ministry building. Indonesia is working inside the same broad statistical system used elsewhere, and outside institutions use the data.

But that does not mean every GDP release is independently audited by some global referee. International institutions do not rebuild Indonesia’s GDP from raw surveys every quarter. They monitor standards, publication practices, and methodology. That is useful, but it is not the same as someone checking every assumption line by line and giving the number a holy blessing.

This distinction matters because GDP is politically valuable. A stable 5% growth number reassures investors, supports government credibility, and gives officials a clean line when the rest of the data are less cooperative.

• Every government prefers a strong growth number to a weak one.

• Every finance minister would rather talk about resilience than stagnation.

• Every administration knows that GDP is not just a statistic;

GDP is an indicator to markets, voters, ratings agencies, investors, and anyone else trying to decide whether the country is on track. A number with that much political value should never be treated as if it exists in a vacuum.

So the answer is not to shout “fake” every time GDP comes out. The answer is to show more of the working.

• Break down investment properly.

• Explain when trade is helped by weak imports.

• Make revisions easy to track.

• Address the gaps between GDP and wages, surveys, or other real-world indicators directly.

That would build trust.

Indonesia does not need a conspiracy debate. It needs a “show your working” debate. If the number is solid, the details should make it stronger. If the details make people more suspicious, that is not the public’s fault.

Indonesia’s 5% growth figure may be right. The country has enough real economic activity to make it plausible. But the way the number gets used is the problem. Too often it is treated like proof that the economy is fine, when it should be treated as the opening stanza.

• Year-on-year growth can make the economy look smoother than quarter-on-quarter movement.

• Consumption can support GDP without proving households feel good.

• Investment can lift the headline before workers see the benefit.

• Net exports can improve because imports are weak.

• Wages can lag far behind output.

None of that proves the numbers are cooked. It does show why the headline should not get a free pass.

The next time Indonesia reports another 5% growth figure, the serious response is to ask what validated the number, what contradicted it, and what the official explanation leaves out.

Because the issue is not whether Indonesia’s GDP number can be defended in a technical sense. It probably can. The issue is whether the story built around it can survive contact with the rest of the data.

That is the smell test.

Show the working.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

Indonesia’s startup boom is now being given a tidy ending, which should make everyone a little suspicious, because tidy endings are usually written for the comfort of people who were standing closer to the mess than they now care to remember. The story forming around the fallout points toward the most obvious disasters, then exits before the rest of the room has to explain why it spent years treating smoke as a growth strategy.

That is too easy.

The companies that became symbols of the boom were helped along by people beyond the management team, and people who knew how to make a shaky story sound like the future if they said it in front of the right investors. The industry calls this ecosystem building. A less charitable person might call it clapping near money.

Indonesia’s digital opportunity was real, and that is what made the hype so hard to challenge. The country had real problems to solve, and plenty of serious founders were trying to solve them, but the size of the market became a convenient way to avoid looking too closely at individual companies.

• When a business looked fragile, someone could always point to Indonesia’s scale.

• When the numbers looked uncomfortable, someone could talk about the long game.

• When the whole thing started to smell a little smoky, someone would insist that this was just what disruption smells like.

That is where the cheerleaders deserve attention. They helped keep the story warm. They made doubt feel unfashionable. They did not need to sit on the board or touch the accounts to matter, because a startup market runs partly on what people think everyone else believes. If enough connected people behave as though a company has already been blessed, the blessing starts doing work of its own.

Indonesia Was the Perfect Story

Indonesia was an easy country to believe in, which is exactly why the story became so powerful. The market was large enough to make even an average pitch sound important, and the daily frustration of doing business here gave founders a ready-made seriousness before anyone had looked too closely at whether their particular company deserved it.

That matters because a country can have huge potential while individual companies inside it remain weak, badly run, or built around assumptions that collapse the moment capital becomes less generous. During the boom, too many people treated Indonesia’s promise as if it could be transferred wholesale onto whichever startup happened to be raising money that quarter. It was a lovely trick. The founder arrived with a company… and the room evaluated a country.

You could see the habit in the way funding rounds were treated as proof. Once a company raised from the right investors, the money itself began to stand in for evidence. The business did not necessarily become more convincing, but the social pressure around it changed. It is amazing how quickly a valuation can become a personality trait when enough people are staring at it lovingly.

Bukalapak’s later turn away from physical goods showed how much harder the real market was than the boom story had typically suggested. In 2025, Bukalapak stopped selling physical products on its marketplace to focus on virtual products, after tough competition from Shopee and TikTok-backed Tokopedia; they had also posted a loss in the first nine months of 2024, and shares had fallen far from their IPO-era peak. GoTo’s push toward breakeven told a similar story with cost reductions, lower incentives, and layoffs helping the company sharply reduce its adjusted EBITDA loss.

The cheerleaders were especially useful before that shift, because they helped make the boom feel more like a consensus. They spoke about Indonesia’s future in ways that made company-level doubt seem ungenerous. A founder could still be struggling with basic execution, yet the conversation around him would transcend into talk of national transformation, as if the size of the country might eventually come down from the clouds and fix retention.

In many cases it was probably more convenient, than dishonest. A person who sounded excited about Indonesia sounded sophisticated, and pleasingly bullish. A person asking whether customers would still use the product without subsidies sounded like he had wandered into the room with the wrong attitude.

The Cheerleader Class

Every boom produces a person who is hard to place but easy to find.

• He is close to founders, or says he is.

• He is close to investors, or appears to be.

This person became one of the more irritating fixtures of the boom years. He understood the value of being seen near a company before it became famous, and he understood the even greater value of standing just far enough away once the story went bad. His title usually did a lot of work. “Advisor” could mean deep operational involvement, or it could mean he once had coffee with the founder and has been dining out on it ever since. “Angel investor” sounded pleasant, even when the public record of angelic activity was known only to the angels.

It would be easy to treat this figure as comic decoration, and admittedly he does make that difficult to resist. But he mattered.

• If he praised a founder, people noticed.

• If he appeared beside a company, the company looked more connected.

• If he spoke as though something was already understood by insiders, outsiders became less willing to ask why the insiders had not shown their working.

This is the strange power of proximity. It can look like judgment from a distance. During the boom, plenty of people managed to convert being near the action into a kind of borrowed authority, which is an efficient business model if one is light on achievements.

The cheerleader’s public value came from the impression that he knew something. That is why the later retreat into innocence is so unconvincing. After the crash, the same person who once seemed to have special access often becomes a harmless enthusiast who was simply supporting the ecosystem.

Public credibility should come with memory. If someone built a reputation by amplifying the last cycle, he should not be able to walk into the next one as though he has just arrived from a monastery of sober reflection. He should be asked what he promoted, what he knew, what he missed, and why anyone should treat his next wave of confidence seriously.

This is especially true for people whose careers seem to consist mainly of being early to rooms where other people are doing things. Indonesia needs more supporters of technology, and less people who confuse access with insight.

Blaming One Company Is Too Easy

The easiest way to process the fallout is to point at the most spectacular cases and let them carry the whole moral burden. It gives the public a villain and gives the ecosystem a way to say it has confronted the problem, which is always preferable to actually confronting the problem.

Public summaries of audit-related allegations in the eFishery case describe serious claims, including overstated revenue and inflated operational scale. If those allegations are borne out, they deserve the scrutiny they have received. The danger is that one dramatic scandal becomes a sedative for everyone else.

A few bad names cannot explain the whole mood of the boom.

• They cannot explain why so many claims travelled so easily.

• They cannot explain why questions about sustainability were delayed until after sustainability became unavoidable.

• They cannot explain why people who sounded extremely informed during the rise now claim to have known surprisingly little.

During the rise, the cheerleader was near enough to imply knowledge. During the fall, he was apparently too distant to have any. Indonesian tech may have struggled with profitability, but it produced world-class evasive footwork.

There is a legal line here, and it should be respected. A person who praised a company based on public information has not necessarily done anything unlawful, and a person who believed the wrong founder may simply have been wrong. The law should not prosecute every overconfident man on LinkedIn.

The issue is public accountability. The cheerleaders traded in credibility, so credibility is the place to begin.

• If they helped sell a company’s story, they can explain what they knew about it.

• If they had a financial interest, they can disclose it.

• If they were repeating claims they had never tested, they can admit that their confidence was thinner than advertised.

This should not be a radical standard.

The more truth is that the boom rewarded people for sounding certain. That reward structure did not disappear just because a scandal made everyone briefly serious. If nobody asks hard questions of the people who helped inflate the last story, the next story will inherit much of the same.

The Same Voices Are Already Back

The dust has barely settled, yet parts of the ecosystem are already speaking as though the previous cycle was a difficult but noble seminar, rather than a period in which a lot of people mistook sentiment for proof.

A new wave may well produce better companies. Indonesia still has serious founders building useful things, and that should be encouraged. Nobody sensible wants the country to replace hype with a permanent sulk. The problem is the return of the same public posture: the vague authority, the heavy confidence, the ability to bless whatever comes next without spending too much time explaining what went wrong before.

When someone appears to explain the next great opportunity, people should ask what he was saying during the last one. If he was loudly enthusiastic about companies that later aged badly, that history belongs in the conversation. It may not disqualify him, but a little awkwardness would do the ecosystem good.

The media should also be more careful with its hunger for confident voices. Startup coverage often treats funding as drama. The cheerleader is useful because he can speak fluently, sound connected, and provide the kind of quote that makes a fragile business feel like a national mood.

Investors should not pretend this happened around them by accident. Capital rewards heat, and people appear to manufacture it. If funds chase whatever feels hot, a whole little industry will emerge to warm the room. Complaining later about the smoke is unconvincing when you helped pay for the machine.

The better version of Indonesia’s startup future will require a lower tolerance for borrowed authority. It will require:

• People to ask direct questions before the story becomes too expensive to doubt.

• Founders to be supported without being turned into mascots.

• The word “ecosystem” to do less laundering for people whose main contribution is appearing enthusiastic.

That may sound harsh. Good. The soft version was expensive.

Indonesia’s startup fallout should not be remembered as a neat morality tale about a handful of fallen founders. That version is too small, and it lets too many people leave the room with their reputations oddly untouched. The underlying story is about a market that became too comfortable with confidence, especially when that confidence came from people who had mastered the art of sounding close to the truth without being responsible for it.

The cheerleaders were not the only problem. Many were probably sincere. Some may have been careless rather than cynical. A few may simply have been rich, bored, and unusually available for panels. None of that erases the role they played.

So yes, they should be held accountable. In most cases, that will not mean legal accountability, and it should not. It should mean public memory. It should mean refusing to treat every returning booster as a neutral guide to the future.

Indonesia deserves better than another cycle of smoke, applause, and selective amnesia. It deserves a startup culture where ambition can survive scrutiny, where serious founders are not buried under theatre, and where the next person calling himself an ecosystem builder is asked what exactly he has built.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

Indonesia’s economy is, officially, doing well.

That is not sarcasm, at least not yet. The country is still growing. The government still has enough positive data to stand in front of a podium and talk about resilience without technically lying, and public confidence, at least in the formal measurements that tend to appear in speeches, remains strong. The long-term story is also still basically true: Indonesia is large, young, resource-rich, strategically important, and too big for global investors to ignore forever.

And yet, something feels off.

The discomfort does not come from one dramatic headline. It comes from the gap between what the official story says and how markets are behaving. If Indonesia is as solid as the headline indicators suggest, then the anxiety around the rupiah, the equity market, foreign capital, policy direction, and institutional credibility should be easier to explain away. But it’s not. The more officials insist that the economy is fine, the more the reassurance begins to sound like the kind of thing people say when they are trying very hard not to use the word “problem.”

Indonesia’s data still gives the government a defensible case. But confidence is not built from GDP alone. It is built from belief that the rules are stable, that institutions are credible, and that policy is predictable. Right now, that belief appears to be weakening.

The answer is not to assume that every official number has been cooked until it resembles the desired national narrative. Nor is there much evidence for the more exciting theory that an international financial conspiracy has gathered to sabotage Indonesia because it hates promising democracies.

The more likely explanation is that Indonesia’s headline economy still looks strong, but the credibility attached to that strength is being marked down.

• A country can grow while investors become more cautious.

• A government can produce good numbers while its policy direction becomes harder to trust.

• A market can look attractive on paper while becoming more difficult to price in practice.

Simply put, Indonesia is facing a credibility gap.

And credibility gaps are dangerous because they often appear first as “sentiment,” before evolving to become “conditions,” at which point everyone pretends they had been worried all along.

GDP Isn’t Trust

The first mistake is treating GDP growth as gospel.

It isn’t.

GDP tells us that economic activity has taken place. It does not tell us whether the activity is healthy, whether it is producing broad confidence, or whether the people expected to fund the next stage of growth believe the system is reliable enough to justify taking more risk.

Indonesia’s government can point to growth and say, with some justification, that the economy is not in recession. But the people becoming nervous are not necessarily arguing that Indonesia has stopped producing output. They are asking whether the country is becoming less predictable as a place to invest, save, lend, and build.

A large domestic economy such as Indonesia does not suddenly stop moving just because investors become uncomfortable. Consumption continues. State spending continues. Projects continue. A country of this size has momentum, and that momentum can keep the headline numbers looking respectable even while confidence deteriorates beneath the surface.

The problem is that the government often uses growth as a reply to concerns that growth cannot answer.

• If people are worried about institutional independence, pointing to GDP does not resolve the issue.

• If investors are worried that policy is becoming more interventionist and less predictable, a strong quarterly number does not make that concern disappear.

• If the currency is under pressure, saying the economy is still expanding may be correct, but it does not explain why so many people appear to prefer holding dollars.

The statement “Indonesia is not in recession” might be technically true, but it misses the point. If everything is so stable, why do so many warning lights seem to be flashing?

The real question is whether Indonesia’s growth story still carries the same trust premium it used to.

At the moment, the answer seems to be no.

That does not mean the growth is fake. It means the growth is no longer enough by itself to persuade everyone that the country is moving in the right direction. For years, Indonesia benefited from the assumption that its size and stability would gradually pull more capital in. Now, that assumption is being tested. Investors still see Indonesia’s potential. They just seem less convinced that the path from here to that potential will be smooth.

The Rupiah Doesn’t Lie

A currency does not fall just because people are in a bad mood. It falls when enough people decide they would rather hold something else. Of course, some of that is global: a strong dollar, nervous investors, money moving out of riskier markets. Indonesia is not operating in a vacuum. But this is not only about the outside world. When people become anxious about policy direction, institutional independence, or the government’s next move, the rupiah is usually one of the first places that shows up.

That is why the rupiah matters so much here.

Recent pressure on the currency has already forced Bank Indonesia and the finance ministry to make Indonesian assets more attractive to investors after capital started leaving and the market took a hit. In simple terms, Indonesia is having to pay people more to stay interested.

To be fair, this is not 1998. Indonesia’s financial system is stronger now, and the country has bigger reserves. But “not 1998” is a bit like saying the building has not collapsed, which is only reassuring up to a point.

The bigger issue is what currency pressure does to behaviour. Once people start thinking the rupiah is vulnerable, they act differently. Businesses become more cautious. Households look for ways to protect their savings. Investors start asking whether any return they make will be wiped out by the exchange rate.

Even the perception that moving money into dollars could become harder can damage confidence. Investors can live with losses, that is part of the game. What they really hate is feeling trapped.

This is why official reassurance only goes so far once the rupiah becomes the focus.. The government can keep saying the fundamentals are strong. But if the fundamentals are so strong, why are so many people trying to protect themselves from them?

Policy Is the Bigger Worry

Indonesia does not exist to keep foreign fund managers comfortable. It has every right to build its own industries, protect its own interests, and decide what kind of economy it wants to become. The problem is not that Indonesia is trying to take more control of its future. The problem is whether people trust the people executing it.

Investors can live with tougher rules if the rules are clear. They can even live with a more hands-on government if they understand what it is trying to do. What makes them nervous is the feeling that the line keeps moving. Once that feeling sets in, every new policy stops being judged on its own and starts being read as a warning about what might come next.

That is where Indonesia is running into trouble.

The government clearly wants faster growth and more control over the sectors it sees as strategic. Prabowo’s 8% growth target is the big headline. But investors are asking how the government plans to get there, and what it will cost.

Indonesia’s parliament recently expanded Bank Indonesia’s role so it is no longer focused only on inflation and the exchange rate, but also on supporting growth and jobs. At the same time, the government has moved to put more control over strategic commodity exports in the hands of the state. Officials present these steps as practical ways to support the economy and the rupiah. Meanwhile, investors hear: more political involvement, and more uncertainty about where policy is heading.

None of this is automatically crazy. A central bank can have a wider role. A country can want more control over its resources. But the reaction depends on whether people trust the system around those decisions.

• When the currency is under pressure, moves that might otherwise be interpreted as developmental strategy can start to look like control measures.

• When investors are already nervous, broader mandates can look less like coordination and more like political influence.

• When the government insists these steps are necessary to strengthen the economy, markets may hear that the state wants more levers because the existing ones are not producing the desired result.

That may be unfair, but it’s also how capital thinks.

Investors do not have to think a policy is a disaster before they pull back. They only have to think the next move is hard to predict. Once that happens, they ask for more return to take the same risk, or they simply decide not to take the risk at all.

Indonesia needs to convince people that there is a plan here, not just a reaction to each new problem as it appears.

Indonesia Still Has Potential

Indonesia’s potential is not really in question.

This is why the situation is so frustrating. Indonesia remains a huge domestic market with favorable demographics, significant natural resources, and strategic weight in a region that every major power claims to care about. The country is too important to ignore, and nobody serious believes that its underlying advantages have suddenly vanished.

But “Indonesia has huge potential” is not the same as “Indonesia is easy to invest in.” A country can have all the right ingredients and still make investors nervous if the rules keep shifting on the way to actually making money.

This is why the MSCI issue matters. For most people, a possible downgrade from emerging market to frontier market sounds like finance jargon that only matters to fund managers and financial journalists. But these labels matter. They affect how much global money can easily flow into a market, and how seriously that market is treated by large investors.

MSCI extending its review is a warning that the concern is about whether the market is transparent enough, whether prices can be trusted, and whether the system works in a way global investors can rely on. That matters because Indonesia does not just need foreign investors when the story is easy to buy. It needs them to stay when the story becomes harder to believe.

Investors do not put money into “potential” by itself. They put money into places where that potential can generate returns.

This does not mean foreign investors are always right. They are often late, easily spooked, and suddenly very principled the moment they start losing money. But ignoring them completely would be a mistake. Their behavior is telling us something important: Indonesia still looks attractive, but investors are no longer as confident about how to value that attractiveness.

Indonesia can respond to that in two ways. It can say the market just does not understand the country’s plan. Or it can ask why the plan has become so hard for outsiders to understand in the first place?

The Story Is Harder to Sell

For years, Indonesia’s economic story was easy enough to believe because the numbers mostly matched what people were seeing and feeling.

• Growth looked solid.

• Politics was messy, but not alarming.

• Reform still sounded like a real direction.

• Foreign investors could tell themselves that Indonesia was complicated but heading the right way.

The story only needed to be convincing enough.

Now, the official narrative increasingly seems to answer yesterday’s questions.

• It says Indonesia is resilient, when the concern is whether it is becoming less predictable.

• It says growth is strong, but the question is what kind of policies are being used to keep that growth going.

• It says the country is open for investment, when investors are asking what “open” means if the rules keep changing.

Credibility begins to erode, when the numbers no longer explain what people are actually experiencing, or what markets are actually pricing.

• If the GDP number is good, why does the rupiah look so vulnerable?

• If the public is optimistic, why are markets behaving so cautiously?

• If the investment story is so strong, why does Indonesia now need to work harder to convince people to hold the risk?

The usual government response is to repeat the good numbers. That makes sense, up to a point. But when people already feel that something is missing from the official story, repeating the same numbers can make the gap feel even bigger. At some point, the issue is no longer whether the numbers are technically right. It is whether people still trust what those numbers are supposed to prove.

And that is the harder conversation.

Trust is what makes people act on the numbers. Without it, growth looks less like proof of strength and more like something that may not last.

• Investors may still show up, but they want to be paid more for the risk.

• Businesses may still operate, but they think twice before expanding.

• Households may keep spending, but they become more careful where they can.

That is why this moment feels so strange. Indonesia is not in an obvious crisis, but the official language still sounds far more confident than the mood around it.

So what is going on?

Indonesia’s economy is not collapsing. The headline numbers are not meaningless. The country’s strengths remain real, and the long-term case has not disappeared because the rupiah is weak or foreign investors are suddenly in a mood.

Indonesia still has plenty of strengths. The problem is that markets are no longer giving it the same benefit of the doubt.

• The government keeps pointing to growth as if that should settle the argument.

• Markets are asking whether Indonesia remains predictable enough to trust.

Right now, those two conversations are not meeting in the middle

The disconnect feels so large because both sides have evidence. Officials are not making things up when they point to growth. But investors are not imagining things either when they look at the rupiah and the policy environment and conclude that the risk has changed.

The mood often turns before the official data shows it. GDP tells you what has already happened; markets are trying to work out what happens next. That means they can react to doubts long before those doubts show up in the numbers.

Once enough people feel the official story no longer explains what they are seeing, even strong data gets tested in a harder way: not by whether it looks good on paper, but by whether anyone is willing to put money behind it.

That seems to be where Indonesia is now. Not necessarily in crisis, but in a credibility gap large enough that “the economy is growing” no longer ends the conversation.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

Indonesia appears to be entering a new phase in how it talks about the economy. The word now being used is ‘Prabowonomics’, and although the term still feels young, it already suggests something more than a slogan. It points toward a broader attempt to redefine what economic success should mean under President Prabowo Subianto.

Prabowonomics seems to ask a question that has followed Indonesia for decades: what is growth supposed to deliver, and for whom should it become visible first?

That question matters because Indonesia has, by many conventional measures, been a development success story. It has maintained relative macroeconomic stability, expanded infrastructure, and improved its position in global supply chains. To many outside observers, particularly investors and foreign analysts, the country has often looked like one of the more compelling long-term economic stories in Asia.

Yet inside Indonesia, the experience of progress is more complicated. Development may be visible in roads, industrial zones, digital services, and commodity exports, but for many households the economy is felt through food prices, school costs, wages, debt, job security, and the everyday question of whether life is becoming more manageable.

This is the space in which Prabowonomics is beginning to take shape.

When Prabowo says that economic development should not just be about statistical numbers, it feels true and politically interesting. No serious economist believes GDP alone captures national well-being. But no serious development strategy can simply move away from numbers into a language of moral intention. A better life is not less measurable than growth; in many ways, it is more difficult to measure properly.

Prabowonomics appears to promise a more people-centered, sovereignty-minded, state-led model of development. It may become a serious attempt to make economic growth more tangible for ordinary Indonesians. It may also test how far a government can stretch the language of welfare before the public begins asking for evidence of delivery.

For foreigners trying to understand Indonesia’s direction, the point is not to decide too quickly whether Prabowonomics is good or bad. The more useful task is to ask what it is trying to do, why it has emerged now, what it continues from the previous era, and what it changes.

What ‘Prabowonomics’ Seems to Mean

Prabowonomics is not yet a fully formalized doctrine. There is no single text that defines its principles, trade-offs, methods, or limits. Instead, it has to be aggregated through speeches, budget priorities, flagship programs, institutional choices, and the political language now surrounding economic policy.

What emerges is a view of the economy as a national project rather than a growth machine. In this view, development should strengthen the country’s capacity to feed itself, protect itself, process more of its own resources, and make welfare visible in the lives of citizens. The state is expected to be an organizer, provider, investor, and guardian of national direction.

That does not mean Indonesia is turning away from markets or foreign investment. In fact, Prabowonomics seems to want both a stronger state and continued international confidence. This is one of its defining balancing acts. Indonesia wants capital, technology, industrial upgrading, and global relevance, but it also wants more control over the terms of its own development.

This is not unusual for a country at Indonesia’s stage of ambition. Many emerging economies eventually confront the limits of simply being attractive to investors. They begin asking whether investment is creating enough domestic value, and whether growth is strengthening society or merely producing impressive aggregate figures.

Prabowo’s economic language appears to come from that concern. It carries a strong belief that Indonesia should not remain dependent on external forces to determine its development. It also reflects a long-standing anxiety in Indonesian political economy: that the country’s natural wealth, demographic scale, and strategic geography should translate into more visible national power and broader domestic prosperity.

This is where Prabowonomics differs in tone from the previous development model. The Jokowi era was often associated with infrastructure, investment, downstreaming, and practical problem-solving. Prabowo has inherited much of that foundation, but he is placing heavier emphasis on welfare, food security, national resilience, and strategic autonomy.

Jokowi’s economic story often seemed to say: build the foundations, and prosperity will follow.

Prabowo’s story seems to ask: if prosperity is the goal, why should the state wait for it to arrive indirectly?

It’s a difficult question, because once a government promises to make welfare more direct, it accepts a more intimate form of accountability. People may debate the long-term benefit of a toll road or industrial estate. A school meal, a household food bill, or a job opportunity is judged much more immediately.

That is why Prabowonomics should be understood as a shift in the emotional contract between the state and the public. It asks citizens to believe that the government can make development feel closer to daily life.

The question is whether the machinery of government can match the ambition of that promise.

What “Beyond Statistics” Means

Prabowo’s statement that development should not only be about statistical numbers is perhaps the most revealing phrase in this emerging economic language.

In one sense, it reflects a mature critique of development measurement. GDP growth can hide many things. It can rise while:

• Inequality remains stubborn,

• Informal workers remain insecure,

• Public services vary dramatically across regions,

• Households feel that the cost of living has absorbed whatever progress they were told had occurred.

This is why the global conversation about development has long moved beyond GDP alone. The issue is not whether growth matters; it clearly does. The issue is whether growth is being treated as a substitute for well-being rather than as one condition that may help produce it.

Seen generously, Prabowo’s argument is a call to make development more human. It suggests that the success of the economy should be judged not only by national aggregates but by whether people live with greater security and dignity.

But the phrase also opens a difficult question.

If development is not just about numbers, how should citizens know whether it is working?

A better life leaves evidence. Not always immediately, and not always in one grand indicator, but over time it should be visible in the condition of households, children, workers, schools, health systems, food security, and regional opportunity. If welfare is the standard, then the government needs more detailed measurement, not less.

Moving beyond GDP should mean moving toward a broader and more honest account of national progress. It should not mean replacing measurable outcomes with softer language that is difficult to challenge.

The temptation is always to celebrate statistics when they are favorable and to question the limits of statistics when they become inconvenient. The more thoughtful challenge is to create a standard that remains valid in both circumstances.

If Prabowonomics is to be taken seriously as a development framework, it will need to define what “better life” means in ways that can be observed. Does it mean

• Improved nutrition?

• More secure employment?

• Stronger purchasing power?

• Better public services?

• Lower vulnerability to price shocks?

• More balanced regional development?

The exact indicators can be debated, but without them, “better life” risks becoming a phrase that everyone supports because everyone can interpret it differently.

The most credible version of Prabowonomics would argue that the old statistics were too narrow and then offer better ones. It would say that GDP remains important, but that Indonesia should judge itself by whether national growth is becoming household resilience.

The State on a Plate

The free nutritious meals program is perhaps the clearest early symbol of Prabowonomics because it turns an abstract development philosophy into something immediate.

Its political appeal is easy to understand. Nutrition is one of the few policy areas where moral urgency and economic logic genuinely meet. A healthier child is a foundation for future productivity, learning, and national capacity. If Indonesia wants to become a stronger economy, it cannot treat human development as an afterthought to industrial strategy.

In that sense, the program is not merely welfare. Before a country can talk convincingly about high-value manufacturing, technological upgrading, or global competitiveness, it must confront the basic condition of its people. Human capital is not created at the university gate.

This is the strongest case for the program. Good policy is often politically useful. The question is whether the state can deliver it reliably, safely, and efficiently at national scale.

A national meals program requires coordination across layers of government, local suppliers, schools, kitchens, monitoring systems, and budget channels. It requires food safety discipline, procurement integrity, and the ability to correct problems quickly. These are exactly the tasks that determine whether a policy becomes a national achievement.

This is why the free meals program should be watched carefully but fairly. Early implementation difficulties do not necessarily prove that the concept is flawed. Large social programs often evolve through correction. But the way those corrections are handled will matter. A serious government learns from weak delivery. A defensive one treats criticism as misunderstanding.

The bigger question is whether the program will be evaluated by its stated social purpose or by the scale of its activity. Serving many meals is impressive, but the developmental question is whether the program improves nutrition, supports learning, reduces household strain, and strengthens the systems around food provision.

What Has Changed Since Jokowi

For many foreign observers, the shift from Jokowi to Prabowo may be confusing because there is both continuity and change.

Indonesia still:

1. Wants investment.

2. Wants industrial upgrading.

3. Sees downstreaming and resource processing as central to its future.

4. Wants infrastructure to support growth.

The ambition to move Indonesia up the economic value chain has not disappeared.

The change is in the logic.

Jokowi’s model was often read as practical developmentalism.

• It focused on building the physical and regulatory conditions for growth.

• Its symbols were concrete, logistical, and investment-facing.

• It reassured many outsiders because it was relatively legible.

Indonesia was building infrastructure, improving connectivity, courting capital, and trying to turn natural-resource advantages into industrial strength.

Prabowo’s model is less content to assume that investment-led growth will automatically translate into broad welfare. It gives the state a more direct role in ensuring that development serves strategic and household-level goals.

Investors are trying to understand the new balance between state direction and market predictability. A more assertive economic state can be effective, but it also raises questions about fiscal pressure, regulatory consistency, institutional capacity, and how policy priorities will be chosen.

These concerns are ordinary questions that arise whenever a government expands its ambition. Markets tend to prefer familiar frameworks, even imperfect ones, because familiarity reduces uncertainty.

Jokowi’s achievements created a sense that Indonesia had found a workable growth formula. When a new administration adjusts that formula, uncertainty follows.

Prabowo’s supporters might argue that this adjustment is necessary. Infrastructure and investment are not enough if many people still feel vulnerable. A country cannot measure success only by how it appears to investors. It must ask whether citizens feel the economy working in their lives.

Cautious observers might ask whether Indonesia expand welfare commitments, strengthen strategic sectors, maintain fiscal discipline, and preserve investor confidence at the same time?

The transition is not just from one president to another. It is from one development emphasis to another: from the infrastructure state toward something closer to a welfare-sovereignty state.

Whether that becomes a durable model will depend on the quality of the institutions asked to carry it.

What Comes Next

The next few years will reveal whether Prabowonomics becomes a coherent economic framework or remains a broad political language attached to multiple priorities.

Indonesia is likely to place more emphasis on state coordination, social welfare, food security, strategic industries, and national control over key areas of the economy. It will continue to seek foreign investment, but with an insistence that investment align with national development goals.

For foreigners, this means Indonesia should not be understood as turning inward in a simple sense. The country is not rejecting global capital or international engagement. Rather, it appears to be trying to negotiate a different relationship with them. The message is less “come and invest” than “come and invest in ways that fit Indonesia’s national project.”

If managed well, this could strengthen Indonesia’s position. The country has scale, resources, and geopolitical relevance. A more confident development strategy could help it capture greater value domestically and build a stronger foundation for long-term prosperity. A state that invests in human capital while guiding industrial development could, in theory, address weaknesses that pure market-led growth might leave unresolved.

But the same strategy carries risks.

• A stronger state can coordinate development, but it can also concentrate discretion.

• National priorities can guide investment, but they can also blur into favoritism if institutions are weak.

• Welfare programs can build human capital, but they can also strain budgets if outcomes are not carefully measured.

• Industrial policy can create competitiveness, but only if it rewards performance rather than proximity to power.

These are the conditions under which success or failure will be determined.

A thoughtful reading of Prabowonomics should avoid the two extremes.

1. It should not dismiss the model as simple populism, because the underlying concerns are real.

2. It should not romanticize state-led development simply because the language is national and humane.

The history of development is full of governments that correctly identified problems and then struggled with the machinery required to solve them.

If Indonesia can define clear welfare outcomes, measure them honestly, protect fiscal credibility, and maintain policy predictability, Prabowonomics could become a serious evolution of Indonesia’s development model.

If it cannot, the language of welfare may become too flexible.

• Every policy can be described as strategic.

• Every trade-off can be described as necessary.

• Every criticism can be answered by invoking a bigger national purpose.

That would make debate harder precisely when debate is most needed.

The future of Prabowonomics will not be decided by whether it sounds compelling. It already does. It will be decided by whether its promises survive budgets, bureaucracy, markets, local implementation, and the daily lives of the people it claims to serve.

Prabowonomics is best understood as Indonesia’s attempt to give economic development a more national and human meaning. It reflects a belief that growth should strengthen sovereignty, improve welfare, and become more visible in ordinary life.

But once a government says development is about better lives rather than statistics alone, it must show how those better lives will be recognized. It needs evidence.

Indonesia’s debate should move toward a more candid conversation about standards.

• What should Prabowonomics be judged by?

• Which outcomes matter most?

• How soon should they be visible?

• Which trade-offs are acceptable?

• How will the public know whether state intervention is producing public value?

Indonesia may be entering a more assertive phase of economic governance. The country still wants growth, investment, and global relevance, but it wants those things to serve a broader domestic purpose. The state is moving closer to the center of the development story, and welfare is being placed closer to the center of the state’s legitimacy.

That could prove to be an important correction to a model that sometimes made national progress look clearer from a distance than it felt at home.

Prabowonomics promise is significant:

• A stronger Indonesia,

• A more visible form of welfare, and

• A development model that asks more of growth than growth alone.

But the unanswered question is equally significant: can the state deliver enough, measure honestly enough, and adapt quickly enough to make that promise real?

Indonesia is right to move beyond narrow statistics, because they are not the whole story. But they are how the story proves it is true.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

There is something frustrating about watching Indonesia announce a policy that, on paper, makes complete sense.

Not bad sense. Not fake sense. Actual sense.

Danantara sounds sensible. A country with enormous state assets should probably think harder about how those assets are governed, capitalised, consolidated and used in service of national development. The free nutritious meals programme, MBG, sounds sensible too. A country that wants to build a stronger future should probably ensure that its children are not trying to learn mathematics while undernourished. The new state export company, designed to bring greater control over commodity exports under Danantara’s orbit, also has an internal logic. Indonesia has long watched too much value leak out of its natural resources, and the instinct to ask whether the state is capturing enough from what the country produces is not only reasonable, but overdue.

That is the maddening part. These ideas are, in my cases, exactly the sort of ideas a serious developing country should be considering.

The problem is what happens next.

Indonesia has a habit of producing policies that arrive dressed in the language of national purpose, only to be slowly undressed by the system meant to implement them.

• The vision is often coherent enough.

• The speech is usually fine.

• The launch is almost always confident.

Then the policy begins its journey through ministries, agencies, regional governments, SOEs, contractors, political interests and administrative habits, and by the time it reaches ordinary reality, the original idea has often been diluted into something less impressive than advertised.

This is not to say Indonesia never executes. The country has built infrastructure, reduced poverty, expanded services, managed democratic transition and produced world-class entrepreneurs despite operating across an geography that seems purpose-built to torment administrators. But the repeated pattern is hard to ignore: Indonesia is often better at imagining transformation than institutionalising it.

That gap between idea and outcome is the real story. It is not merely a question of whether Danantara is good, whether MBG is noble, or whether the export company is clever. The deeper question is why Indonesia so often struggles to convert decent ideas into durable results, and why so much public value seems to disappear somewhere between intention and delivery.

The Policy Is Not Always The Problem

One of the more tiresome habits in political debate is pretending that every government policy must be either genius or idiocy. Indonesia’s recent big-ticket initiatives resist that kind of simple treatment. They are not obviously absurd. In fact, several of them respond to real national weaknesses.

Danantara reflects an understandable desire to make Indonesia’s state assets work harder. MBG reflects a real concern about nutrition and human capital. The export-centralisation plan reflects a long-running anxiety that Indonesia has not captured enough value from its commodities.

But a policy is not good simply because it speaks in the language of national purpose. It becomes good only when the machinery beneath it is capable of turning that purpose into something citizens, businesses and institutions can actually rely on. That is where Indonesia so often runs into trouble, because the country’s policy environment has a strange ability to make the announcement of reform feel much more complete than the reform itself.

A serious policy requires a delivery system. Indonesia can produce these things in pockets, and sometimes very impressively, but the national system is often uneven. A policy may begin with presidential urgency and then descend into a landscape where no one is fully responsible.

Indonesia has mastered the ceremonial architecture of reform. It knows how to create the institution, announce the target, attach the moral justification and insist that history has entered a new phase. What it has not mastered, at least not consistently, is the discipline of making sure the thing works once the cameras leave.

Danantara could become a serious investment institution, but only if it is insulated from political temptation and run with financial discipline. MBG could improve nutrition, but only if it can solve the unromantic problems of food safety, distribution, and accountability. The export company could reduce leakage, but only if it creates more transparency than discretion. Otherwise, each programme risks becoming another good idea entering a system that negotiates away its own purpose.

The Extraction Problem

When people talk about Indonesian execution failures, they often reach for the polite word: leakage.

It is a useful word because it sounds technical and repairable. But leakage is not always an accident. Often it is extraction. It is what happens when the path between public money and public benefit contains too many opportunities for private advantage.

Leakage most often appears as:

• Inflated costs,

• Favourable contracts,

• Vague rules,

• Unnecessary intermediaries,

• Administrative delay,

• Selective enforcement.

Everyone involved may still speak the language of development. The meetings may be minuted. The policy may continue to exist in official speeches. But the value has already begun to bleed out.

This is why execution in Indonesia can feel so exhausting. Many people know exactly how the system works; that is the problem. They know where discretion sits, where oversight is weak, where urgency can be exploited, where political protection matters and where public purpose can be made to pay a private dividend.

This is not uniquely Indonesian in the sense that no other country faces it. Patronage, corruption and rent-seeking exist everywhere. But Indonesia’s particular combination of decentralised authority, expensive politics, powerful business networks, uneven bureaucracy and weak enforcement can make leakage feel unusually persistent.

A national programme can be genuinely well-intended at the top and still become compromised in the middle.

• A minister can want results.

• A civil servant can work sincerely.

• A local official can understand the need.

Yet the structure surrounding them may still reward the broker more than the builder.

The MBG programme is a useful example because the moral purpose is so difficult to oppose. But precisely because the programme is large, urgent and morally protected, it also requires unusually strong safeguards. Indonesia had allocated 75 trillion rupiah ($4.24 billion), to the programme by the end of April 2026. Any programme of that size must be treated as a massive procurement ecosystem.

The same is true of the commodity export plan. If Indonesia wants to reduce under-invoicing and capture more value, then better state capacity is essential. But if the answer is to create a powerful new intermediary without adequate transparency, then leakage may occur.

The Announcement Is The Easy Win

Indonesia is full of capable people. It has

• Entrepreneurs who navigate impossible logistics,

• Families who manage social obligations with astonishing discipline,

• Local communities that organise where the state is absent,

• Public officials who quietly do excellent work.

The problem is the incentive structure in which public decisions are made.

Indonesia’s democracy is real, but it is also transactional.

• Political coalitions are expensive to build and maintain.

• Parties require resources.

• Campaigns require financing.

• Local power brokers matter.

Once one understands this, the implementation gap begins to look less mysterious.

A cleanly executed policy delivers value to citizens. A politically useful policy delivers value to the networks surrounding power. Sometimes those goals overlap. Often they do not.

This helps explain why Indonesia can appear so energetic at the point of launch and so evasive at the point of accountability. Announcements create immediate political value. Delivery creates delayed public value. In a system driven by electoral cycles, coalition management and elite bargaining, the immediate form has obvious appeal.

• A launch can be televised.

• A target can be repeated.

• A new institution can be presented as proof of action.

But the real test comes later, when someone must decide whether to punish an underperforming contractor, publish embarrassing data, or admit a design flaw.

At that point, reform becomes less photogenic.

This is why the recurring Indonesian failure is not always a lack of effort, but a lack of consequences. If programmes underperform and no one important pays a price, the system learns. If budgets leak and the punishment is symbolic, the system learns. If unclear regulations unsettle markets but the political narrative remains intact, the system learns. Unfortunately, what it learns is not necessarily how to deliver better. It learns how much failure can be absorbed without threatening the people who matter.

The Country Is Complicated

Indonesia is an archipelago with enormous regional variation, uneven infrastructure, diverse local politics and administrative capacity that can differ dramatically from one district to the next. Any government trying to deliver national programmes across that landscape is dealing with real complexity.

This matters because some criticism of Indonesia can become too easy. It is simple to sit in Jakarta, observe dysfunction and conclude that the country is uniquely hopeless. It is harder, and more honest, to recognise that national execution in Indonesia involves logistical and institutional challenges that would test any state.

But the geography excuse has limits. It explains why delivery is hard. It does not explain why rules are unclear, why mandates overlap, why politically connected actors keep appearing in convenient places.

Take MBG. The challenge of feeding children across Indonesia is enormous, but that only strengthens the case for careful design. It demands piloting, evaluation, local adaptation and a willingness to scale according to capacity rather than political appetite. If a programme is logistically hard, the answer is to become boringly serious about the operating model.

The same applies to commodity export centralisation. Global buyers, financiers and producers do not operate on the assumption that regulatory details will be sorted out eventually. They price uncertainty immediately, because contracts have consequences.

Indonesia’s tragedy is that it often understands the scale of its problems better than the scale of discipline required to solve them.

Why The Past Still Matters

The modern Indonesian state emerged from colonial extraction, revolutionary struggle, post-independence instability, authoritarian centralisation and then democratic decentralisation. Each period left something behind.

• The colonial state was designed to extract rather than serve.

• The early republic was preoccupied with survival.

• The New Order built administrative reach, but it did so through control, patronage and hierarchy.

• Reformasi opened the system, but also dispersed power into local arenas where accountability did not always travel as quickly as money.

The state is highly present in some ways and strangely absent in others. It can regulate, intervene, summon, inspect and announce, yet still struggle to deliver basic reliability. Businesses encounter a pattern of enthusiasm for investment at the top, friction in the middle, ambiguity at the edges.

But Indonesia is no longer a young state finding its balance after independence. It is a major democracy, a G20 economy and one of the most important countries in the world by population, resources and strategic position. There is no serious future in which Indonesia can say, indefinitely, that execution is difficult because the country is complicated and the past was messy. That may be true, but it is not enough. Many countries have difficult pasts.

The bigger question is whether Indonesia truly wants the kind of execution it claims to want. Real execution would mean:

• Fewer ambiguities to exploit,

• Fewer discretionary spaces to trade,

• Fewer institutions used as rewards,

• Fewer opportunities for public purpose to be converted into private advantage.

That is a much harder reform than creating another institution.

Danantara, MBG and the export company all respond to real concerns, and it is possible to imagine versions of each that would leave Indonesia stronger.

That is exactly why the execution problem matters so much.

Bad ideas failing is not especially tragic. Good ideas failing is worse, because they teach the public to become cynical about possibility itself. Every failed reform makes the next reform harder to believe, and over time, trust is lost.

A country can build roads and ports, but if people assume that rules are negotiable, and budgets are porous, then every policy travels uphill.

Indonesia can do better. That is the obvious conclusion of anyone who has seen the country’s talent, energy and capacity when incentives line up properly. The issue is not whether Indonesians are capable of execution. They are. The issue is whether the system rewards the people who execute more than the people who extract.

For now, the answer is mixed.

The country does not need to stop dreaming big, but it does need to stop pretending that the dream is the hard part.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

The rupiah has been weakening, Bank Indonesia has been trying to steady it, and the cost of import-dependent essentials has begun to remind everyone that global markets do not accept domestic political reassurance as payment. Into this came the soothing observation that ordinary Indonesians do not spend U.S. dollars. They spend rupiah. Therefore, apparently, the rupiah’s value against the dollar is not something people should worry about too much.

Well. Thank goodness.

Somewhere near a village market, an entire chain of people whose lives are shaped by imported costs must have wondered why nobody told them the problem could be solved by looking only at the currency printed on the receipt.

The argument is not completely false. Indonesians do spend rupiah. Nobody is suggesting that a grandmother buying tempeh checks the Federal Reserve’s mood before deciding what to cook for dinner. Nobody thinks an ojek driver fills his tank by refreshing a foreign-exchange chart.

But that is not the point.

The point is that the currency used at the end of a transaction is not the same thing as the currency pressures embedded at the beginning of it. A person may pay in rupiah, but the things they buy often carry costs shaped by the world outside Indonesia: import dependence, energy exposure, shipping costs, foreign debt, and the government’s own efforts to stop global prices from arriving too violently at the household level.

That does not mean every price moves instantly or that every citizen needs to become a currency analyst. It means only that Indonesia is not sealed off from the rest of the world by the fact that warungs do not accept dollars.

The rupiah matters because the world matters. The dollar matters because much of that world is still priced, financed, or benchmarked through it. And even when the final transaction happens in rupiah, the chain behind that transaction often began somewhere else, in a currency Indonesia does not control.

The Price Tag Hides the Exchange Rate

The easiest way to misunderstand an exchange rate is to begin and end with the consumer. A person walks into a market, buys tempeh, pays in rupiah, and leaves. No dollars were exchanged.

From that narrow angle, the argument almost works.

But the economy does not begin at the market stall. By the time the customer pays, the cost has already travelled through a chain of farmers, importers, processors, transporters, distributors, and sellers, each of whom has had to deal with costs that may be directly or indirectly linked to foreign currency. The customer sees the final price because the customer is at the end of the chain, but that does not mean the earlier links were imaginary.

Soybeans make the point well because they are ordinary. They are not a luxury import; they are the basis of tofu and tempeh, two foods central to daily life. If the imported input becomes more expensive because the rupiah buys fewer dollars, the pressure eventually has to go somewhere. It may be absorbed for a while by traders, reduced through margins, disguised through smaller portions, softened by government action, or passed along in the price. But it does not vanish because the final buyer pays in rupiah.

That is the basic flaw in the cash-register argument.

A shop may price everything in rupiah because it exists in Indonesia and would like customers to understand the label. But the price itself is still shaped by what it costs to produce, import, transport, store, and finance the goods being sold.

This is why exchange-rate depreciation often feels mysterious to ordinary households. There is not always a single moment when the public sees the currency fall and the price rise at the same time. The pressure moves slowly. It enters through wholesale contracts, fuel costs, imported inputs, and business expectations before it finally appears as a smaller serving, or a seller apologetically explaining that everything has gone up again.

The more import-dependent the economy is in essential areas, the more this matters. That does not mean every product is imported, or that Indonesia lacks domestic production. It means that a weaker rupiah raises the local-currency cost of the foreign parts of the economy, and those foreign parts are embedded deeply in everyday life.

Subsidies Hide the Pressure Until They Can’t

One reason this issue can be softened is that the government can stand between global prices and domestic households. It can subsidise fuel, cushion electricity, and slow the pass-through from a weaker currency to the prices people see. In a country where energy and transport costs shape the price of everything else, sudden exposure to global markets can be socially brutal.

When the rupiah weakens, imported energy and other globally priced necessities become more expensive in local currency. If the government chooses to keep household prices stable, the cost moves onto the state budget. Consumers may be protected at the pump or in the kitchen, but the pressure has not disappeared.

A government can spend heavily to prevent the public from feeling the full effect of currency depreciation, then point to the public not yet feeling the full effect as evidence that currency depreciation is not very important.

Subsidies can be justified. They can be necessary. But they are not magic. They require money, and money spent insulating consumers from exchange-rate pressure is money that cannot be used elsewhere, unless the government borrows more, cuts something else, or leans on state-owned companies to absorb the strain.

Governments are very good at making unsustainable things look manageable right up until the meeting where everyone suddenly starts using phrases like “reprioritisation” and “fiscal discipline.”

• A surplus can cushion the early stage.

• A budget can absorb some shocks.

• A political system can postpone difficult choices.

But if the currency keeps weakening, and if global prices do not cooperate, the cost of pretending grows.

This is especially true when the government is already pursuing expensive programmes. A state can do many things, but it cannot permanently subsidise imported pressure, fund every flagship promise, defend purchasing power, preserve investor confidence, and maintain the appearance that none of this is connected to the exchange rate.

Sooner or later, the cost must be paid through higher prices, higher taxes, higher borrowing, lower spending elsewhere, weaker public balance sheets, or some combination of the above.

If Bank Indonesia Cares, So Should We

If the exchange rate were truly unimportant to daily life, Bank Indonesia would have an easy job. It could let the rupiah wander wherever it pleased, and reassure everyone that villagers use local currency.

Instead, the central bank behaves as though the exchange rate matters because, inconveniently, it does.

A weakening currency can force a central bank into a difficult position. If it does too little, depreciation can feed inflation, weaken confidence, and make investors wonder whether the currency has more falling left to do. If it does too much, it may need to tighten financial conditions, use reserves, or keep interest rates higher than the domestic economy would otherwise prefer.

If currency pressure contributes to higher interest rates, the effect spreads through the domestic economy. Business loans become more expensive, investment becomes more cautious, and consumers find that credit is less forgiving. A small business owner does not need to understand foreign-exchange intervention to be affected by the cost of working capital.

The “people spend rupiah” argument treats currency as a matter of what appears in someone’s wallet, when the more important question is how the value of that currency impacts the conditions around them. The rupiah is an indicator of confidence, purchasing power, and external pressure. When it weakens sharply, institutions need to respond.

There is also a psychological dimension, which economists prefer to call expectation.

1. If businesses expect the rupiah to keep weakening, they price more cautiously.

2. If importers expect costs to rise, they adjust earlier.

3. If investors expect instability, they demand higher returns or move money elsewhere.

4. If households begin to distrust future prices, they change behaviour too.

That is the problem with currency weakness. It can become self-reinforcing because everyone is trying to protect themselves at the same time. The central bank then has to act not only against current depreciation but against the possibility that depreciation becomes an expectation embedded in prices, contracts, and behaviour.

Indonesia Does Not Trade With Itself

Indonesia’s geography can tempt people into a narrative of self-containment. It is vast, with a large domestic market, and abundant natural resources.

• A country can be resource-rich and still dependent on imported energy in key areas.

• It can produce food and still rely on imported inputs.

• It can manufacture domestically and still need foreign machinery, components, finance, or technology.

Modern economies are not judged by whether they can point to domestic activity somewhere in the chain; they are judged by how exposed they are when the foreign parts of that chain become more expensive.

This is where the dollar matters, but also where the dollar is only part of the story. The dollar remains central to global trade and finance, so a weaker rupiah against it raises the cost of many things Indonesia buys or owes. But Indonesia’s currency does not exist only in relation to Washington. Its value against regional and global currencies also affects competitiveness, travel, education, investment, and the cost of doing business with the countries around it.

If the rupiah is weak against a currency that has itself had uneven moments, the comparison with stronger currencies can be even less flattering. But the deeper issue is purchasing power. How much can the rupiah command outside Indonesia? How expensive does the rest of the world become when measured in local income?

That question matters for households more than they may realise. A family may never think about the Singapore dollar, the Malaysian ringgit, or the pound, but the economy around them does. Students, travellers, businesses, importers, investors, hospitals, manufacturers, and government agencies all interact with foreign prices in one way or another. A weaker rupiah narrows the country’s purchasing power beyond its borders.

There is a fair counterargument that currency depreciation can help exporters by making Indonesian goods more competitive abroad. This is true. A weaker currency can support certain sectors if they earn foreign revenue and have enough domestic cost advantages. But this is not a magic national offset. The benefit depends on what is being exported, how much imported input is used to produce it, and whether the gains are broad enough to outweigh the pressure on consumers and the budget.

A weaker currency is helpful only if the economy is structured to benefit from it more than it suffers from it.

This is the problem with treating depreciation as harmless. It assumes a version of Indonesia that is more self-sufficient, less import-exposed, less financially connected, and less vulnerable to global pricing than the real one.

What Happens If the Weakness Continues

The danger of currency depreciation is that it works slowly.

At first, the effects are manageable.

• Businesses absorb some costs.

• The government cushions key prices.

• Consumers grumble but adjust.

• Officials explain that the situation is under control.

But if weakness continues for twelve months or more, the pressure becomes harder to contain.

• Import-dependent prices do not need to explode to hurt households; they only need to keep rising faster than incomes.

• Subsidies do not need to collapse to strain the budget; they only need to keep consuming space that could have gone elsewhere.

• Interest rates do not need to choke the economy completely to make businesses delay investment or households think twice before borrowing.

The cumulative effect is the point. A single price increase can be explained away. A year of them becomes a living standard issue.

For ordinary Indonesians, this will appear as the same amount of money doing less.

• A meal costs a little more.

• Transport feels less forgiving.

• A household purchase gets delayed.

• A business owner becomes cautious.

The government can continue to manage some of this, but management becomes more expensive the longer the pressure lasts. At some point, policy choices become more difficult.

1. Allow prices to rise and households suffer.

2. Spend more and the budget suffers.

3. Tighten policy and growth suffers.

4. Do nothing and confidence suffers.

The art of economic management is choosing which discomfort arrives first and what name to give it.

This is why the exchange rate matters even when there is no dramatic collapse. In fact, that is exactly why it matters. A slow decline in purchasing power can be politically easier to deny than a crisis, but it becomes embedded in expectations, business decisions, and wage demands.

The danger is not that every Indonesian wakes up one morning needing dollars. The danger is that the rupiah they already use becomes weaker in the world that supplies, finances, and prices too much of what their economy depends on.

Yes, Indonesians spend rupiah. That was never in dispute. The question is what forces shaped the price before goods get to the checkout counter. In a country connected to global supply chains, dependent on imported essentials in key areas, exposed to foreign finance, and reliant on subsidies to soften politically sensitive costs, the exchange rate is one of the prices that determines how pressure moves through the economy.

A weaker rupiah raises the cost of what Indonesia must buy from abroad, complicates the state’s effort to shield households, forces difficult choices on the central bank, and gradually erodes purchasing power in ways that ordinary people may feel long before they name the cause.

The dollar comparison matters because the dollar remains central to global trade and finance, but the broader point is even larger than USD/IDR. The rupiah’s value against the world matters because Indonesia is part of the world. It buys from it, sells to it, borrows from it, competes with it, and depends on it in ways that cannot be wished away by noting that local transactions are local.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

There is something deeply uncomfortable about watching Indonesia’s startup reckoning move from boardrooms and write-downs into courtrooms and sentencing demands. The country’s venture capital boom was never short of absurdity: the valuations, the bravado, the circular validation between founders and funders. But even if one believes the ecosystem was excessive, it does not automatically follow that the people caught up in its collapse deserve to be treated as criminals.

That distinction matters, because the issue now is not whether bad investments were made. Clearly, they were. The question is whether those investments involved criminal wrongdoing, or whether they reflected weak governance, inexperience, and herd behaviour.

This is where the involvement of state-linked capital changes everything. In a private venture fund, a failed investment is usually understood within the brutal arithmetic of the asset class. Investors may be furious, and future fundraising may become impossible, but the law does not normally treat every write-down as a potential crime. Once state money is involved, however, the same investment loss becomes a public loss, and in Indonesia that phrase carries legal and political consequences.

That is the contradiction at the centre of the whole affair. Venture capital requires the possibility of failure; it is hard to describe the model honestly without admitting that failure is expected. The state, by contrast, is not naturally built to absorb speculative losses, and not in a system where losses to state finances can invite criminal scrutiny. Putting public or SOE-linked money into venture capital therefore requires exceptional clarity about mandate, governance, risk tolerance, and legal responsibility. Without that clarity, the structure becomes dangerous.

If people enriched themselves improperly, concealed conflicts, or knowingly misused state funds, then prosecution is justified. The problem is that the grey area is large, and venture capital lives almost entirely inside grey areas.

• A bad investment can look outrageous in hindsight while still having been made in good faith.

• A manager can be unqualified without being corrupt.

• A founder can mislead investors without every investor becoming a criminal.

• A market can collapse without the collapse being evidence of a conspiracy.

That is why the severity of some of the sentences being proposed feels so jarring. They appear to be sending a message that Indonesia is serious about state losses and willing to impose consequences on those associated with them. The danger is that a broad systemic failure gets reduced to a few personal tragedies, while the people and institutions that designed the system are allowed to pretend the risks were never obvious.

Why State Capital Struggles With Venture Losses

Venture capital is a deliberately high-risk form of capital allocation in which failure is not a surprising outcome. The model depends on accepting that many investments will disappoint, because the few that succeed may do so at a scale that compensates for the rest.

That is relatively straightforward when the money comes from private limited partners who have chosen to allocate to the asset class. They may still complain, but they have entered the arrangement with some understanding that venture returns are uneven, and highly dependent on a small number of outsized outcomes.

By contrast, state capital comes with public obligations, political scrutiny, and legal frameworks that were designed for a different kind of financial harm. When money is lost in a procurement process, the idea of a state loss is relatively intuitive. If a public project is inflated or manipulated, one can point to the gap between what should have been paid and what was paid, and ask who benefited. Venture capital does not lend itself to that kind of analysis. A startup can fail without anyone stealing anything. It can fail because the company was badly run, or because the capital markets closed at the wrong moment.

If every state-linked investment loss is vulnerable to being treated as a potential criminal matter, then state-backed VC becomes almost impossible. The people managing it are asked to pursue an asset class built on risk while carrying personal exposure to outcomes that may be impossible to separate from that risk.

Indonesia’s challenge is that this distinction appears to be much easier to state than to operationalise. The state wants the political and developmental benefits of participating in the startup economy, but it is not clear that the legal system has been adapted to the realities of that participation.

The Limits Of Being Well Connected

One of the uncomfortable truths about Indonesia’s startup ecosystem is that a number of its leading figures were not seasoned investors in the institutional sense. Some were skilled connectors, some were good operators, some understood the local political economy, and some had the ability to move between founders, corporates, ministries, and foreign capital in ways that were genuinely useful. In Indonesia, that sort of access has value.

But access is not the same as investment judgment.

A venture investor needs to be able to evaluate risk with a degree of independence from the mood of the market. This is harder than it sounds, especially in a boom, because the mood of the market presents itself as consensus. The pressure is social, institutional, and reputational.

That is precisely why track record matters. Experienced investors are not immune to bubbles, but experience at least provides some memory of how convincing a bad deal can look at the time. It teaches caution around fashionable sectors, and founders who are much better at raising capital than building enduring businesses. It also teaches that the hardest part of investing is not finding reasons to say yes, but maintaining the discipline to say no when yes would be more popular.

Many of the people drawn into Indonesia’s startup capital machine were operating in an environment that rewarded the opposite.

• Confidence was useful.

• Scepticism was inconvenient.

• Being early to a theme mattered less than being seen to participate in it.

That is a failure, but it is not necessarily a crime. If people without sufficiently deep investment experience were entrusted with state-linked capital, then the question should not stop at whether they made bad decisions. It should extend to the institutions that gave them the mandate, the boards that supervised them, and the governance structures that were supposed to constrain them. Someone decided that these were the right people to manage this kind of risk.

If the problem was that a group of connectors were asked to behave like professional asset managers, then the failure belongs not only to those individuals. A country cannot hand out the keys to a risky asset class and then act astonished when the drivers turn out not to be Formula One material.

The Herd Was The Strategy

Many serious investors could see that parts of the startup ecosystem had become detached from financial reality. The numbers did not work, the valuations were stretched, and the confidence with which some companies explained away their losses was… impressive.

But markets become irrational because enough institutions decide, at the same time, that caution is less rewarding than participation. During Indonesia’s startup boom, the incentives pointed strongly in one direction.

• Founders wanted capital,

• Investors wanted exposure,

• Corporates wanted strategic relevance, and t

• The state wanted to associate itself with technological progress.

Nobody wanted to be remembered as the person who failed to believe in the national digital opportunity.

The startup boom was a public mood, reinforced by media coverage, policy language, international capital flows, and the broader global belief that technology companies deserved a different kind of financial patience.

The correction exposed how fragile some of those assumptions were. When global money became more expensive and later-stage investors became more selective, businesses that had relied on repeated capital injections suddenly had to confront realities they had previously deferred. Growth that depended on subsidies became harder to defend. Expansion that had been justified as strategy began to look like overreach. The distinction between a company temporarily losing money and a company structurally unable to make money became much harder to avoid.

None of this is uniquely Indonesian. The same broad pattern appeared in many markets. What makes Indonesia’s version more legally combustible is the presence of state-linked money and the way losses to that money are interpreted. In a private ecosystem, the reckoning might remain a matter of reputational damage and financial write-downs. In Indonesia, the reckoning can acquire the full gravity of a public-loss narrative.

This is why the current moment feels like a society trying to decide what kind of mistake it has made.

• Was this corruption?

• Was it negligence?

• Was it poor investment practice?

• Was it a predictable consequence of letting state-linked institutions join a global capital frenzy without the right safeguards?

The answer may differ from case to case, which is precisely why broad moral certainty is dangerous.

The Problem Was Baked In Early

Around the world, governments have used public money to support innovation, deepen capital markets, and encourage investment in sectors that private capital may underfund. Some models are more successful than others, but the concept itself is not inherently absurd.

The question is one of design. A state-backed venture programme can be defensible when it is clear about its purpose.

• If the goal is to catalyse a private VC market, the state can invest indirectly and allow professional fund managers to make decisions within defined limits.

• If the goal is industrial policy, the state can accept that some returns will be strategic rather than purely financial.

• If the goal is commercial return, then the vehicle should be governed and staffed accordingly, with a level of independence and expertise appropriate to the task.

A state-owned or SOE-linked venture vehicle may claim to seek financial returns, strategic relevance, ecosystem development, and national technological progress all at once. When an investment succeeds, every objective can take credit. When it fails, nobody is quite sure which objective justified the risk in the first place.

For Indonesia, the lesson should be less about whether state-linked VC is morally acceptable and more about whether it is structurally compatible with the legal and institutional environment. If the law treats state losses in a way that makes speculative investment personally dangerous for managers, then the state must either create clear legal protections for good-faith investment decisions or avoid the asset class. What it cannot do is maintain ambiguity and hope that everyone will behave wisely inside it.

Ambiguity shifts risk onto individuals while allowing institutions to enjoy optionality. During the boom, the institution gets innovation credentials. During the bust, the individual gets legal exposure.

Not Every Bad Investment Is A Crime

A person who abuses their position for personal gain deserves a very different judgment from a person who made a bad investment after a flawed but genuine process.

There is a legitimate reason for scrutiny. Startup markets are not innocent places. The combination of opaque valuations, related-party relationships, advisory fees, secondary sales, and soft governance can create opportunities for abuse. A failed company can leave behind a complicated trail in which some people lost money while others did quite well.

But it would be naïve to assume that every large loss reveals a crime. Venture capital produces ugly outcomes even without corruption.

• It can enrich early participants while punishing late ones.

• It can make foolish decisions look rational because everyone else appeared to agree.

• It can turn a plausible thesis into a disaster through timing alone.

That is why proportionality matters so much. Harsh sentences may satisfy a demand for visible accountability, especially when the public sees large numbers attached to state losses. They may also reassure foreign investors that Indonesia is serious about cleaning up governance. But there is a risk that excessive punishment sends a different message: that state-linked commercial judgment will be judged with severe hindsight.

Indonesia does need:

• Better governance around public capital.

• To punish genuine corruption.

• To ask who benefited from failures and whether decisions were properly made.

But it also needs a system that can absorb the possibility that some losses are the result of bad judgment rather than criminal intent. Otherwise, the safest decision for anyone managing state-linked capital will be to avoid risk altogether, regardless of whether the stated policy goals require some level of risk-taking.

One can be deeply critical of Indonesia’s startup ecosystem and still feel uneasy about the severity of the legal consequences now being imposed or discussed. The ecosystem was excessive.

• It rewarded confidence too generously and scepticism too rarely.

• It allowed people with networks to be treated as though they necessarily had investment discipline.

• It encouraged institutions to chase the appearance of innovation without building the machinery required to manage the risk.

Sometimes excess is simply what happens when a system rewards the wrong behaviour for long enough that the behaviour begins to look normal. During the boom, many of the decisions now being scrutinised were were made because of the ecosystem’s logic.

This does not mean individuals should escape responsibility where there was genuine wrongdoing. If someone stole, concealed, or corruptly benefited, the case is straightforward. If someone was careless, unqualified, or far too willing to believe the market’s own mythology, the response should be different. And if institutions knowingly placed such people in positions where they could expose state-linked funds to venture risk, then the institutions themselves should not be allowed to disappear behind the drama of individual prosecution.

Indonesia wanted the prestige of venture capital and the promise of startup-led transformation. It wanted SOEs and state-linked institutions to look forward-facing, strategic, and modern. What it may not have wanted, or at least may not have fully accepted, was the basic bargain underneath the entire model: sometimes the money disappears even when no crime has occurred.

That is the part that makes the current moment feel so bleak. The losses may be real, the anger may be understandable, and the need for accountability may be genuine. But if the system itself was built on a contradiction, then the punishment of individuals cannot be the whole answer.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

There’s a confidence that attaches itself to people who have done well in serious markets. It is usually well earned, which is what makes it so difficult to challenge. A person has worked in London, Singapore, Dubai, Sydney, or New York. They have survived large organizations, ambiguous bosses, budget seasons, and strategic restructures..

So when that person arrives in Jakarta, they do not arrive as a fool. That would be simpler and, in many ways, more merciful. They arrive as a high-functioning professional who knows how to read a job description, present a résumé, and speak in the somewhat narcotic language of modern business. They know how a process is supposed to feel when it is real.

This is where the trouble begins.

Jakarta often looks familiar enough to invite confidence, but not familiar enough to reward it without adjustment. The candidate sees the multinational logo, the glass meeting room, the English-language job title, and reasonably assumes that the surrounding logic will resemble the markets they already understand.

Unfortunately, the city rarely corrects this assumption directly. Jakarta is too socially advanced for that sort of blunt generosity. It tends to correct people through a more refined method:

• A promising meeting that produces no next step,

• A warm conversation that turns out to have carried very little decision weight,

• A role that sounds urgent until the matter of budget causes everyone to develop an interest in “internal alignment.”

The candidate leaves each interaction with just enough encouragement to continue and just enough ambiguity to begin slowly losing their mind.

The temptation is to call the market chaotic. Many do. It is a satisfying word because if the market is chaotic, then no one has misread anything. Yet much of what appears random to an outsider is not randomness, but a pattern being expressed through unfamiliar etiquette, hidden constraints, hierarchy, internal politics, and the local preference for not saying the most useful thing out loud if a less useful but more comfortable sentence is available.

This is not an argument that Jakarta is secretly perfect and misunderstood by impatient foreigners. That would be ridiculous. The market can be slow, opaque, inconsistent, status-conscious, under-scoped, and over-polite. But acknowledging that is not the same as understanding it.

The real problem for many smart foreign candidates is not that they lack quality. It is that they arrive with a map from somewhere else, and because that map once worked beautifully, they struggle to recalibrate.

Corporate Polish Can Be Misleading

The first misread usually happens before anyone has said anything important.

A candidate walks into an office that has all the reassuring props of contemporary corporate life.

• The coffee is decent.

• The meeting room has a name suggesting either nature or innovation.

• The hiring manager speaks fluent English

• There is a discussion about growth, structure, regional opportunity, and the need for someone who can “bring best practice” into the organization.

At this point, the candidate relaxes. They have seen this room before. It existed in Singapore. It existed in London. It existed in Dubai.

The problem is that the room may look familiar while the decision-making logic behind it isn’t. A company can speak the language of international professionalism and still operate through a deeply local mix of seniority, trust, face, personal authority, and informal interpretation. This is how organizations adapt global form to local reality. The imported candidate sees the form and assumes the reality underneath has imported itself as well.

• A job title may suggest authority, but the person holding it may still be waiting for approval from someone who is not in the meeting and whose view of the role may be only loosely connected to the job description.

• A public vacancy may appear to signal a defined need, when in practice it is closer to an organizational wish that has not yet survived contact with budget.

• A polished conversation may feel like traction, while internally the company is still deciding whether the problem is painful enough to justify the foreign hire required to solve it.

The candidate is not wrong to take the company seriously. Jakarta has serious employers, sophisticated operators, and plenty of organizations doing complex work in difficult conditions. The mistake is assuming that seriousness will express itself through the same procedures, and decision making processes that made sense somewhere else.

If Jakarta looked completely alien to the foreign candidate, they might behave with more caution.

• They would ask better questions.

• They would listen harder.

• They would be less tempted to let their prior experience fill in the blanks.

Instead, the city offers just enough resemblance to encourage overconfidence.

The result is a candidate who believes they are reading the room.

Good Meetings Can Still Go Nowhere

Foreign candidates often struggle most with the way politeness behaves in Jakarta. In more explicit markets, a good meeting tends to mean a process is moving, or at least that someone will soon explain why it is not. There are evasions, of course, but there is still a shared expectation that certain questions deserve answers.

• What is the salary range?

• Who signs off?

• When will a decision be made?

• Is this role approved?

In Jakarta, such questions may be answered, but the answer often arrives wearing several layers of social padding.

This is where many outsiders mistake warmth for action.

• The meeting felt good, so surely the process is alive.

• The hiring manager seemed interested, so surely the organization is ready.

• The recruiter sounded positive, so surely the only remaining obstacle is timing.

A person can live for weeks on this kind of encouragement, which is why it should probably be regulated.

The issue is that politeness in a relationship-sensitive environment often has responsibilities that are more important than clarity.

• It protects the mood.

• It avoids embarrassment.

• It allows senior people room to change their minds without appearing to have changed them.

• It keeps the conversation socially intact even when the commercial reality is uncertain, or weak.

There may be real interest behind the warmth. That is what makes it hard. The employer may genuinely like the candidate, genuinely see the value, and genuinely hope the role can work. They may also be unsure about cost, sponsorship, reporting structure, or internal politics. The candidate receives friendliness and tries to measure progress with it.

An outsider may experience this as evasiveness. Sometimes it is. But often it is the conversation has moved faster than the organization’s willingness or ability to decide, all while the candidate is trained to interpret communication as information.

Credentials Need Translation

Strong foreign candidates often arrive with a very reasonable belief that their background should make the market easier to navigate. They have recognisable employers, and credible achievements. In another context, that combination may have opened doors quickly. In Jakarta, it may open the door and then make everyone inside start calculating risk.

This is one of the more irritating features of the market, because credentials do matter. A good track record is not irrelevant. Serious employers are not sitting around hoping to discover a charismatic underperformer with a relaxed attitude to outcomes. But a résumé is more than evidence. It creates an impression, and impressions are interpreted through local anxieties.

A candidate may believe their international experience demonstrates capability. The employer may wonder whether that capability comes bundled with salary expectations, impatience, directness, and an assumption that the local team exists to be upgraded. The candidate may present seniority as a source of value, while the room sees it as a question of fit.

This does not mean the candidate should pretend to be less qualified. The point is that impressive experience has to be made usable. It has to be translated into reassurance as well as authority. The employer is not only asking whether the candidate can do the work. They are asking whether the organization can absorb the person who can do the work.

That distinction is easy to miss if someone has spent years being rewarded for demonstrating capability in places that were already built for it. In Jakarta, things may be more fragile, more political, or more dependent on informal trust than the candidate expects. A person who presents themselves as a high-powered change agent may be perfectly qualified and still sound, to the wrong room, like a future internal disturbance.

The smartest candidates learn to manage the story their credentials create. They do not simply recite achievements and hope the room reaches the correct conclusion. They pay attention to the anxieties their experience may trigger. They know when to show judgment rather than scale, and adaptability rather than superiority.

Not Every Strange Outcome Is Random

At some point, after enough slow processes and strange outcomes, the foreign candidate reaches a conclusion. This conclusion is seductive because it preserves the candidate’s competence. If the market is irrational, then the candidate has not misunderstood anything. They have been wronged by disorder.

A more useful interpretation however, is that the candidate has been tracking the wrong variables, or at least not enough of them.

• They have watched the formal process while underestimating the informal one.

• They have listened to what was said while missing what the organization was unwilling to make explicit.

• They have treated the job description as the object, when it may only be the public-facing symptom of a more awkward internal need.

A role that disappears after two interviews may not have been fake. It may have been insufficiently owned. A company that praises a candidate and then stalls may be discovering that enthusiasm is cheaper than approval. A salary conversation that feels strangely elastic may reflect not only budget, but the employer’s uncertainty about how much disruption the hire is worth.

These are clues.

The candidate who insists everything is chaos will miss them, because chaos is where thinking goes to nap. The candidate who starts asking what the market is rewarding begins to see different patterns.

• They notice when interest is personal but not institutional.

• They notice when a recruiter has energy but no leverage.

• They notice when a role is attractive in language but weak in structure.

• They notice when the real opportunity is not the advertised title, but the problem everyone keeps describing around it.

This is the kind of market literacy that rarely appears in public advice because public advice prefers to remain hygienic. It is much safer to tell people to tailor their CV, build their network, and follow up professionally. None of that is wrong, which is exactly why it is so often useless. It allows everyone to feel practical without touching the more uncomfortable truth, that in a market like Jakarta, interpretation matters as much as effort.

The moment a candidate accepts this, the market becomes less personally insulting.

• Silence stops being a referendum on their worth.

• Warmth stops being mistaken for traction.

• Ambiguity stops automatically meaning incompetence.

The candidate becomes more selective with their energy, which is an underrated advantage in a market that can otherwise turn intelligent adults into inbox-haunting ghosts.

This is the decision to stop demanding that the market explain itself in the format one prefers and the start of learning how it actually communicates.

Many foreign candidates are not wrong about their own quality. They may be experienced, capable, commercially useful, and genuinely able to create value in Jakarta. Their mistake is believing that value will be recognized through the same pathways, at the same speed, and with the same assumptions that applied elsewhere.

Prior success teaches habits, and successful people tend to defend their habits long after the environment has changed.

• They ask direct questions and expect direct answers.

• They use credentials as proof and expect proof to settle the matter.

• They benchmark compensation as though the market has agreed which market it is.

• They interpret delay as dysfunction, and politeness as progress.

Jakarta does not always reward that. It rewards candidates who can read context without needing it narrated to them, and who can understand when the formal process is only the visible portion of the decision. This is simply the difference between being impressive in the abstract and being viable in the room.

For the foreign candidate, the choice is fairly simple.

1. Keep holding up the old map and complaining that Jakarta has arranged itself incorrectly,

2. Accept that the first task is not to prove themselves harder, but to better understand the terrain.

The best candidates usually make that adjustment before the market has charged them too much tuition.

The rest continue attending warm meetings, and receiving soft encouragement, which remains one of Jakarta’s preferred ways of turning optimism into mist.

At Career Candour, we work 1:1 with foreign professionals to help them understand Indonesia’s hiring market and position themselves more effectively. Doesn’t matter how qualified you are if you don’t understand what employers are actually weighing up. Want clarity before you waste months? DM us.

Indonesia has announced what may become one of the most consequential natural-resource policy shifts in years: a special state-linked export vehicle, PT Danantara Sumber Daya Indonesia, intended to sit at the centre of exports for strategic commodities such as palm oil, coal, and ferroalloys.

The stated mission?

• Stop under-invoicing,

• Stop transfer pricing,

• Stop export proceeds slipping offshore,

• Strengthen the rupiah,

• Protect the national interest, and

• Ensure Indonesia’s natural wealth benefits the Indonesian people.

… all of which sounds excellent.

The policy is not just another export tax, quota, benchmark price, or reporting requirement. Indonesia already had plenty of those.

• Coal miners have long faced domestic market obligations.

• Palm oil exporters have lived through levies, permits, domestic supply rules.

• Mineral exporters have seen outright bans in the name of downstreaming.

The state was never absent.

What is new is the proposed centralisation of the foreign-facing export function itself. In the strongest reading, private producers may no longer sell directly overseas as exporters of record for covered commodities. Instead, they may have to route contracts, documentation, shipment, and perhaps payment through a state-appointed channel. The government says this is transparency. Investors hear “single choke point.”

The Official Story

Indonesia exports vast quantities of natural resources. Coal, palm oil, and mineral products are among the country’s major foreign-exchange earners. If some exporters are under-reporting values, using offshore affiliates, manipulating transfer prices, or parking proceeds abroad, then the state is right to be concerned.

The official framing rests on three pillars.

First, the state wants visibility.

• Who is buying?

• At what price?

• In what volume?

• Through which entity?

• With proceeds landing where?

These are fair questions. If Indonesia owns the soil, forests, mines, and political headaches attached to these commodities, it is not unreasonable to ask whether the national balance sheet is getting a fair shake.

Second, the state wants foreign exchange. The rupiah has been under pressure, and natural-resource export proceeds are an obvious place to look for dollars.

Third, the government wants revenue. Under-invoicing and transfer pricing are real problems. Commodity trading structures can be opaque, and Indonesia has every reason to worry that value is being skimmed somewhere between the mine mouth, the plantation gate, the offshore trader, and the end buyer. If the new SOE can genuinely improve audit trails, reduce mispricing, increase tax collection, and stop fake-low export declarations, that would be an achievement.

So, there is a plausible good-faith case here. The government is not necessarily wrong to identify the disease. The question is whether the prescribed medicine is correct.

This Was Never a Free-for-All

One slightly misleading part of the debate is the idea that Indonesia is moving from a pure free market to state control. That is not quite right. Indonesia’s commodity export regime was already highly managed.

• Coal producers already dealt with domestic market obligations, production rules, benchmark pricing, and the threat of sanctions.

• Palm oil exporters already operated under levies, taxes, export permits, and domestic supply interventions.

• Minerals have been subject to some of the world’s most aggressive downstreaming policies, including export bans designed to force processing onshore.

The state has long been in the room.

That matters because the government can plausibly say: “We are not inventing intervention. We are improving governance.” Exporters in strategic commodities were never just free agents tossing coal and palm oil into the global market, they already had to satisfy licensing rules, tax rules, customs rules, domestic obligations, banking rules, and sector-specific controls.

But there is a difference between being regulated and being commercially intermediated.

• A referee enforces the rules. A gatekeeper controls access.

• A referee says the ball crossed the line. A gatekeeper says the ball must first be submitted to a newly formed national ball-management agency.

This policy risks moving Indonesia from the first model to the second.

The old system had checks and balances, however imperfect. The state could set export conditions, require documentation, audit prices, impose sanctions, regulate foreign-exchange proceeds, and punish misreporting. The new model appears to say: because some players may have cheated, the government will now become the player standing between everyone and the goal.

The New Export Middleman

The most provocative part of the plan is the “sole exporter” concept. Depending on the final implementing rules, the SOE could be anything from a reporting platform to a mandatory marketing agent to a full state trading company handling contracts, shipments, and payments.

If DSI is mostly a transparency platform, then the policy may be manageable. Exporters continue selling to buyers, but the state gets real-time visibility over contracts, prices, shipment documents, and proceeds. It could function like a supercharged reporting and audit system.

If DSI becomes a mandatory export agent, the stakes rise. Private firms may still produce, negotiate domestically, and receive proceeds, but the foreign-facing transaction must go through the state vehicle. Buyers now deal with a central node. Pricing, timing, documentation, and contract execution may depend on one institution’s competence and neutrality. That is where “transparency” begins to look more like “permission.”

If DSI becomes the principal buyer-reseller or exclusive exporter of record, the implications are much larger. Then producers are no longer truly exporters in the commercial sense. They become suppliers into a state-controlled export funnel. The SOE sits between Indonesian producers and global buyers. It sees everything, controls the interface, and potentially influences who gets access, when shipments move, which contracts are recognised, and how value is allocated.

This is when investors start reaching for the antacids.

High-value, capital-intensive industries do not love uncertainty. Mines, plantations, smelters, logistics networks, ports, and long-term supply contracts require financing, predictable regulation, enforceable contracts, and some confidence that today’s commercial structure will not be replaced tomorrow by a patriotic toll booth.

• The government may call it a “marketing facility.”

• Investors may call it counterparty risk.

• Exporters may call it another desk at which to bow before shipment.

• Cynics may call it the formalisation of the sentence: “You can still do business, of course, but now you must do it through our friend.”

Why Investors Are Nervous

Commodity investors in Indonesia are used to intervention. They price it in. They have lived through bans, levies, domestic obligations, sudden quota changes, and unpredictable policy announcements.

But there is a different kind of anxiety triggered by centralisation.

Investors can model taxes. They can model royalties. They can model domestic market obligations. They can even model export bans. What they struggle to model is discretionary gatekeeping:

• who approves contracts,

• who controls documentation,

• who prioritises shipments,

• how pricing is set,

• whether favoured players receive smoother treatment,

• whether delays become negotiation tools,

• whether the new monopoly behaves like a public utility or a private club.

The issue is not that Indonesia is moving away from free-market orthodoxy. Indonesia has never been a doctrinaire free-market. The issue is that the proposed structure may concentrate too much commercial power in one state-linked institution, in sectors where the values are enormous and the temptations are… tempting.

This is especially important because the big players are operating in capital-intensive sectors.

• A coal mine is not a pop-up shop.

• A palm oil supply chain involves plantations, mills, refiners, traders, shipping, finance, and international buyers.

• Ferroalloy and mineral processing involve industrial assets, power supply, technology, financing, and long-term contracts.

These are systems. Insert a new mandatory intermediary into the middle and the whole system must reprice risk.

And risk is expensive.

• If the SOE delays payment, who bears the working-capital cost?

• If foreign buyers demand discounts for dealing with a less flexible channel, who eats the margin?

• If contract terms are standardised, who loses bargaining power?

• If documentation slows, who pays demurrage?

• If political priorities override commercial ones, who explains that to lenders?

The official answer may be: do not worry, this will all be transparent.

Which is often the equivalent of a restaurant saying the fish is “very fresh” before anyone has asked.

Who Benefits From the Bottleneck?

State-owned enterprises can perform useful functions. Export credit agencies, commodity boards, and national trading companies exist in many countries. In theory, a centralised export channel could be designed with hard safeguards: public pricing formulas, independent audits, transparent allocation rules, digital contract trails, parliamentary oversight, appeal mechanisms, strict anti-conflict rules, and criminal penalties for interference.

The problem is institutional incentive. A mandatory export SOE would sit at a point of immense value. It could become the place where information, discretion, access, timing, and money converge.

Consider the possible pressure points.

• Exporters may need their contracts recognised.

• Buyers may need access to supply.

• Shipments may need prioritisation.

• Pricing may need validation.

• Documentation may need clearance.

• Payment may need routing.

• Exceptions may need approval.

• Existing contracts may need transitional treatment.

• Disputes may need resolution.

Every one of those verbs can be innocent. Every one can also become a queue.

A queue is not corruption. But in systems where discretion is high and transparency is weak, queues develop personalities. Some move faster. Some become “strategic.” Some discover that national interest is surprisingly aligned with people who know the right people.

This is why the policy’s success depends more on its plumbing than slogans. “For the prosperity of the people” is a constitutional principle. “Who exactly gets to decide the FOB price for a shipment of coal under a pre-existing contract with a Japanese utility?” isn’t.

If DSI is to avoid becoming a rent-seeking machine, several boring questions must be answered.

• Will pricing be benchmarked publicly?

• Will exporters retain buyer relationships?

• Will all contracts be visible to auditors?

• Will DSI publish aggregate performance data?

• Will there be independent oversight?

• Will private firms have legal recourse against delays or arbitrary treatment?

• Will officials and politically exposed persons be barred from benefiting indirectly?

• Will the SOE be compensated by a fixed transparent fee?

Without those answers, the policy risks becoming a new layer of gatekeeping, rather than reform.

The frustrating thing about this policy is that the government’s diagnosis is not absurd. Under-invoicing, transfer pricing, offshore proceeds, and weak commodity-trade transparency are real issues. Indonesia should want better data, better tax collection, stronger FX retention, and a fairer share of value from its natural resources. There are merits here, and they should not be arbitrarily dismissed.

But a real problem does not automatically justify a monopoly-shaped answer.

Indonesia already had tools like licensing, customs audits, tax enforcement, benchmark pricing, domestic obligations, export proceeds rules, financial reporting, and sector supervision. If those tools were insufficient, the obvious reform path would be to improve enforcement, integrate data systems, strengthen audit capacity, punish misreporting, and close transfer-pricing loopholes. Instead, the government appears tempted by a grander solution: place a state-linked entity between private exporters and the world market.

So the big picture is this: the policy is a potentially major shift from regulation to intermediation. It could improve transparency and revenue if designed narrowly and governed impeccably. It could also create a powerful choke point in some of Indonesia’s most important export industries, raising costs, unsettling investors, weakening commercial certainty, and opening new space for discretion, favouritism, and rent extraction.

The state says it wants to stop value leaking out of the country. Fair enough. But if the answer is to create a single gate through which vast value must pass, Indonesians and investors alike are entitled to ask who guards the gatekeeper, and who prices the toll.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.

There’s a facial expression people make when salary comes up too early.

You can see it… even on Zoom.

1. The jaw tightens.

2. The eyes do a small internal calculation.

3. The voice becomes reasonable in that suspiciously soft way people use when they are trying to sound relaxed.

The recruiter has asked a simple question.

“What are your compensation expectations?”

And suddenly a senior professional, who has managed budgets, led teams, and handled impossible clients, starts behaving as though they have been invited to commit a minor act of social vandalism.

“Well, I’m really just looking for the right fit.”

A beautiful sentence. Mature. But in many cases, financially ruinous.

Of course they are looking for the right fit. Everyone is looking for the right fit. Nobody is out there saying, “My dream is to join a toxic circus.” Fit matters. Culture matters. Purpose matters, or at least the modern workplace has agreed to keep saying that it does.

But money has a vulgar little habit of continuing to matter after the values conversation ends.

By mid-career, compensation is no longer just pay. It is insurance. It is recognition. It is freedom. It is the price placed on the version of you that took 20 or 25 years to build.

Which is exactly why so many people become strangely coy about it.

The Cost of Sounding Too Flexible

The odd thing is that most experienced professionals understand negotiation perfectly well when it belongs to the business.

• They have sat in rooms where suppliers were squeezed .

• They have watched procurement query a line item worth less than the coffee budget.

• They have seen companies delay decisions, reframe scope, defer costs, and call it all “commercial discipline.”

Then their own salary is on the table and suddenly they become ambassadors for generosity.

They start considering the employer’s constraints with touching sincerity. They imagine budget pressures. They empathise with internal equity. They worry about seeming difficult. They pre-emptively reduce the number in their head because somewhere, somehow, they have absorbed the idea that asking clearly for fair compensation is gauche, while being quietly underpaid is a sign of character.

This is not humility. It is usually fear.

And fear, in compensation conversations, is an expensive adviser.

t reminds you that you are not 31 anymore. It suggests that the company probably has other candidates. It points out that you have not interviewed properly in years. It says the role sounds interesting and maybe this is not the moment to push.

So you become realistic.

You give a range wide enough to include both your actual expectation and an amount that would eventually make you resentful. You say you are flexible before you have explained what your flexibility costs. You treat a vague promise of future review as if it were a financial instrument with regulatory backing.

The employer may not even be trying to exploit you. This is the annoying part. There may be no villain. No smoke-filled room. No HR executive stroking a white cat while lowering your base salary by 12 percent.

There is just a buyer and a seller.

And if the seller opens by implying the price is negotiable downward, the buyer is unlikely to pause the process and say, “Actually, before we proceed, I feel ethically compelled to protect you from your own lack of preparation.”

A “Great Opportunity” Is Not Legal Tender

A lower offer can be wrapped in very attractive language.

• Opportunity.

• Growth.

• Platform.

• Visibility.

• Scope.

• Upside.

• Mission.

• Access.

• Future potential.

The corporate vocabulary for “less money now” is astonishingly well developed.

And sometimes the language is true. Some roles really do create a better trajectory. Some pay cuts are deliberate and intelligent. Some people trade salary for health, family, flexibility, location, or learning.

But those are choices.

The problem begins when a candidate accepts a financial compromise and then decorates it with meaning after the fact.

• The lower base becomes “strategic.”

• The vague bonus becomes “potential.”

• The title becomes “a platform.”

At first, everything feels fine. There is a welcome email, a meeting with someone from People, perhaps a branded notebook if the company is feeling lavish. You tell yourself the package is acceptable because the work is interesting and the people seem decent and nobody has yet said “we’re like a family,” which is always a blessing.

Then the role begins to expand.

Not dramatically. Scope never kicks the door in wearing a cape. It just starts standing slightly closer each week. A meeting appears that was not mentioned during the process. Then a stakeholder group. Then a strategic project with no resources and an immediate deadline.

Soon the job is larger than the job you priced.

That is when the original salary conversation returns.

• You notice it when you work late.

• You notice it when someone praises your impact warmly and without budget implication.

• You notice it when your calendar fills with responsibilities that appear to belong to someone at the next level, while your pay remains committed to the previous one.

This is how resentment matures.

What Makes the Move Worth It?

“Know your worth” sounds empowering until you have to turn it into a number without suddenly revisiting your entire career.

Terms are cleaner because they do not require you to prove your entire human value to someone in Talent Acquisition called Sophie who has another screening call in twelve minutes. Terms simply describe the conditions under which the move makes commercial sense.

• This is the level of responsibility.

• This is the risk.

• This is the market.

• This is what makes the role worth saying yes to.

That is the conversation.

The preparation happens before the recruiter asks. That is the part people miss. By the time the question arrives, it is too late to start rummaging through your emotions for a number. You need to have already decided what would make you excited, what would make you comfortable, and what would make you bitter while pretending to be grateful.

You also need to understand what non-cash benefits are actually worth. Not in the abstract, lifestyle-magazine sense. In actual terms.

• Flexibility has value if it is real.

• Title has value if it changes your market position.

• Equity has value if it has a credible relationship with reality.

• A six-month review has value if it is written down, owned by someone specific, and connected to a decision.

This means refusing to drift into life-altering financial decisions because you wanted to seem agreeable on cue.

There are excellent reasons to accept less money.

But “I got nervous and sounded flexible” is not one of them.

Good Work Does Not Price Itself

Many experienced professionals built careers on being useful, loyal, effective, and low-maintenance.

They did good work. They solved problems. They made bosses look calm and departments look functional. They became the person people could rely on..

Somewhere along the way, they assumed the deal was that good work would eventually explain itself.

It will not.

The market rewards relevance that is easy to understand. It rewards people who can connect their experience to a problem the buyer already knows they have. It rewards value that has been made legible before the room loses interest or starts worrying about headcount approval.

That can feel vulgar if you have spent years believing professional value should be self-evident. But self-evident value is mostly a myth told by people who already have sponsorship.

If you do not frame your value, someone else will frame your cost.

That is usually where the money goes.

By the time the offer arrives, much of the negotiation may already be over.

The salary conversation is not only the moment where numbers are exchanged. It is happening earlier, in how you describe yourself, how clearly you discuss scope, and how confidently you connect your experience to commercial outcomes.

The goal is not to squeeze every employer until coins fall out.

Sometimes the highest-paying role is the wrong role. Sometimes a smaller package buys back health, time, family stability, geography, autonomy, or freedom from a workplace where every day feels like being trapped.

Money is not everything.

But compensation is one of the ways a role tells the truth about itself. It tells you:

• How the company values the work.

• How clearly they understand the level.

• Whether the responsibility, risk, and reward have been placed in the same room.

• Whether you are being hired as a serious operator.

So yes, care about the mission. Care about the people. Care about culture, flexibility, learning, autonomy, scope, and whether the office lighting makes everyone look recently unwell.

But care about the money clearly.

Avoiding the salary conversation does not keep things tasteful. It hands the pen to someone else.

And they may write a number you spend the next two years resenting.

At Career Candour we work 1:1 with mid-career professionals to make experience easier to understand and harder to underpay. CVs, LinkedIn, interviews, positioning, salary conversations. The whole thing needs to line up. Want this handled properly? DM us.

There are few things more comforting in modern economic management than the sudden discovery of a trillion dollars.

One minute, a country is dealing with currency pressure, investor skepticism, governance concerns, and fiscal constraints. The next minute, a senior official announces that the country has one of the world’s largest sovereign wealth funds.

Wonderful. Problem solved. Somebody tell Norway.

Indonesia’s Danantara has been described as managing close to or above US$900 billion in assets, with some rhetoric pushing the number toward US$1 trillion. This has then been presented, or at least received, as evidence that Indonesia has created one of the largest sovereign wealth funds in the world. Depending on the version of the claim, it has been suggested that Danantara is the fifth-largest globally.

There is a version of this story that is defensible. Indonesia has large state-owned enterprises. Those enterprises have big balance sheets. If you place them under one umbrella, you can produce a very large aggregate number. Danantara oversees more than US$900 billion in assets, however its actual near-term investment capacity is far smaller at around US$20 billion, with specific projects in the tens of billions rather than the hundreds.

But there is also a version of this story that is nonsense.

The issue is not whether Indonesia should try to reform, consolidate, and professionalize state-owned assets. It absolutely should. The issue is whether Indonesia has suddenly created a sovereign wealth fund comparable to Norway’s oil fund, Abu Dhabi’s ADIA, Kuwait’s KIA, Singapore’s GIC, China’s CIC, or Saudi Arabia’s PIF.

…

The Magic Trick

The confusion is fairly simple: Danantara appears to be counting assets it supervises, not cash it can freely invest.

That distinction is everything.

A sovereign wealth fund is usually understood as a state-owned investment vehicle funded by surplus reserves, commodity windfalls, fiscal surpluses, foreign exchange reserves, privatization proceeds, or accumulated national savings.

That is the traditional model.

• Norway sells oil, saves the proceeds, invests globally, and produces a giant national portfolio.

• Abu Dhabi, Kuwait, Qatar, and Saudi Arabia do versions of the same thing with hydrocarbon wealth.

• Singapore’s GIC comes from reserves accumulated through decades of fiscal discipline and external surpluses.

• China’s CIC and SAFE are tied to large foreign-exchange reserves and balance-of-payments strength.

Some of these institutions are opaque, and politically influenced. Some are more strategic than purely financial. But the broad principle is that they represent accumulated sovereign capital.

Danantara is different.

Danantara is not sitting on a trillion dollars of surplus Indonesian savings. It is a new state asset-management and investment vehicle built around the consolidation of existing SOEs, including major names such as Pertamina, PLN, Telkom, BRI, BNI, Mandiri, and MIND ID.

That’s important because rolling existing companies under a new roof does not magically create fresh wealth. But it can improve governance, centralize decision-making, and allow better capital allocation.

Unfortunately, it does not mean Indonesia now has US$1 trillion of deployable sovereign capital.

“Fifth Largest Globally”

Depending on the ranking used, the world’s largest sovereign wealth funds include

• Norway’s Government Pension Fund Global,

• China’s SAFE Investment Company,

• China Investment Corporation,

• Abu Dhabi Investment Authority,

• Kuwait Investment Authority,

• Singapore’s GIC,

• Saudi Arabia’s Public Investment Fund,

• Qatar Investment Authority,

• Hong Kong’s Exchange Fund, and others.

Public ranking data commonly places Norway well above US$2 trillion, China’s SAFE and CIC above US$1 trillion, ADIA around or above US$1 trillion, Kuwait around US$1 trillion, and GIC and PIF around the high hundreds of billions.

So yes, if one accepts Danantara’s roughly US$900 billion number at face value, it may appear near the global top ten. That is presumably how the “fifth-largest” framing emerges.

But that ranking depends on treating Danantara’s SOE assets as equivalent to the investable portfolios of established sovereign funds. That is an extremely generous interpretation.

Norway’s fund owns listed equities, bonds, real estate, and infrastructure assets around the world. It is funded by petroleum revenues and fiscal transfers. In 2024 Norway’s fund had reached around US$1.8 trillion, owned about 1.5% of all listed global stocks, and had grown through both oil and gas revenues and market performance.

That is a sovereign wealth fund.

Danantara, by contrast, appears to be a holding and investment structure sitting above domestic state-owned enterprises, many of which already existed, already had liabilities, already had minority shareholders, and already had political obligations.

If Danantara says, “We supervise a state-owned enterprise universe with nearly US$1 trillion in assets,” fine. That is a big claim, but at least it sort of describes it.

If Danantara says, “We are therefore one of the world’s largest sovereign wealth funds,” the appropriate response is:

• By what definition?

• Under what accounting treatment?

• Using what liquidity assumptions?

The Funding Question

Traditional sovereign wealth funds tend not to need outside investors in order to be sovereign. That is kind of the point. They are the outside investors.

Danantara, meanwhile, has been linked to co-investment structures and external financing. Indonesia and Qatar agreed to create a US$4 billion joint fund, with each side contributing US$2 billion.

Co-investment does not automatically disqualify an institution from being sovereign or strategic. Many legitimate SWFs co-invest. They partner with private equity firms, pension funds, infrastructure funds, and other states. That is normal.

But, if the country has just created a trillion-dollar sovereign wealth fund:

• Why is the actual investment program measured in billions, not hundreds of billions?

• Why does it need co-investors for relatively modest pools of capital?

• Why are project announcements in the US$7 billion or US$36.7 billion range rather than at the scale implied by the trillion-dollar headline?

Again, US$36.7 billion is not small. It is serious money.

But it is not US$1 trillion.

And this is where Indonesia so often gets itself into trouble. The underlying opportunity is real, but the presentation inflates it into something grander, shinier, and less believable.

The Listed SOE Problem

One of the most important issues is that many of Indonesia’s strongest SOEs are not wholly owned private toys of the state. They are publicly listed companies with minority shareholders.

Banks such as BRI, Mandiri, and BNI matter enormously to Indonesia’s economy. So does Telkom. These are listed companies with market valuations, boards, shareholders, disclosures, regulatory obligations, and investor expectations.

So when people talk casually about Danantara “having” these assets, we need to slow down.

What exactly does “having” mean?

• Does Danantara own the state’s shares?

• Does it control governance?

• Can it direct dividends?

• Can it pledge shares?

• Can it borrow against them?

• Can it force mergers?

• Can it redirect corporate strategy?

• Can it treat market-listed companies as collateral for state projects?

• What happens to minority shareholders?

• What happens to bank capital adequacy?

• What happens if strategic national goals conflict with commercial returns?

These are the questions that determine whether Danantara becomes a professional value-creation institution or a very large machine for moving risk around the state balance sheet while calling it transformation.

If Danantara’s mandate is to modernize SOEs, improve governance, reduce duplication, professionalize investment decisions, and consolidate fragmented state ownership, that’s great. In fact, it is probably overdue.

Indonesia’s SOE universe has long needed discipline.

A well-designed Danantara could help.

But if Danantara becomes a vehicle to extract, pledge, direct, or politically deploy the perceived balance-sheet strength of listed SOEs, that is a very different story. That is no longer sovereign wealth management.

Investors may not understand every internal political signal in Jakarta, but they do understand when state companies are used as fiscal shock absorbers, and when “strategic” starts to sound like “please ignore the return profile.”

The Real Damage

Foreign investors already understand the Indonesia story. They have heard it for years. Many of them have believed it. Some still do.

• Large population.

• Young workforce.

• Growing middle class.

• Natural resources.

• Nickel. EV supply chain.

• Digital economy.

• Infrastructure gap.

• ASEAN scale.

• Strategic location.

• Domestic consumption.

• Underpenetrated financial services.

• A country too big to ignore.

This pitch has been made in conference rooms from Singapore to London to New York with enough frequency that entire generations of analysts have grown up, had children, and moved into private credit while waiting for the execution to catch up.

The issue it not awareness. It’s trust.

Investors do not need Indonesia to tell them it is big. They know. They need Indonesia to show that rules are stable, contracts are respected, corruption is contained, minority shareholders are protected, policy is predictable, bureaucracy is navigable, taxes are not changed by ambush, and capital can enter and exit cleanly.

This is where the “US$1 trillion SWF” rhetoric becomes counterproductive.

Domestically, it may create optimism. It may help sell the idea that Indonesia is finally taking charge of its own economic destiny, and reinforce a political narrative of national strength.

But serious foreign investors are not isolated in a cabin in the woods, reading only footnotes from annual reports by candlelight. They see the same speeches. They read the same headlines. They compare the claims with the numbers. They ask advisers.

If the headline is exaggerated, they become more cautious.

That matters because Indonesia has already developed a reputation among certain investors for overpromising and underdelivering.

• Big announcements.

• Big ambitions.

• Big ceremonies.

• Big targets.

Then delays, policy reversals, bottlenecks, regulatory confusion, corruption concerns, currency weakness, and a request to be patient because the next phase will definitely be different.

This is the slow erosion problem.

Every inflated claim forces the next claim to work harder.

And when the currency is under pressure, that credibility premium becomes very expensive.

Danantara does not have to be fake to be oversold.

It can be a real institution. It can be useful, and improve Indonesia’s state-capital allocation. It can create long-term value.

But:

• It cannot become Norway overnight.

• It cannot become Abu Dhabi by reclassification.

• It cannot become Singapore via press conference.

And it cannot become a trillion-dollar sovereign wealth fund simply because existing SOE balance sheets have been gathered into a national holding structure and confidently presented.

The better argument for Danantara is that Indonesia has too many valuable state-linked assets managed too unevenly, and a more disciplined central institution could improve outcomes. That is a serious proposition.

Indonesia’s challenge is a shortage of executed outcomes large enough to make narratives unnecessary.

Danantara should be judged by what it delivers. Not by the largest possible number someone can assemble from the national asset cupboard.

Because if Indonesia wants real local and international trust, the solution is smaller claims, better execution, and numbers that pass the smell test.

At StratEx - Indonesia Business Advisory provides Indonesia-focused advisory and leadership intelligence for investors that need to understand what is really moving beneath the surface. Contact us for better visibility before making your next move in Indonesia.