Indonesia is facing significant economic uncertainty in the early days of President Prabowo Subianto's administration. The Jakarta Composite Index has fallen 20% from a record high in September 2024, the month before Prabowo took office. The rupiah has weakened more than many other Asian currencies, and mass layoffs have hit some of Indonesia's largest employers, including textile company Sritex.
On March 19, 2025, Prabowo issued orders to National Economic Council chairperson Luhut Binsar Pandjaitan and coordinating economics minister Airlangga Hartarto to draft deregulation measures, remove barriers to business development, and support foreign trade and investment. A limited cabinet meeting will take place in the coming days to further develop and implement the deregulation measures and Prabowo will also meet with select foreign businesses to solicit input. Chairperson Luhut offered assurances that deregulation would maintain crucial protections for domestic industries while opening up Indonesian markets to increased foreign investment and removing red tape for essential imports.
Protectionism in the form of strict non-tariff measures has been a feature of every modern Indonesian administration. Headlines at the beginning of 2025 were dominated by Indonesia's dispute with Apple over the technology company's failure to comply with local content requirements and the resulting ban on sales of the iPhone 16 within the Indonesian market. In addition to local content requirements, pre-shipment approvals for imports have hampered Indonesian supply chains, resulting in higher costs for companies trying to compete against firms from other countries in the region.
If Prabowo enacts trade deregulation that includes reducing local content requirements and pre-shipment approvals for imports, it would mark a significant shift away from the ideology he had espoused on the campaign trail during the 2024 election. The president has advocated protectionism, sought to reduce imports, and has criticized international trade agreements. However, the recent market downturn may provide an opportunity for international investors to collaborate with the Indonesian government for mutual benefit.
The Indonesian government is formulating a deregulation strategy to stimulate national exports, a crucial move amidst the recent decline in the Jakarta Composite Index on the Indonesia Stock Exchange. "The President has instructed us to implement deregulation across various sectors," said National Economic Council (DEN) Chairman Luhut Binsar Pandjaitan at the Presidential Office on Wednesday evening, March 19, 2025, as quoted by rri.co.id. Luhut noted that this policy aligns with President Prabowo Subianto's directive to streamline regulations in multiple sectors.
