For most of you reading this article, government social aid or bantuan sosial (bansos) is perhaps something you’ve only seen in the news. Different versions of it can be traced back to at least three decades ago, right after the 1997 Asian Financial Crisis. It mostly came in the form of distributing essential goods to the lowest-income households, crafted and delivered by policymakers who decide what is best for a social class they don’t belong to.

That’s probably why we still see rice bags with the smiling face of a politician plastered on them and cash transfers handed out just before election day.

But for over 23 million people still living below the poverty line, bansos is not a political chip. It’s what makes life just a little bit more tolerable for the country’s neediest.

The evolution of bansos has attracted serious attention among researchers worldwide. Esther Duflo and Abhijit Banerjee, the 2019 Economic Nobel Prize winners and co-founders of the Abdul Lateef Jameel Poverty Action Lab (J-PAL), built their careers on conducting intensive studies to monitor and evaluate the 30-year lifespan of bansos programs.

In those three decades, Indonesia’s social aid system has reinvented itself many times over. This is the story that this edition of The Reformist invites you to explore across three key regimes: rice distribution, cash transfers, and digital reform. It is essential to acknowledge and learn the rigor and planning required to launch each of these initiatives, because good enough won’t cut it.

I. The rice subsidy era: A need for speed

Modern social aid programs in Indonesia began in response to the 1997 Asian Financial Crisis. The newly appointed B.J. Habibie administration initiated an urgent program called the Special Market Operation (Operasi Pasar Khusus, or OPK) to create a social safety net for low-income households to cushion the effects of the economic crisis.

Back then, the government decided that rice was the most essential to ordinary Indonesians’ everyday lives, so rice became the centerpiece of this program; distributed to the lowest-income households across the country.

OPK allowed every eligible household to purchase 10 kilograms of rice every month at Rp 1,000 per kilogram — 50 percent cheaper than the Rp 2,000 per kilogram market price at the time.

The program was launched on 1 July 1998, under the leadership of the State Logistics Agency (Bulog), using population datasets from the National Population and Family Planning Board (BKKBN), and employing local government officials across 27 provinces to distribute the rice en masse.

What is perhaps most striking about OPK was the variables the government used to decide who received the rice packages. Because it had used BKKBN’s data as its basis, the program also used the institution’s economic classification system.

The lowest tier in BKKBN’s system was the “pre-prosperous family” (KPS), households that fail to satisfy one of these five seemingly arbitrary variables:

1. Eating at least twice a day.

2. Living in a house with flooring (not dirt).

3. Wearing different sets of clothes for work and leisure.

4. Taking a sick child to a clinic rather than a shaman (dukun).

5. Performing basic religious observance according to each family’s faith.

However crude these requirements may look today, the BKKBN identified over 7.3 million households — 15 percent of the entire Indonesian population at the time — belonging to this social class. Due to the financial crisis, the list grew to 12.8 million after more families fell into the KPS category.

What worked: Working with what we had to achieve the goal

As hasty as the program was, OPK was successful in what the program was primarily designed to do: deliver rice quickly to as many people as possible, en masse.

An evaluation report by the SMERU Research Institute in 1998 found no evidence of people stealing and reselling rice, though it found several “leakage opportunities”, and that the delivery and purchase of rice in some provinces were done adequately.

We understand why the government chose the BKKBN data for OPK, as it had already mapped the then-three-decade-old family planning program. They used the best available datasets they had, but it was simply not built for the problem they were trying to solve.

Read The Reformist’s volume on Indonesia’s family planning program here.

Importantly, the overall supply of rice from Bulog also remained sufficient throughout the program, despite the high demand in such a short timeframe (though the quality of the subsidized rice was not the best). Much of that supply readiness can be attributed to how social aid was carried out during the New Order regime.

Before 1998, rice distribution programs were supply-focused. The government targeted farmers and crop producers to increase the country’s overall rice supply by providing easy credit and fertilizer subsidies to increase productivity. The goal was to keep rice prices low, ensuring that this essential good remains accessible for the majority of Indonesians.

This New Order-era state intervention sought to reduce poverty through a trickle-down effect via job creation and easy credit lending, instead of direct aid.

But then the 1997 financial crisis shifted the way the Indonesian government sought to help its citizens. From then on, social aid programs became more beneficiary-facing, directly providing basic goods like rice to lower-income households.

What didn’t: Everything else

Unfortunately, everything else about the OPK program was lackluster.

Coordination between central government institutions and on-the-ground field workers became a major problem. Field workers updated household statistics every month, raising the number of eligible households to 12.8 million by October. But the central government continued planning and allocating rice against an outdated BKKBN count of roughly 8 million households, causing uncertainty for central-level planners and on-the-ground workers.

Mistargeting became the most severe issue. Despite a large number of recipients, it was often the case that poor households that most deserved rice did not end up receiving an OPK package. BKKBN’s criteria were more a reflection of asset-based proxies than the individual expenditures of a household’s actual income or consumption. A family can still be poor in every other aspect despite living in a house with proper flooring.

BKKBN’s database also excluded households that weren’t the conventional married nuclear family (since the data was originally meant for family planning, not social aid). Widows, divorcees, and groups of unmarried individuals were thus systematically left out of consideration for the program.

A large factor in the mistargeting problem also lies in local leader discretion. Because local leaders (like village heads) were responsible for distributing rice to individual households, rice distribution became unequal and largely discretionary. Elite capture had perverted the program implementation.

A 2001 evaluation study of OPK found that local village heads would typically ignore government-created lists entirely and disburse rice depending on who they personally saw fit. Some villages targeted the rice well while others simply divided it evenly among all households regardless of need. Village heads argued that the BKKBN’s lists failed to recognize which families were actually poor in the locality, causing them to act on their own judgment.

Lastly, this program required households to pay in cash for their subsidized rice. This made it more difficult, especially for the poorest ones, as they had no cash to purchase their monthly allocations to begin with. As a result, the program grew a backlog of excess rice that was needed by many who simply couldn’t afford to pay for it. The excess then ended up in the hands of more affluent households who had cash to spare, defeating the purpose of the entire program.

An unripe evolution

For an initiative that had to roll out quickly due to the threat of an unexpected crisis, the way OPK was disbursed in a rational, data-driven (however arbitrary the criteria), and organized manner is somewhat a commendable feat. So it wasn’t a shock that the program continued to exist even after the economic crisis ended.

In 2002, the government doubled down on the “rice” tag and renamed OPK into the Rice for the Poor program, or “Raskin”. In this new era, the government began experimenting with new ways to deliver social assistance programs.

BKBBN datasets were eventually scrapped in favor of the growing Statistics Indonesia (BPS) agency, and the government began to conduct periodic censuses to regularly update the conditions of poverty in the country.

Despite procedural overhaul, non-poor households kept on receiving subsidized rice that wasn't meant for them. In 2005, poor households accounted for only 25 percent of Raskin subsidies, whereas the remaining 75 percent went to non-poor households. By 2010, little had changed as around 70 percent of Raskin’s total beneficiaries were still non-poor.

II. The cash transfer era: PKH and BPNT

Public policy researchers and policymakers have long recommended direct cash transfers as a better, cost-effective, and result-yielding alternative to in-kind distribution schemes in which goods are transferred from the government to households.

The first Direct Cash Transfer (BLT)

The first breakthrough came under President Susilo Bambang Yudhoyono’s (SBY) administration. In the wake of rising fuel prices in 2005, the government rolled out its first unconditional cash transfer program called Direct Cash Transfer (BLT), distributing Rp 1.2 million per household over the course of the year.

In this program, BPS was entrusted with identifying eligible households. The statistical agency conducted a basic national health and education survey, the SDKP, and found over 19.1 million households eligible for the cash transfer program.

Critics, however, argued that the program falsely targeted households that were vulnerable yet remained above the poverty line. They were afraid that this would create a practice of dependency on the program and that the additional income would instead be used for non-essential goods like alcohol or tobacco.

The Family Hope Program (PKH)

This one-off cash distribution scheme paved the way for the creation of the Family Hope Program (PKH) in 2007. Instead of “universal” coverage, PKH was turned into a conditional cash transfer program meant for the extreme poor (people living below 80 percent of the poverty line). Households are only eligible if they meet certain criteria and abide by strict conditions to receive money for a sustained period.

When designing PKH, the Indonesian government took inspiration from a largely successful conditional cash transfer scheme in Brazil, called the Bolsa Familia. Formally introduced in 2003 by then-and-current Brazilian President Luiz Inácio Lula da Silva, Bolsa Familia consolidated four of Brazil’s existing cash transfer programs into a single poverty aid scheme.

Bolsa Familia has been noted as generally successful in increasing household consumption, reducing rates of childhood stunting, and reducing overall poverty in Brazil.

Copying Brazil, Indonesia launched the program under the leadership of the Social Affairs Ministry. PKH was novel in its function and delivery.

Beneficiary households were initially intended to stay in the program for two to four years, over which PKH aimed to reduce poverty, child malnutrition, and work participation. While benefiting from this program, households were expected to boost consumption of high-energy and high-protein foods, as well as raise their children’s educational attainment and school attendance rates.

To keep receiving their quarterly transfers, recipients had to meet conditions such as frequent health and prenatal checkups for pregnant women, complete childhood immunization and health checkups for families with children aged 0 to 6, and school enrollment and high attendance for those with children above the age of 6.

Each family receives a range between a minimum of Rp 600,000 and a maximum of Rp 2.2 million in quarterly payments. The more children a family has in the house, the higher the nominal amount they get. The cash is delivered and received through the post office, cutting out an intermediary figure who may use their discretion in bad faith.

When the program first piloted in 2007, PKH covered 300,000 families across seven provinces. By 2025, that number had skyrocketed to over 10 million households across the entire country.

How PKH solved Raskin’s mistargeting but exposed a new problem

While PKH and Raskin served two different goals, the former was able to mitigate mistargeting in ways that matter.

One 2019 study evaluating both programs found that Raskin suffered a significant inclusion error, meaning households who weren’t supposed to receive rice ended up eligible. Raskin reported beneficiaries of up to 35 percent of all Indonesian households, overshooting its 22 percent target.

PKH, on the other hand, did not suffer the same fate. Instead, it failed to include more families in the program. The same study found that PKH was only able to reach 9 percent out of the desired 14 percent of Indonesian families (this finding says more about the difficulty of reaching the poorest households than it does about targeting).

BPNT, an evolved Raskin?

Even with the introduction of the PKH, the Raskin program continued well into the Joko “Jokowi” Widodo presidency. The program was renamed to Rice for Welfare (Beras Sejahtera, Rastra) in 2015. The name swapped out the word “poor” for “welfare”, for a more optimistic tone. But this name change was largely cosmetic, offering little systemic change to the operationalization of the social aid program.

All the way up to 2017, the price for this program’s subsidized rice hovered at around Rp 1,600 per kilogram, despite two decades’ worth of inflation and the market price of rice leaping to approximately Rp 9,000 per kilogram.

It was in this year that the government only began implementing structural reforms to Raskin/Rastra. The theory: if rice was prone to local discretion, then it would be best to take that decision-making away from local leaders completely.

So what they did was replace the goods distribution system with a food voucher program called the Non-Cash Food Assistance Program (BPNT). During this transition period, the government also made Raskin/Rastra rice free before the new program kicked in nationally. In addition to rice, this new program also allowed for the purchase of eggs as an additional source of protein.

Instead of receiving rice directly from local leaders, each eligible household is given a Rp 110,000 monthly voucher that is transferred to a debit account owned by a female adult in the household. The figure was set slightly above the market price of rice at the time of the program’s launch (approximately Rp 9,700 per kilogram) to compensate for additional logistical costs, since rice is not distributed directly to households as was the case for Rastra.

For BPNT, individual households must now travel to local shops set up in each village to redeem their vouchers in exchange for goods. For each purchase with a voucher, the corresponding amount would be deducted from the voucher’s remaining credit.

The change to set up shop in localities resulted in cheaper administration costs for the overall program. Whereas for every rice package delivered under Rastra, the delivery took 4 percent in administration fees; BPNT only cost the government between 0.75 and 2 percent.

Importantly, these vouchers cannot be withdrawn from a bank account and can only be redeemed to purchase rice and eggs found in local shops, limiting misuse of funds.

The change from Rastra to BPNT was also met with local resistance, especially from representatives of Indonesia’s outer regions. Heading into 2019, the Rastra program was to be officially discontinued, but Papuan representatives pushed back on the change on the basis that the Rp 110,000 voucher would be ineffective in a region like Papua where 10 kilograms of rice could cost up to Rp 400,000.

Despite this pushback, the program ensued. At the macro level, the program was successful in generating better results than Rastra. A 2021 evaluation study that compared BPNT districts to those that were still running Rastra found that targeted households received 45 percent more assistance in voucher regions than in in-kind districts, and among the poorest households the poverty rate fell by 20 percent.

III. Bansos today: Wicked problems, digital solutions?

The underlying denominator for every social aid program that has appeared over close to three decades is the government’s adaptability in seeking the best data available.

When the Habibie administration launched OPK, it used data from the BKKBN because it understood that the agency had three decades’ worth of population data from its family planning program.

When BLT came around, BPS had started to set its mark as the government’s go-to database provider. The government continued to update its targeting procedure, but the problem remains that a national census can only be done periodically, is expensive to run at scale, and fails to catch up with the living conditions of individual households as time passes.

This is where the current era’s reform package becomes interesting. There are now greater opportunities for a demand-driven social aid program in the age of digitalization and artificial intelligence. Under the current administration, the Digital Transformation Acceleration Committee (KPTDP) has stepped forward as the agency responsible for these digital reforms.

The new system’s novelty is in the paradigm shift. Instead of relying on the government to begin, plan, and distribute social assistance, whether it be rice or e-vouchers, eligible recipients can now request them on-demand. A mix of self-targeting and institutional cross-checks.

Through a digital portal, individuals will only have to sign up with their identity card and credentials. Afterward, the system will take over, cross-checking an individual’s living conditions through BPS’s new central welfare database (DTSEN) decile classification, employment and income records via the Workers Social Security Agency (BPJS Ketenagakerjaan), chronic illness status via the Healthcare and Social Security Agency (BPJS Kesehatan), bank account activity, and land and vehicle ownership.

The graph below helps better explain the registration process of this new digital system.

For PKH, this means an already pregnant mother would not have to go to the post office to receive her quarterly checks. If they also happen to be part of the BPNT program, e-vouchers would be distributed instantly within the same distribution cycle. For individuals without smartphones, extension workers will be deployed to aid in the registration process.

Since the end of 2025, the agency has been conducting a pilot program in Banyuwangi, East Java, to test run this system for both PKH and BPNT. Since then, the results have been noteworthy.

The pilot program drew over 300,000 registrations. Of that total, 44 percent of BPNT applicants and 30 percent of PKH applicants were deemed eligible. What is most striking is the PKH figure in absolute values. Over 87,386 households were eligible for the PKH program, over double the number of existing PKH recipients in Banyuwangi at 40,028, and more than the city’s 54 thousand quota if the DPI numbers were adopted.

This means that not only has PKH suffered a massive exclusion error, but government predictions on just how many poor households there are in this country are also staggeringly low. Nonetheless, the program’s findings highlight the potential of what a fully digital and integrated social assistance program may look like.

It also remains to be seen whether this digitalization program can reproduce the same effects for other districts and villages over the long-run. With the Banyuwangi pilot project done, the agency has announced that it will expand the pilot program to 143 new cities and regencies to further socialize and stress-test the new system.

Lessons from the past, present and future

For the better part of this three-decade evolution, Indonesia has flipped the switch on how it delivers aid to the poorest citizens in the country. It has been a long and tumultuous process, but it is one filled with technocratic and policy-making rigor.

While reform stories like these usually take a back seat to high-stakes corruption cases and geopolitical news, it is important for us at The Reformist to highlight major reforms that have taken place and are currently taking place in Indonesia.

The three decades’ worth of persistent political support of the programs, despite regime changes, shows that a pro-poor program can withstand the test of time. While we are not naive to the fact that these programs have been misused by those in power to expand and secure political capital at the grassroots level, the ongoing reforms to the program show that at least real efforts are being made to raise the living conditions of Indonesian citizens.

Instead, the call to action is for Indonesia’s political leaders to protect these programs from partisan agendas. It shouldn’t be the case that social aid only makes the news when rice packages are plastered with faces of presidential candidates or that subsidies are rolled out months in advance to appeal to the electoral cycle.

Moreover, as the government continues to upgrade these programs, critical questions arise in this new age of digitalization. What happens if the data is wrong? What if the machines and algorithms make false assumptions about who should and shouldn’t receive aid? What if the lack of integration across the government’s many databases renders someone ineligible merely due to administrative mix-ups?

These are some of the most crucial questions that digitalization reforms must answer, or risk repeating the same mistakes of their predecessors. It is good that the government continues to evolve its social aid programs at a technical level. But technical improvements must come with a clear strategy to distribute bansos equally and equitably.

Perhaps in a year’s time, we can return to this topic with new information and evaluation notes. Perhaps by then, we will be looking back at this volume as nothing more than a cautionary tale — as real material benefits have been delivered in even greater numbers to the country’s neediest.

We’d like to hear from you: What do you think about the new plan to digitally reform bansos planning and implementation? Will technology solve the problems of past programs, or will it become a new barrier? Let us know in the comments!

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It is the morning of the World Cup final, and while the entire globe is tuned in for the ultimate showdown, the tournament’s defining narrative was written during the Argentina-Cape Verde match. When Sidney Lopes Cabral curled the equalizing goal against the reigning champions in extra time, people were on the edge of their seats. Even though Lionel Messi and co eventually edged out the victory in the dying minutes, the game proved that any team — regardless of size or footballing stature — can compete against the very best in the world.

Watching this unfold on the global stage, we at The Reformist couldn’t help but look at our own national team. It’s a stark reality check on the morning of football’s biggest game: Indonesia failed to even qualify for the tournament, despite the massive amount of state resources poured into the national team. Since 2020, over 21 European-born players have been naturalized as Indonesian citizens to represent the national team, most of them hailing from the Netherlands and of Indonesian ancestry.

In 2025, the Indonesian government disbursed close to half a trillion rupiah to the Indonesian football team. Each time an international fixture rolls around, the squad stays in five-star hotels like the Fairmont in Senayan; Rolex watches on their wrists, gifted by President Prabowo Subianto, while their faces are plastered across every billboard in the country. All for a team that would fail to qualify for the World Cup by October.

Here is where the story should have turned toward introspection. Instead, the Indonesian Football Federation’s (PSSI) answer to this failure was the same as its answer to everything else: more naturalization.

The Youth and Sports Ministry has continuously called for increased grassroots development. But amid all the press statements, the search for more foreign-born talent never slowed down. This year, two youth players from Australia and the United States were naturalized, with PSSI’s scouts still working the diaspora for more.

Why is it so hard for the Indonesian government to look inwards and develop the human capital it has at home? The answer, again and again, is that long-term policies do not benefit politicians or leaders with short-sighted political goals. Development is all too long and tedious when “solutions” like naturalization can boost political capital in the short term.

In this edition of The Reformist, we go over the political-economic structure behind Indonesia’s sports governance, the government’s lack of support for sports other than football, and the low-hanging reform that nobody in power seems interested in picking up: prioritizing grassroots development over glamor.

Our sports management is short-sighted by design

Running football in Indonesia has become a reliable stepping stone into national politics, which tells you plenty about why development gets sacrificed for spectacle. Since the Reformasi era, four of the seven substantive PSSI chairs have gone on to hold higher political office after their tenure.

This politicking isn’t even subtle. During Prabowo Subianto’s 2024 presidential campaign, Erick Thohir — current PSSI Chairman — openly said that if voters wanted Indonesian football to prosper, they should vote for Prabowo.

Whether his words actually meant anything is up to interpretation, but what is clear is that Erick was comfortable enough to use a sport, which reportedly has a supporter base of over 165 million people, as leverage to propel Prabowo’s popularity. Although he had already assumed the role of State-Owned Enterprises (SOEs) Minister at the time, he has since served as Youth and Sports Minister under the Prabowo administration.

Sports are a spectacle, and political elites use the moment to gain short-sighted political gains. Long-term development, much like in economics, is politically unpopular for politicians with short electoral cycles.

It’s worse everywhere else for everyone else

Football at least gets the government’s attention, however badly spent and short-sighted it may be. Most Indonesian sports, on the other hand, don’t get that much.

Think of any competitive sport Indonesians follow, and there is a corresponding federation that manages it: football has the PSSI, pencak silat has the Indonesian Pencak Silat Association (IPSI), and badminton has the Indonesian Badminton Association (PBSI). For the most part, federation budgets in Indonesia are overwhelmingly bankrolled by sponsors, broadcast rights, and private individuals who already have skin in the game.

The Djarum conglomerate, for example, has been a cornerstone in the development of Indonesian badminton through the creation of its own club, PB Djarum. It has also been endowing the badminton federation since the early 1970s due to owner Budi Hartono’s love and admiration for the sport. Their presence is felt to this day. A few months back, 34 of the 74 badminton athletes selected for the national training camp (Pelatnas) came through the ranks of PB Djarum.

When sports do end up getting state money, it either flows sporadically, depending on the success of an Indonesian athlete in international competitions, or it flows through one primary channel: the Youth and Sports Ministry’s annual Pelatnas fund, the national training budget meant to prepare athletes across all disciplines for international competition. This is where the state’s real preferences become visible.

In 2025, the Youth and Sports Ministry disbursed Rp 407.72 billion in Pelatnas funding across 13 sport categories. Football alone took Rp 199.78 billion of it — essentially half the entire pool, more than the other twelve sports combined.

Athletics and archery — which delivered nine and six gold medals respectively at the 2025 SEA Games — received a combined Rp 40.2 billion, nearly five times less than football’s Rp 199.78 billion.

But it didn’t stop at the Pelatnas fund. In the same week Prabowo hosted the national football team for lunch and sent every player home with a Rolex, the Directorate General of Taxes of the Finance Ministry — weird, we know — announced a separate Rp 277 billion endowment from the 2025 State Budget for PSSI, justified under the mandate of Presidential Instruction No. 3/2019 to develop Indonesian football “as a whole,” not just fund its training camp. Add the two together, and the state committed close to half a trillion rupiah to football in a single year.

For non-football athletes without wealthy conglomerates backing them, financial concerns are a recurring grievance. Just a week ago, speed climber Desak Made Rita Kusuma Dewi made national headlines after winning gold at the World Climbing Series in Krakow. When asked by reporters about her feat, she thanked her team and the Indonesian fans for their support throughout the competition. She then opened up about her sorrows, explicitly calling out the Indonesian government for its lack of support in the competition.

“Before I came to Krakow, we had problems because the government didn’t support us. Now I hope the government will always support us for the next competition,” said the athlete.

Rizki Juniansyah, 2024 Paris Olympics gold medalist and world-record weightlifter, also called out his local government, Banten, and other governing bodies for showering athletes with support only after they’ve won international competitions.

“It shouldn’t just be at the Olympics. Even national championships deserve appreciation. Athletes shouldn’t be welcomed only once they’ve already returned to Indonesia, as if it’s just for show, so to speak. I’m sorry, it’s not that I’m upset or anything. That’s genuinely how it is,” said Rizky.

Tennis breakout star Janice Tjen drew international attention for her dark horse run in the 2025 Grand Slam, becoming the first Indonesian woman to win a Grand Slam match since Angelique Widjaja in 2003. Despite her accomplishment, Janice’s rise occurred despite Indonesia’s tennis infrastructure. Her coach, Chris Bilt, put it plainly:

“Coming from Indonesia has its challenges … there’s not really a player development plan from juniors to pros. So it’s been pretty tough financially for her,” said Bilt.

This norm of negligence continues to this day. This year, the Pelatnas fund has been slashed significantly in preparation for the 2026 Asian Games, from Rp 389.82 billion for the 2022 Hangzhou Games to just Rp 81.04 billion for this year’s Aichi-Nagoya Games. At the same time, President Prabowo joked that qualifying for the World Cup remains the hardest problem he has yet to solve, calling on Minister Erick and the Finance Ministry to find a way towards 2030.

He and his government, however, have not found the same urgency for climbers, swimmers, runners, and other athletes who have already made a name for themselves at the international stage but remain short on cash when support is needed most.

What state intervention in sports can look like

To learn more about what systemic support looks like, Indonesia could look to Germany for how its government reformed its football development system en masse.

After Germany crashed out of the 2000 European Football Championships at the bottom of their group — a nation that had reached the World Cup final six years earlier, only to be eliminated in the first round of the continental championship — the German Football Association (DFB) overhauled its entire development agenda.

Within two years, it had launched the most sweeping structural overhaul in the sport’s history: the Extended Talent Promotion Programme. The DFB and the German professional league jointly committed €48 million per year to it, building a two-tier development network of 366 regional coaching bases staffed by over 1,000 full-time coaches. The motto was simple: no talented child anywhere in Germany should live more than 25 kilometers from a proper training base.

Alongside the public investment, the DFB also made the reform binding on the clubs. Every first- and second-division professional team was required to build and staff a certified youth academy as a condition of its professional license. No academy, no license. Clubs that didn’t comply lost the right to play professionally. Professional clubs alone have since poured more than €1.5 billion into that infrastructure.

The result took fourteen years to materialize fully, but it did so unmistakably. When Germany lifted the World Cup in Brazil in 2014, the overwhelming majority of that squad — Thomas Müller, Manuel Neuer, Toni Kroos, Mesut Özil, Mats Hummels, Mario Götze among them — had come up entirely through the academy system built in the wake of Euro 2000’s humiliation.

For a more local comparison, grassroots development of a team sport can be seen through the rise of volleyball in Indonesia. Just last month, the Indonesian Volleyball Team won the Asian Volleyball Confederation Cup for the first time in national history, beating South Korea, the 26th best team in the world, whilst fielding a full team made up of local athletes. The national team has also been a constant force at the regional level, winning gold more than 12 times at the SEA Games.

This isn’t a coincidence, though it’s also not quite a government success story either. Across tens of thousands of villages across Indonesia, volleyball courts are more prevalent than football pitches, infrastructure the state can at least partly claim credit for.

But the deeper pipeline here is civil society, not policy. Take Farhan Halim, a starter on the AVC-winning squad: he came up through Klub Voli Pasundan, a volleyball program run by a century-old community education foundation that offers players steep tuition discounts in exchange for training commitment. He was made captain at 16, and by 2022, his club team was fielding a fully homegrown, 100 percent Pasundan-product squad — the youngest in the country’s top domestic league — and winning anyway.

While impressive and inspiring, Indonesia’s sporting development shouldn’t have to be like this. State intervention, when done with intent and a shared vision of youth development and long-term growth, can lead the country to sporting stardom.

Indonesia needs to cultivate a sporting culture early on

If stories from athletes and a locally run community club aren’t enough to prove that Indonesia is severely lacking in grassroots development to cultivate sporting culture from the outset, then perhaps the numbers can shed another perspective. A 2022 global report on youth physical activity lists Indonesia as one of the worst-performing countries for children and adolescent physical activity. The Active Healthy Kids Global Alliance gave Indonesia an “F” grade across the board for its poor efforts in promoting overall physical activity and organized sports.

The overall grade draws on multiple Indonesian government surveys pooled together. Health Ministry data found just 12.9 percent of Indonesian adolescents aged 13–17 met the World Health Organization (WHO) benchmark of 60 minutes of daily moderate-to-vigorous physical activity on all seven days. Meanwhile, a separate Ministry of Youth and Sport survey data, sampling nearly 17,500 people aged 10–19, found that only 10.1 percent averaged more than 60 minutes a day.

The organized-sport grade is worse, highlighting the systemic failures in Indonesian grassroots development. The global report defines the indicator as capturing children who “officially engage in routine training activities and are registered members of sports clubs or related societies,” or, in other words, whether a child’s activity happens through an actual coached, sustained program.

On this measure, the global report cited a 2018 Statistics Indonesia (BPS) study that found 3.54 percent of Indonesian children aged 5–17 were members of a registered sports club. Six years later, in 2024, that figure had stagnated at 3.66 percent, remaining functionally unchanged. Whatever Indonesian politicians have been claiming about youth sports development over the past half-decade, it certainly hasn’t shown up in the data measuring it.

So, the reform is actually not that complicated

This is exactly where the state must step in to intervene if it wants international glory in the long run, across all sports.

The infrastructure-centered German model and the subsidized system of the local Pasundan community club are blueprints the Indonesian government should learn from. The goal should be to move the 3.66 percent needle to develop homegrown stars, not to row through the canals of Amsterdam, praying that one more player who doesn’t make the cut with the Dutch national team would instead wear the red and white jersey and help Indonesia make it to the World Cup.

It doesn’t take far to see what this priority can produce. Look at Kylian Mbappé, the best footballer of his generation, who grew up in a low-income Paris suburb called Bondy, playing for a municipal club subsidized by his local government. Apart from Mbappé, over 53 other players participating in this year’s World Cup grew up and were built through the city of Paris and its suburbs.

If Indonesia wants to produce its own Mbappé, it needs to create versions of AS Bondy that could exist in every city, suburb, regency, and village in the country. This means that government leaders must come to terms with growth that is quietly funded but sustainable, and a belief that results will show in the long run — for football, for volleyball, for climbing, and for every other sport currently being asked to make do with a fraction of what football gets, and still somehow outperforming it.

We’d like to hear from you: In your opinion, what is the lowest-hanging reform that the Indonesian government could do to improve the state of your favorite sport? Comment below or write your opinion and send it to connect@thinkpolicy.id!

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Online frenzy ensued soon after X (formerly Twitter) users discovered Israeli-owned restaurants, businesses, and community groups in Bali. This discovery prompted scrutiny and anger over how Israelis could open up an entire business, or even secure visas to enter the country, when the State of Israel isn’t even diplomatically recognized by Indonesia.

Social media users have also revealed that Israeli visa agency groups have been offering services to enter Indonesia for Israeli passport holders, suggesting a systemic practice.

Without an Indonesian counterpart to approve their documents, this practice would have been dead on arrival, and yet it is not.

Meanwhile, the Corruption Eradication Commission (KPK) made national headlines after it arrested then-Deputy Corrections and Immigration Minister Silmy Karim. The high-profile arrest was unknowingly timely — as if confirming that our immigration sector had been troublesome — since Silmy was arrested on charges of a graft scheme involving the extortion of illicit fees for visas and stay permits for foreign nationals in Indonesia.

Alongside the deputy minister, seven other ministry officials were arrested by the KPK, allegedly racking up Rp 145.6 billion over four years, from 2022 to 2026. In Bali, KPK investigators raided the island’s immigration office in connection with Silmy’s case, suggesting that his practices may have occurred there primarily.

While Silmy’s arrest and the online discourse are two separate instances, they are connected through the web of the problematic Indonesian immigration sector. The former is a formal authority whom the KPK claimed had misused its power for personal gain, while the latter is the presumed effect of the former’s corrupt practices.

But Indonesia’s immigration problem is far more complex than bribery and loopholes at the arrival gates. In this edition of The Reformist, we will uncover the patterns of graft in Indonesia’s immigration sector, its effects on foreign nationals entering the country, and question why this seemingly textbook public service has become a magnet for systemic corruption where the law becomes negotiable through layers of discretionary policies, payments for access, and a business model that rests on weak enforcement.

A playground for corruption

Despite Silmy’s high-profile arrest, his case is only the tip of Indonesia’s immigration corruption iceberg.

In the course of investigating Silmy’s syndicate, KPK cross-referenced the case with a financial intelligence report from the Financial Transaction Reports and Analysis Center (PPATK) that had been quietly accumulating evidence.

It found that 35 Immigration and Corrections Ministry employees had, between 2019 and 2025, controlled 96 bank accounts with a combined balance of Rp 366.7 billion. Only 3 percent of that sum came from their official salaries. The other 97 percent had to come from somewhere — and investigators believe it came from the same extortion scheme applied across years of permit applications.

KPK chair Setyo Budiyanto was explicit at Silmy’s press conference: the scheme operated with a clear division of labor, with some commanding, executing, collecting, and distributing. Commands flowed top-down. Money flowed bottom-up. Every Friday, Rp 100 million went to line Silmy’s pockets, routed through his subordinates, under the code name “malaikat” (angel).

Silmy’s case, however, is not a story of bad apples. Two months before Silmy’s arrest, Suhartono, the Manpower Ministry’s former director general for foreign workers’ placement, was convicted and sentenced to four years in prison.

Suhartono’s crime was structurally identical. He extorted illicit fees from agencies processing the mandatory work plan document that a foreign national must submit before a stay permit application can even begin. His syndicate ran from 2017 to 2025, accumulated Rp 135 billion across eight officials, and at its most brazen, also accepted a Toyota Innova Reborn and a Vespa Primavera as tribute.

Last year, the graft commission uncovered another expatriate extortion scheme within the Manpower Ministry, in which eight ministry officials were arrested for collecting bribes totaling up to Rp 53.7 billion between 2019 and 2024. This particular case unveiled the rotten core of the whole organizational chart behind this graft, as the collected fees were found to have been “redistributed” progressively, with lower-ranking officials and office boys taking a cut of the stolen money.

The ironic gray area between legality and graft

Despite systemic corruption at every layer of the permit process, the number of foreign nationals in Indonesia has conversely grown year on year. An estimate of 184,000 foreign workers was on the Manpower Ministry’s books in 2024, up from 168,000 the previous year. Numbers not only increased but skyrocketed, since pre-pandemic levels had fewer than 100,000 foreign workers residing in the country.

This highlights that foreign nationals and the companies employing them have largely absorbed the unofficial surcharges as a cost of doing business. As one Jakarta Post editorial article noted last year, many hiring companies and foreign workers “probably never knew they were paying bribes, or if they did, just dismissed it as a normal part of doing business in Indonesia.”

Regardless of how foreigners absorb these costs, the structural damage accrues to Indonesia. According to the 2020 World Bank’s Ease of Doing Business (EODB) index, Indonesia ranked 73rd globally, below countries such as Malaysia, Vietnam, and Thailand. Investors see this friction and inefficiency as a signal of where to allocate their capital. The more foreign investors see the rentier economy of immigration, the less likely they are to continue investing in Indonesia.

And while we acknowledge that the EODB is no longer considered the gold standard for measuring the investment climate today, it’s still a useful reference for showcasing how corruption in the immigration sector creates an unpredictable business environment. To support this claim, the chart above highlights how far Indonesia’s foreign direct investment (FDI) has lagged over the past 20 years, despite a strong recovery after the 1998 economic crisis.

From 2019 to 2024, Indonesia consistently hovered below 2 percent, while Thailand sharply bolstered its FDI after the 2020 pandemic, implementing sweeping reforms to boost FDI that were acclaimed by the Organization for Economic Co-operation and Development (OECD).

At the same time, Indonesia drew more criticism than praise from the international body. It highlighted how Indonesian “policymakers have yet to demonstrate their intention to establish a clear role for FDI in Indonesia’s development ambitions,” as well as “failing to live up to its potential as a host to FDI, despite its numerous attributes.”

When rules are applied arbitrarily and legal thresholds fluctuate depending on how much money changes hands, we’re basically telling foreigners who genuinely want to invest in Indonesia not to come here.

The workaround tourist economy

Going to Bali these days will have you marvel at the number of tourists enjoying the Island of the Gods. In 2025, close to 7 million tourists visited Bali, an increase of 9,7 percent from the previous year, with close to a quarter of them being Australian tourists.

But what about foreign businesses that have set up shop all over Bali without any explanation of their legal status?

Bali’s tourism agency estimates that over 4,000 accommodation units are listed illegally, out of the official total of 16,000. Last year, Bali Governor I Wayan Koster claimed that around 400 travel and vehicle rental agencies were illegally run by foreigners. “Many don’t even have offices, don’t reside in Bali, yet are still able to operate. This is clearly outrageous,” said Koster.

The formal foreign workforce may not care about Indonesia’s corrupt immigration process. But foreigners running informal businesses don’t just ignore it; they actively benefit from it.

Officially, foreigners are not allowed to own small-scale businesses. While this definition is loose, the threshold is clarified through Presidential Regulation No. 10/2021. In it, foreign nationals are only allowed to open businesses with a minimum capital contribution of Rp 10 billion or US$ 558 thousand at current exchange rates.

The Indonesian government has since updated this classification through Investment Coordinating Board Regulation (BKPM) No.5/2025, which reduces the required paid-up capital to Rp 2.5 billion or US$ 140 thousand, with the caveat that the minimum investment plan stays at Rp 10 billion.

It is unlikely that these foreigners, be they Israeli, Russian, or Australian, are spending over 140 thousand dollars, with a promise to increase it to 558 thousand dollars, to open a small restaurant in Bali.

To get around the formal requirements, foreign nationals have settled on two well-worn alternatives: marry an Indonesian (plus a few extra steps), or find one to front the business (a ‘nominee’).

The former is straightforward enough; a legal marriage to an Indonesian citizen secures a pathway to residency under immigration law.

But the latter has become a defining feature of Bali’s shadow economy, operating through what is commonly called a nominee structure, in which a foreign national partners with an Indonesian citizen who poses as the formal owner of the business or property while the foreigner retains beneficial ownership and economic benefit.

This grey area has not gone unnoticed. The current Balinese administration has publicly vowed to crack down on such practices. Last year, Bali Governor I Wayan Koster created a task force comprising the National Police, the Military, and local tourism associations to “discipline” the practice. The governor’s concern centers on the rentier dynamic these businesses create. Foreign operators, insulated from the full cost of doing business legally, drive up land prices and living costs for ordinary Balinese while contributing little to the formal tax base.

While Koster has been vocal, there has been little follow-up on how effective the task force has been in cracking down on this issue.

More recently, Koster pushed the national legislature to promulgate the Bill on International Private Law (HPI). The bill, if passed, would consolidate Indonesia’s currently fragmented legal framework on cross-border disputes, covering nominee property arrangements, mixed marriages, and inheritance conflicts, into a single statute, giving local authorities and law enforcement clearer ground to act on cases that today fall under legal uncertainty.

This one example alone tells us enough that corruption in the immigration sector is not a ‘bug’ in the system. Corrupt officials and their brokers design bottlenecks in immigration permit processing, which they then monetize. They did not just ‘stumble’ upon the opportunity by chance.

Multifaceted problems require multi-layered solutions

As is the case with many of Indonesia’s governance problems, the immigration issue won’t be solved simply by clean housing for the Immigration and Corrections Ministry or the Directorate General of Immigration at the Manpower Ministry alone. Solutions will only come when stakeholders from all levels of government take up responsibility and are convened to tackle the issue together.

Last year’s Manpower Ministry bribe case makes the point sharply. When graft commission purged the agency, they found that the illicit practice had been running since 2012, spanning three ministerial regimes. It’s hard to imagine how a scheme this structured, extracting bribes from foreign work-permit applicants for over a decade, could survive three changes in leadership without ever triggering an internal red flag.

What Silmy’s arrest, Suhartono’s conviction, and last year’s Manpower Ministry bribe scandal have in common cannot be simplified to routine graft. It is the entire architecture behind the country’s immigration governance that needs reform.

For illegal businesses, the remedy for all of this already exists in law, making the scale of the problem harder to excuse as an accident. Under Article 33 of the 2007 Investment Law, any agreement that puts share ownership in one person’s name for the actual benefit of another is void from the outset, making it legally nonexistent.

Article 146 of the Limited Liability Company Law lets a district court dissolve a company outright on a prosecutor’s or interested party’s petition if the company violates prevailing regulation or its founding deed is legally defective — which a nominee arrangement built to dodge foreign-ownership limits plainly is.

The tools to dismantle a nominee-run business exist from the district court up to BKPM in the capital. That thousands of these arrangements have been allowed to operate openly for years is a story about enforcement nobody chose to use, be it in Bali with their task force or higher up in the country’s law enforcement and executive branch.

An honest look into a dishonest sector

To provide an answer to Indonesia’s immigration problems is not what this article seeks to do. But what is clear from this discussion is that the issue is two-pronged: (1) formal authorities have misused their powers; (2) opportunity-seeking foreigners take advantage of the system’s lack of enforcement.

At the macro level, if immigration graft scandals continue to make national headlines, foreign investors may soon take their capital elsewhere as perceptions of Indonesia’s rule of law deteriorate.

At the micro level, tourists who have set up shop in the country’s tourist hotspot will continue to manipulate the country’s legal system so long as the system allows high-level public officials to abuse their discretionary powers.

Until these problems are confronted honestly, it shouldn’t come as a shock that Israelis have found a way to “infiltrate” Indonesian borders. Keep this up, and the system will keep producing exactly what it was designed to produce: a playground, as it has always been, for those who know how to play it.

What are your thoughts on this issue? Do you see these criminal syndicates and illegal businesses as a systemic problem or a simple case in need of a band-aid? Let us know in the comments what reforms should be made to Indonesia’s immigration sector!

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As the rupiah plummeted, Indonesians nationwide have organized protests expressing discontent with the government’s handling of the country’s worsening economy. Can Indonesia get out of this rut?

Economists have warned since last year to rectify the disproportionate budget for populist programs like the flagship Free Nutritious Meal (MBG) program. Some argue that the Indonesian central bank, Bank Indonesia (BI), should intervene to stabilize the rupiah. While they are all good recommendations, we thought it would also be a good idea to look back in history to see whether we have been through a similar crisis and how we handled it.

Turns out, once upon a time, we actually did rescue ourselves from an impending economic crisis.

In 2013, Indonesia faced an economic crisis after the United States Federal Reserve (‘The Fed’) signaled it would begin tapering its bond-buying program. This move sent shockwaves through the developing world, triggering capital outflows, currency depreciations, and tumbling financial markets in what became known as the Taper Tantrum.

Indonesia was among the hardest-hit, joining Brazil, India, South Africa, and Turkiye as countries dubbed the “Fragile Five” — a group perceived as most vulnerable to the Fed’s tapering policy. Incredibly, Indonesia made its way out of the “Fragile Five” in just seven months.

How did we do that? In this edition of The Reformist, we uncover how Indonesia lifted itself from the brink and what lessons the Prabowo administration would do well to heed today.

Growth under borrowed time

Much like the United States-Iran war, the Taper Tantrum was a sudden, unexpected phenomenon that caused global panic. After the 2008 global financial crisis, the US entered a Great Recession. The Fed then stepped in to revive the economy through Quantitative Easing (QE).

Given a deflationary US economy, everyone was afraid to spend. So, the Fed purchased assets and bonds from US commercial banks in exchange for dollars, thereby pouring more money into the US financial system. This, in conjunction with lowering the interest rate, led people to spend more, reviving the sluggish economy.

The effects of the US’s domestic policy reached Indonesia precisely because of this influx of new capital. With low interest rates, US dollar-holding investors began to look to emerging countries like Indonesia for higher returns on their investments.

From 2009 to 2014, external financing to Indonesia (bonds, equities, and loans) increased from US$ 24.7 billion to US$ 32.6 billion, peaking in the second quarter of 2013, just before the crisis ensued. Globally, emerging markets received close to half of all capital flows during this period, with roughly 90 percent of that concentrated in just eight countries; Indonesia among them. Critically, much of this inflow exceeded what Indonesia’s economic fundamentals could actually justify.

This led to what former Finance Minister Chatib Basri labeled a “false normal world.” The post-2008 flow came with an incredible wave of new capital. But even he understood that the numbers were unsustainable. During this period, the rupiah appreciated sharply against the dollar.

Additionally, the economist noted a lack of investment in the country’s export-oriented sector, with investment instead directed towards the highly volatile commodities sector. The former would have created industries meant for long-term economic growth (factories, manufacturing, traded goods), whereas the latter is a short-term cash grab that gets transferred out of the country as soon as commodity prices spiral. Indonesia was getting richer during this period, but doing so on a fragile foundation.

Normal, on the other hand, is a world without QE. When the Fed signaled in May 2013 that it was preparing to wind down its QE program, the world snapped back to normal very quickly. Investors who had been chasing returns in emerging markets suddenly had reason to bring their money back to the US.

For Indonesia, the consequences were swift and severe: the rupiah plummeted, the stock market collapsed, and foreign exchange reserves began to drain.

The Taper Tantrum had arrived.

Preventing monetary lift off

Just days before the Fed signaled that it would reverse the QE policy, Chatib Basri was appointed finance minister by then-President Susilo Bambang Yudhoyono (SBY) to oversee the appropriation of the 2014 state budget. But when the Taper Tantrum began, all focus shifted to handling an impending economic crisis.

The most crucial aspect of taming the market during the period was to prevent panic selling of the rupiah. The government did so by applying a variety of monetary policies through central bank intervention. BI pulled three levers in quick succession: hiking the policy rate, tightening liquidity conditions, and, critically, pulling back from excessive foreign exchange market intervention.

On the rate front, BI increased its policy rate by 175 basis points to 7.25 percent and raised the overnight deposit facility rate — the rate at which commercial banks receive for parking their money in BI — to 5.5 percent. Higher interest rates make holding rupiah-denominated assets more attractive to investors, since they now earn better returns, slowing the rush toward the exit.

The intuitive assumption is that a weakening rupiah is driven by businesses and individuals rushing to buy dollars to avoid a crash. This is true if those dollars leave Indonesia. But if the dollar remains within the country’s banking system, the pressure on the exchange rate is cushioned, making it easier for the central bank to manage.

To keep dollars in the system, BI introduced biweekly foreign-exchange swap auctions with commercial banks, giving businesses a way to hedge their dollar exposure without physically taking dollars out of the country. It also gave banks broader maturity options, or the liberty to choose how long they would like to park their US dollars with BI, making it more attractive to keep dollars in the Indonesian financial system.

The most counterintuitive decision, however, was what BI chose not to do. Before the crisis even occurred, BI had been burning through its foreign exchange reserves to artificially prop up the rupiah.

Chatib, along with the then-trade minister, Gita Wirjawan, argued and eventually convinced President SBY that this had to stop. The rupiah needed to be allowed to weaken in line with market fundamentals, rather than be defended at great cost.

Once BI stepped back from excessive intervention, reserves began to stabilize and eventually recover, climbing from a low of US$ 92 billion in August 2013 back to US$ 99 billion by the end of December and US$ 105 billion by April 2014.

But the decision to let the rupiah weaken was not merely about conserving reserves. It was also a deliberate policy tool in its own right. Economists call this expenditure switching, a policy in which the government attempts to shift consumption of foreign goods towards domestic goods. The way it works is that when a currency weakens, Indonesian exports become cheaper for foreign buyers, making them more competitive in world markets. At the same time, imports become more expensive for Indonesians, nudging domestic consumers toward local products.

One prudent lesson from the Taper Tantrum crisis was that BI could wield its monetary policy decisively, even if it meant sacrificing short-term economic growth.

Today, there is a perception that BI is under pressure to support the administration’s political agenda. This is evidenced by the “burden-sharing” arrangement, in which BI revives pandemic-era bond purchases to finance populist programs, effectively amounting to debt monetization and fiscal dominance. Last year, economists warned that this scheme could threaten BI’s independence, currency stability, and investor confidence.

And then there is the recent revision to the Financial Sector Development and Strengthening Law (UU P2SK), which now expands BI’s role to support economic growth. But even before UU P2SK was passed, BI had cut the policy rate three times last year, from 5.75 percent at the start of the year to 4.75 percent by the end of the year. Much like what the Fed did: with a lower interest rate, borrowing becomes cheaper, but saving becomes less attractive.

This is good for a pro-economic growth administration like Prabowo’s, as more capital can be used to support the government’s policy agenda, whether flagship or infrastructure programs. But it can be incredibly detrimental to the rupiah’s strength, as the currency becomes less attractive to hold for investors. What serves the government’s growth agenda, however, does not necessarily serve the rupiah.

Now, everyone has felt the effects of a weakened rupiah, despite President Prabowo’s claim that “villagers do not use the dollar”. Importing foreign goods has become increasingly expensive, raising the prices of everyday staples and — widely covered by the media recently — pharmaceutical products, impacting public health services and people with chronic illnesses.

After the US-Iran war erupted in February, BI still maintained the 4.75 percent policy rate through May. It was only after the rupiah exceeded Rp 18,000 and persistent external pressure that BI decided it was time to intervene in the interest rate. On 20 May, BI raised it to 5.25 percent, and only a week ago to 5.5 percent.

As soon as the hikes were implemented, the rupiah slowly recovered and dropped below Rp 18,000, signaling a return of market confidence and highlighting the need for monetary prudence amid geopolitical uncertainty.

Ripping the necessary fiscal band-aid

Monetary policy alone, however, would not have been enough to close the wound. During the Taper Tantrum, the deeper structural problem was Indonesia’s current account deficit (the difference between what the country earned from exports and what it spent on imports), driven specifically by fuel subsidies.

The government was subsidizing petrol and diesel prices so heavily that it was encouraging overconsumption, inflating demand for oil imports, and blowing out the budget. By 2013, if left unchanged, internal Finance Ministry estimates projected that the budget deficit would balloon to 5 percent of GDP, well above the 3 percent legal ceiling.

In a meeting with President SBY, Chatib lobbied that the current account deficit must be addressed through expenditure reduction, namely by reforming fuel subsidies. This was highly unattractive at the time, especially with the 2014 presidential elections right around the corner. The vast majority of Indonesians use petrol daily for personal and business consumption, so even a slight price hike would trigger a political uproar.

But the SBY administration was brave enough to rip the band-aid. In June 2013, following heated parliamentary debate and nationwide protests, the prices of subsidized petrol and diesel were increased by 44 percent and 22 percent, respectively. To cushion the blow, the government directed Rp 9.3 trillion from the savings toward direct and conditional cash transfers to 15.5 million low-income households, as well as Rp 7.2 trillion towards rural infrastructure spending.

In his testimony, Chatib cited a 2012 World Bank report which estimated that a fuel price increase of roughly Rp 1,500 per liter would push an additional 0.7 percent of Indonesians into poverty. Thus, fuel subsidy reform, in any capacity, has to be backed with progressive shock measures that take lower-income citizens into account.

Fast forward to 2026, and similar policy efforts seem to be underway in a poorly designed manner.

Just a few days ago, state energy company Pertamina hiked the price of non-subsidized petrol from Rp 12,300 to Rp 16,250 overnight. This followed the previous price increase, which occurred a couple of months earlier in March.

For economists, the increase was expected, given that the price of crude oil rose sharply from around US$ 57 per barrel at the start of the year to over US$ 120 per barrel at the peak of the US-Iran War in April. This is reflected in the state budget, which projected only that crude oil prices would hover between US$ 70 and US$ 95.

Yet, even if it was to be expected, public communication for this policy has been lackluster. The price increase happened overnight, without warning, and came not from the President but from an announcement by Pertamina’s subsidiary, Pertamina Patra Niaga. Talks of a new direct cash transfer program also came from National Economic Council (DEN) head Luhut Pandjaitan, who was called to the Presidential Palace for a completely different agenda.

Meanwhile, at his latest public address, President Prabowo showed no qualms about mentioning the price hike. Instead, he continued to mock dissent by calling on attendees to ignore those who snide at the government, insinuating his infamous rhetoric about foreign stooges.

Like Prabowo, then-president SBY was not brave enough to announce the price increase himself. But many of his ministers stepped in to assure the Indonesian public that they would be compensated, including Finance Minister Chatib Basri and Coordinating Economic Affairs Minister Hatta Rajasa.

Notably, the SBY administration had already warned the Indonesian public about a price hike for months, even before the Taper Tantrum, which assured the finance minister that fuel subsidies had to go.

They understood that managing a crisis was as much about managing perception as about managing the budget, especially for a politically sensitive issue like the fuel subsidy.

That lesson, it seems, has not made the trip from one administration to the next.

Lessons for the present day

Learning from this experience, Indonesia should be able to overcome today’s economic spiral despite widespread signs of pessimism. The key, however, lies in whether the current administration is willing to show enough humility and take the necessary steps to address systemic policy gaps.

As Chatib employed policy mechanisms in 2013, the same framework can be applied today to reverse the trend. In fact, in his recent public appearance at the Grab Business Forum, he provided a glimpse into the country’s current economic outlook.

He mentioned that the role of the finance minister is simple: either to earn more revenue, spend less, or borrow more money to ensure the stability of the Indonesian economy. Easier said than done, but entirely possible given the government’s ability to stabilize the economy a decade prior.

In his diagnosis, Chatib also pointed to Indonesia’s rising Credit Default Swap (the premium a lender pays to protect itself against the risk that a sovereign entity defaults on its loans) well before the war between the United States and Iran erupted. Take a look at this graph:

At the start of January this year, the CDS stood at around 68 basis points (bps). By the end of February, right before the US-Iran war started, that number jumped to 83 bps, up 14 bps, or roughly 22 percent.

This meant that even before the war brought about an oil crisis, foreign lenders had already begun to lose confidence in how the Indonesian government was carrying out its policies, to the extent that they were willing to pay a higher premium to protect themselves against the risk that the government might fail to repay its loans.

But the CDS serves more as a perception-based insight than as a reliable reflection of whether Indonesia will spiral into a great recession. It means the higher the CDS, the more foreign investors perceive Indonesia as riskier to invest in than before; nonetheless, they remain willing to invest in the country if they are better protected.

For the government, as Chatib explained, the rising CDS cannot be attributed to external factors alone. Rather, it is a reflection of questionable domestic policies that have strained capital trust.

External shocks are one thing. But what matters more is that investors want to see clean and prudent governance. Instead, they see the problematic implementation of the state-budget-straining Free Nutritious Meal (MBG) program, the rent-seeking tendencies of the centralization of commodity exports, and the increasingly prevalent criminalization of policymakers.

The Taper Tantrum was just as unexpected as the US-Iran War. Yet the government was willing to make unpopular decisions quickly and communicate them honestly to ensure long-term stability of the Indonesian economy.

In 2013, Indonesia surprised the world. Whether it can do so again depends less on the complexity of the policy tools available and more on the political will to use them.

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Nine months ago, a collective of more than 400 Indonesian economists, under the Alliance of Indonesian Economists (AEI), published seven demands directed at the administration of President Prabowo Subianto just before he completed his first full year in office.

Among other things, the AEI questioned President Prabowo’s unwillingness to evaluate his populist Free Nutritious Meals (MBG) and Red and White Village Cooperatives (KDMP) programs, which have continued to receive his full political backing despite their evidently problematic conception, implementation, and budget allocation.

Nine months later, these demands seem to have fallen on deaf ears. The Rupiah has hit a historic low. The IHSG contracted by 35 percent in the past five months. The central bank’s independence has been put under the microscope, all while we’re witnessing, in real time, how state intervention continues to choke the economy.

Amid the chaos, the President, on the other hand, has just returned from his 54th overseas trip in only 19 months since assuming office.

What is going on in Indonesia?

To answer that, we thought it’d be a good idea to look back at the AEI’s seven demands from nine months ago. We think they have remained relevant and, most importantly, might just be what the government needs to course correct:

1. Comprehensively rectify budget misallocations and reallocate them to policies and programs fairly and proportionally.

2. Restore the independence and transparency of state institutions

3. Stop state dominance that risks weakening local economic activity

4. Deregulate policies, permits, and licenses, and simplify bureaucracy

5. Prioritize policies that address inequality across its various dimensions.

6. Restore evidence-based policymaking and technocratic decision-making processes, and eliminate populist programs that undermine fiscal stability and prudence.

7. Improve the quality of institutions, build public trust, and promote sound governance of state administrators and democracy.

In this edition of The Reformist, we are keeping tabs on the government’s seven economic sins and how these seven demands could’ve (and would’ve) prevented the fiasco unfolding before our eyes today.

1. Gluttony: Budget misallocations

The AEI’s first demand is for the government to rectify budget misallocations across the state budget, most notably in the costly MBG and the President’s other flagship programs.

When the demand was made last September, Indonesians were only just beginning to feel the effects of a sweeping political and economic restructuring under the Prabowo cabinet. Through Presidential Regulation No. 1/2025, the government imposed widespread austerity cuts that gutted longstanding budget transfers to local governments, slashed ministerial allocation, and wound down several programs inherited from the previous administration.

Much of the fiscal space freed by these cuts was then redirected toward Prabowo’s pet projects. MBG bore the most visible price tag. In 2025, it received an initial allocation of Rp 71 trillion, already a substantial commitment for a program still finding its footing.

This year, that figure has skyrocketed to Rp 335 trillion, before being cut down to Rp 268 trillion recently. Mixed in the ensuing controversy was MBG’s classification as an education expenditure, a budget category constitutionally required to receive at least 20 percent of total state spending. In practice, this means a substantial share of Indonesia’s education budget is now spent on a program that has been spoiled by food poisoning incidents, rent-seeking, and, most recently, the arrest of Dadan Hindayana, Head of the National Nutrition Agency (BGN), by the Attorney General’s Office on corruption charges.

While the government has made some concessions, the broader fiscal posture has changed little, if at all. Local transfer funds (TKD), which finance essential public services across the archipelago, remain under pressure, while the KDMP pushes ahead with its rollout across tens of thousands of villages, drawing on both village funds and state financing despite limited evidence of economic impact to justify such a large-scale intervention.

Nine months since the AEI made their demands, the populist burden on the state budget has not diminished. So far, it has merely been rearranged.

2. Envy: Undermined institutional independence

The AEI’s second demand is for the government to restore the independence of state institutions. Back when it was written in September 2025, concerns about Bank Indonesia (BI), the country’s central bank, had begun to surface. From burden-sharing arrangements during the COVID-19 pandemic to political pressure for lower interest rates, debates around BI’s independence are hardly news, as Prabowo never shied away from publicly pushing the envelope further.

In many instances, the administration repeatedly signaled its expectation that BI would “support” Prabowo’s 8-percent economic growth target—even amid a weakened rupiah and monetary deterioration. When Prabowo appointed his nephew, Thomas Djiwandono, as BI’s Deputy Governor, economists and market observers saw it as an unnecessary politicization of an institution whose credibility rests heavily on its perceived independence. On 4 June 2026, the House of Representatives (DPR) passed an amendment to the P2SK Law, which extends BI’s responsibilities to include supporting economic growth and job creation, in addition to maintaining monetary stability.

A dual mandate is not unprecedented. The US Federal Reserve, for example, balances price stability and employment objectives. But this is where context matters most: in an administration that has already placed a family member within the leadership of its central bank, concerns over institutional independence are inevitable.

Yet this story extends beyond the central bank. The independence of many other state institutions has weakened. For example, the Corruption Eradication Commission (KPK) is a shell of what it once was before then-president Joko Widodo amended the KPK Law in 2019. In turn, the AGO has emerged as the primary anti-corruption law enforcement. From the Rp 200-trillion Pertamina adulterated fuel scandal and Tom Lembong’s sugar import case to the recent Nadiem Makarim’s Chromebook trial, the AGO has steadily positioned itself at the center of some of the most prominent graft investigations of recent memory.

As the AGO’s role expands while the KPK weakens, questions arise over who gets investigated, which cases are prioritized, and how much influence political considerations have on law enforcement.

Nine months since the AEI made their demands, patterns of institutional intervention have only become clearer. There is no question that institutions exist, but can they really keep political leaders in check when the lines have blurred?

3. Lust: Unrelenting market interference

The AEI’s third demand is for the government to stop state dominance from crowding out the local economy. Today, it’s clear that they have chosen an entirely different path.

Rather than fulfilling its role as a regulator, the government has made it clear that they want a piece of the market share. Through the military, the police, state-owned enterprises, and flagship programs, the government has significantly increased its footprint in Indonesia’s economy.

The MBG program provides the clearest example, through the Nutritional Provision Service Unit (SPPG) kitchens serving as all-in-one intermediaries responsible for procuring, producing, and distributing meals to schools. The rapid expansion of SPPGs has created appealing opportunities for rent-seekers who view MBG’s lucrative contracts and minimal oversight as a breeding ground for politically connected or state-affiliated actors. The police, for example, own over 1,179 SPPGs as of February this year. Meanwhile, the military had already claimed 452 branches by the end of 2025, with a stated ambition to scale to 2,000 kitchens this year.

Politicians have not been shy about participating either. Late last year, the daughter of a South Sulawesi legislator was found to have registered ownership of 41 SPPG kitchens, despite regulations limiting ownership to a maximum of ten units per individual.

The market raids by political and state-linked actors go far beyond MBG. Both the police and the military have been spotted cultivating farms at food estate program sites and building KDMP offices, marking further encroachment by security forces into the depths of local economic activities.

At the national level, the same pattern emerges through Danantara, Indonesia’s sovereign wealth fund, which consolidated all state-owned enterprises (SOEs) under its management and holds over USD 900 billion in assets. Despite the sovereign wealth fund label. In reality, the agency has served more as a means of circumventing the state budget to advance the administration’s political goals with little to no scrutiny.

Late last year, it injected Rp 23.67 trillion into the chronically loss-making Garuda Indonesia, reducing the airline’s public float from 27 to just 7.96 percent. More recently, Danantara confirmed it had acquired a minority stake in GoTo, with reports suggesting an ambition to become a majority owner. As of now, the greater concern is that accountability mechanisms remain weak relative to the scale of the assets they manage.

The latest and perhaps most brazen example is PT Danantara Sumberdaya Indonesia (DSI), which now requires all exports of palm oil, coal, and ferroalloys to be routed through a single state intermediary.

The government argues such an arrangement is necessary to combat under-invoicing and improve oversight of strategic commodities. But we have seen how this played out before—most notoriously through the New Order’s Clove Buffer and Marketing Agency (BPPC), where crucial commodities were controlled by not only the state, but by then-president Suharto’s family and their cronies, to enrich themselves at the expense of local producers and the broader economy.

Nine months since the AEI made their demands, the concern is no longer about how much the government interferes in the market, but rather that it has increasingly become the administration’s default playbook to fulfill its unchecked political ambition.

4. Pride: Half-hearted deregulation

The AEI’s fourth demand is for the government to deregulate policies, permits, and licensing requirements that have long impeded a healthy business and investment climate in the country. They specifically criticized the increasingly costly and ineffective Local Content Requirement (TKDN) policy, which President Prabowo has publicly acknowledged as too rigid.

In September 2025, the Industry Ministry issued Ministerial Regulation No. 35/2025, which overhauled the existing TKDN certification framework. The new regulation simplifies the certification process, extends the validity of certificates, and introduces additional incentives for firms that build domestic production facilities, employ local workers, and establish local supply chains.

While this was a step in the right direction, little has been done to shift perceptions. TKDN remains a point of contention; for example, when the United States explicitly sought an exemption in the US-Indonesia trade agreement, it suggested that foreign investors remain unconvinced.

Most importantly, TKDN was never the root problem. It is that individual regulations are implemented inconsistently, creating legal uncertainty. When the China Chamber of Commerce sent a letter addressed to President Prabowo expressing alarm over the deteriorating business climate in Indonesia, they cited policy uncertainty, prevalent extortion by third-party actors, and excessive interference by law enforcement authorities as major obstacles to operating in Indonesia.

The letter was damaging enough that the head of the National Economic Council, Luhut Binsar Pandjaitan, felt compelled to publicly apologize to investors for the current state of the Indonesian economy during a speech in Singapore. If a senior government official has to come out of his way to offer a public apology, then the gap between the promise of deregulation and realities on the ground could not be more apparent.

Nine months after the AEI made their demands, investor confidence remains fragile, while the government seems unwilling to address the broader governance problems that could heal that trust.

5. Greed: Widening inequality

The AEI’s fifth demand is for the government to introduce policies that seriously address inequality across its many dimensions. Indonesia’s labor market tells the most urgent part of that story. Between 2019 and 2025, Indonesia lost more than 11 million members of its lower-middle class, with only 416,000 new members joining the middle and upper classes. In other words, for every Indonesian climbing the economic ladder, way more fell through the cracks.

On top of that, the informal sector has become increasingly dominant—making up 57 percent of the workforce—meaning more people live on an unsteady paycheck and face greater economic vulnerability. It certainly doesn’t help that only 15 percent of those informal workers are covered by BPSJ Ketenagakerjaan, Indonesia’s social protection program.

Against today’s backdrop, the lack of social protection represents perhaps one of the most glaring policy failures of past and current administrations. The government’s decision last year to lower BPJS Ketenagakerjaan monthly premiums for informal workers from Rp 16,800 to Rp 8,400 was expected to incentivize enrollment but fell short of addressing the real problem at hand.

Such a habit of choosing the ‘easiest’ way out when faced with complex problems—as opposed to addressing the structural gaps—has unfortunately become what most, if not all, of us expect of this administration.

The AEI’s demands also touched on energy subsidies policy, where—again—this administration has chosen the path of least political resistance. Rather than reforming the subsidy regime—which disproportionately benefits higher-income households that own more vehicles than those who actually need a leg up—the government has left subsidized fuel prices untouched despite well-established concerns about Indonesia’s ability to keep the charade up amid escalating geopolitical tensions that continue to disrupt global energy supply chains.

While reforming fuel subsidies has always been politically tricky, this administration has made no effort to even consider targeted policy mechanisms, such as direct cash transfers or a shock-treatment scheme for lower-income households. It’s disappointing, to say the least, but hardly surprising.

Nine months since the AEI made their demands, we’re still at an impasse. The government has no coherent strategy and, worse, no sense of urgency in communicating its plan of action. It’s even more ironic that this administration comprises the largest cabinet in our history.

Who knew that more isn’t always merrier?

6. Sloth: Impulsive policymaking

The AEI’s sixth demand is for the government to abandon its impulsive policymaking and return to evidence-based, consultative, iterative, and technocratic processes. Nine months on, the diagnosis has not only persisted, but arguably worsened. More policies have instead emerged seemingly on a whim without rigorous deliberation.

Prabowo’s hasty policymaking is perhaps best illustrated by Danantara, which was announced one month into his presidency despite never being mentioned during his presidential campaign. Within four months, Danantara was granted authority over one billion dollars in Indonesia’s state assets before its governance framework was even close to being properly established.

When Prabowo announced the export body DSI two weeks ago, we saw the same pattern reemerge. With no buildup whatsoever, the new agency was set to start operations this month. Days prior, the government had just rolled out a new policy requiring exporters to retain their earnings in state-owned banks and convert 50 percent of those funds to rupiah. Whimsical policies like these make it hard to blame the Chinese investors for what they complain about in their letter. It’s almost like this administration is on a mission to always double down on something where all the signs say they’re wrong.

Whether Danantara ultimately succeeds or not is besides the point. Entrusting any newly formed institutions with such extraordinary powers is simply preposterous.

Many have also pointed out Prabowo’s comical tendency to promise to include a new foreign language in the school curriculum based on the country he visits. First came Portuguese, which he said after meeting the Brazilian President Luiz Inácio “Lula” da Silva, and then, more recently, French, during his latest visit to meet President Emmanuel Macron in Paris.

Nine months since the AEI made their demands, we continue to be served new policies that seem to be all vibe with no evidence to back it up. But the scariest part of it all is that while it took President Prabowo less than two years to do all this, undoing the damage won’t be as speedy—that is, if we learn anything from what has transpired so far.

7. Wrath: Broken public trust

The AEI’s seventh demand is for the government to improve institutional quality, strengthen democratic governance, and repair public trust. On this front, the government has done very little to quell concerns.

Since taking office, President Prabowo has personally presided over a broad expansion of the military’s role in his administration. Among other things, he has deployed TNI personnel not only for policing tasks but also for running SPPG kitchens, building physical infrastructure, and planting his food estate dreams.

The broader democratic picture offers no reassurance. Discussions about eliminating direct local elections, crackdowns on freedom of speech, and unempathetic public communications leave public trust in the government hanging by a thread.

In mid-March, a group of military intelligence personnel attempted to assassinate human rights activist Andrie Yunus by attacking him with corrosive acid. Andrie has been a well-known critic of the military’s encroachment into civilian affairs since Prabowo took office. When the online media outlet Magdalene published its investigation of the case, the government was quick to restrict access to it—only to walk it back a few days later amid loud public outcry.

Over on the police side, things have not exactly been better by any means. While the military has been the subject of stronger scrutiny as of late, the government’s lack of urgency in advancing police reform in the aftermath of the killing of Affan Kurniawan during the August 2025 protest has only strained public confidence further.

Yet perhaps the most revealing of it all is how the government—particularly President Prabowo—has chosen to deflect any and all criticisms, from “villagers don’t use the dollars anyway” to “why don’t you just escape to Yemen then”.

Nine months after the AEI made their demands, public input has not only been dismissed but also often ridiculed or even penalized. Without accountability, the government risks losing sight of its most crucial duty: to listen.

Where to go from here?

Perhaps what is most concerning is not what other bad policies the government has come up with, but the extent to which it is willing to defend its policies through coercive and intimidating tactics rather than step away from its ivory tower to listen carefully.

That none of the economists’ concerns have been meaningfully acted on nine months later is, in many ways, a direct consequence of this. It is no secret at this point that channels of communication to the President are extremely difficult under this current administration. Information either comes from an individual close to the President or goes through a rigid, selective information tunnel through Cabinet Secretary Teddy Indra Wijaya.

The effect of hollowing out dialogue is exactly what is happening to the country right now. Investors, markets, and civil society at large are reluctant to take part in a society that fails to listen to its people. Reversing the Rupiah’s downfall or revising the MBG may take time, but if the government is truly serious about upending the current situation, it may need to lower its ego and allow room for dissent, sending the right signal that change is possible.

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Economists at Bank Mandiri estimate that one out of three Indonesians (86 million people) belongs to the “transitional middle class.” They’re not poor, but also not resilient enough to overcome shocks, according to former finance minister Chatib Basri, who dubbed the lower end of this economic class ‘fragile’. A job loss, for example, could instantly send them into poverty.

Between 2019 and 2025, Indonesia lost over 11 million of its lower-middle class, with only 416,000 new members in the middle and upper classes. What happens to those 10.5 million whose mobility went on a downward trajectory instead?

One might think—no worries, we have a social safety net. But what’s the catch?

The Workers Social Security Agency (BPJS Ketenagakerjaan) is Indonesia’s social security agency. It follows a provident fund scheme in which both employers and employees contribute a portion of their wages to the agency, which then manages the pooled funds through investment. In return, members are eligible for five different protections: old age (JHT), pension (JP), death (JKM), job loss (JKP), and work-related injury (JKK).

As of this month, only 30.6 percent (47.4 million) of Indonesia’s 154.91 million total workforce is enrolled in BPJS Ketenagakerjaan. This means around seven out of ten workers remain vulnerable to the sudden, unfortunately imminent threats of economic shocks, especially now as the Rupiah continues to plunge.

Unlike its healthcare counterpart, BPJS Kesehatan, BPJS Ketenagakerjaan does not provide universal coverage if a worker loses their source of income.

Despite sharing the same BPJS name, they are two separate institutions with fundamentally different problems. BPJS Kesehatan is grappling with mounting annual deficits, while BPJS Ketenagakerjaan faces the opposite challenge: a coverage gap, with too few Indonesians enrolled in the program despite the country’s massive labor force.

Without proper reforms and stronger political will, the agency will begin to collapse financially under the weight of what some see as negligence. In this edition of The Reformist, we will uncover the history behind Indonesia’s social security system and why it’s a ticking time bomb.

How it started

Before BPJS Ketenagakerjaan came into existence, there had been attempts to establish a nationwide social security system. The earliest came shortly after independence, when the infant government passed a law in 1947 to protect workers from work-related injuries and death. Little is documented about compliance during this era, but the passage of this law demonstrated that the need for such protections was recognized as a priority from early on.

Under the New Order regime, the foundations of a more systematic program emerged. Then-President Suharto issued Government Regulation No. 33/1977, which established the Workers Social Insurance (Astek) program and required all private companies and state-owned enterprises (SOEs) to enroll their employees. It followed in the footsteps of PT Taspen, Indonesia’s first-ever social security fund exclusively made for civil servants, established in 1963.

Astek was renamed Jamsostek after the government enacted Law No. 3/1992 on Workers Social Security.

During this era, compliance and coverage were very minimal and non-beneficial for active members. According to a 2003 report by SMERU Research Institute, only 16.1 percent of Indonesia’s workforce was covered by Jamsostek by 1998.

Both employers and employees reported unsatisfactory service, including pension payouts equivalent to just 7 percent of a worker’s previous wage and the same old, sluggish bureaucracy that delays claim requests. Beneficiaries perceived Jamsostek obligations more as a hidden tax than a safety net, making the social security system unattractive.

It wasn’t until after the New Order regime was toppled that social security reforms became a priority in political discourse.

The reforms were reflected in the Constitutional amendments:

• The second amendment in 2000 added Article 28H(3), which recognizes social security as a fundamental right of every citizen; and

• The fourth amendment in 2002 further strengthened this commitment through Article 34(2), which mandates that the state establish a social security system to preserve human dignity for all.

Two years later, then-President Megawati Soekarnoputri fulfilled this mandate by passing the 2004 Social Security Law. But its implementation did not materialize until 2011, after the Constitutional Court ruled in favor of a petition filed by a federation of labor unions. The reform finally took place through the passage of Law No. 24/2011 on Social Security Administration, transforming Jamsostek into BPJS Ketenagakerjaan.

In 2014, both BPJS Ketenagakerjaan and BPJS Kesehatan began operation. The latter saw immediate success, enrolling over 140 million Indonesians upon launch and achieving over 95 percent population coverage today, while BPJS Ketenagakerjaan lags behind.

How sluggish progress exposed glaring problems

With sweeping reforms in place, it is a shame that BPJS Ketenegakerjaan has retained the same sluggish coverage problem seen during the New Order regime. Of its 47.2 million active members, 26.65 million (56.5 percent) are formal workers, 13.86 million (29 percent) are informal workers, 6 million (13 percent) are seasonal construction workers, and the remaining 691 thousand (1.5 percent) are migrant workers.

BPJS Ketenagakerjaan today covers only 30.6 percent of the total workforce, meaning coverage has increased by only 14.5 percentage points 28 years into Reformasi. This exposes two glaring problems:

I. The neglected informal sector

Although BPJS Ketenagakerjaan is most often associated with traditional employer-employee arrangements, it also covers informal workers through a separate enrollment track. Ride-hailing drivers, small and medium entrepreneurs, food stall workers, and virtually any occupation without a formal contractual agreement fall within this category.

With over 85 million (55 percent of the workforce) working in the informal sector, BPJS Ketenagakerjaan covers only 13.89 million today. That is less than two out of every ten, whereas these informal workers are the most vulnerable to economic shocks, given their income uncertainty. Unlike BPJS Kesehatan, which offers contribution assistance (PBI), BPJS Ketenagakerjaan offers no subsidies whatsoever.

With membership strictly tied to monthly premiums, social security protection remains a privilege for the large majority of informal workers. On top of that barrier to entry, those who fail to pay their dues also lose their protection altogether.

It certainly doesn’t help that there is persistent confusion between BPJS Ketenagakerjaan and BPJS Kesehatan, as many Indonesians assume the two are the same or are completely unaware of the difference.

But it’s not that they are not trying. Under Government Regulation No. 50/2025, monthly premiums for informal workers were slashed to Rp 8,400—a 50-percent reduction from the previous rate of Rp 16,800—to incentivize enrollment. The agency has also launched grassroots dissemination programs to increase membership, aiming to reach 63 million members overall by the end of this year.

How much of that targeted increase comprises the informal sector is a test of its commitment to protecting informal workers.

II. Non-compliant employers get away with it

With around 26.65 million (excluding construction and migrant workers) of 59.93 million formal workers enrolled, more than 55 percent of Indonesia’s formal sector remains without a safety net. This is despite the 2011 law obligating employers to register their employees with the agency or risk a hefty fine of up to Rp 1 billion or up to eight years of imprisonment.

We now get to the common denominator of virtually every good policy in Indonesia: weak enforcement. But political will only explains half of the root cause. In 2021, the Ombudsman flagged BPJS Ketenagakerjaan for failing to expand membership, citing both poor administrative performance and a shortage of personnel within the Manpower Ministry to address non-compliant employers.

The limited number of labor inspectors within the Ministry of Manpower, who only operate at the provincial level, results in weak supervision and inadequate handling of public complaints. This, in turn, leads to low compliance among employers in enrolling their workers as BPJS Ketenagakerjaan beneficiaries,” said Hery Susanto, a member of the Ombudsman.

By the end of 2025, the agency’s supervisory council announced that more than 523,000 employers had yet to register themselves and their employees with BPJS Ketenagakerjaan. On top of all that, over 490 thousand of the 878 thousand registered employers (55.8 percent) do not fully participate in all five programs offered by the agency.

If the government is serious about creating a protected and strong workforce, then both BPJS Ketenagakerjaan and the Manpower Ministry must take firmer actions against non-compliant employers. Otherwise, the social security system is at risk of structural failure, which leaves everyone worse off.

The time bomb’s ticking

Without reforms aimed to address these structural challenges, it won’t be long until BPJS Ketenagakerjaan hits its ceiling and eventually implodes. In his book, Paradoks Indonesia (The Paradox of Indonesia), President Prabowo Subianto seems to be aware that the so-called demographic dividend is as much a challenge as it is a ‘bonus’.

That bonus is projected to peak in 2045, after which Indonesia’s population will begin to age rapidly. As is true in many countries that have had their bonus, failure to build during the crucial period before the peak leaves them at an impasse, trying to construct a welfare state and pay out benefits at the same time. What is unfolding in France, with its mature pension system buckling under aging demographics, illustrates this scenario vividly.

Indonesia could be doomed to repeat France’s pattern unless we begin expanding social security coverage. Reports have revealed that, in its current form, BPJS Ketenagakerjaan is on track to incur financial deficits as early as 2038, a few years before Indonesia’s demographic bonus runs its course. As the current labor force ages, many more claims will be filed for BPJS Ketenagakerjaan payouts while it remains without a sustainable financial base.

The JKM program, for example, is projected to have a claim deficit of over 124 percent and rising by 2029, while JHT—the agency’s most expensive premium, collecting 5.7 percent of a worker’s monthly salary—is facing scrutiny amid an aging workforce.

Although the program’s name of old age security suggests that money would only be paid at old age, the agency allows workers to fully withdraw their JHT in a lump sum upon resignation or layoff. In 2023 alone, more than 1 million workers withdrew funds from their JHT accounts, either partially or completely. The Ministry of Finance projects that 100 million workers will be left with no pension by 2038.

Universitas Gadjah Mada’s labor expert, Qisha Quarina, says that there is currently no “comprehensive secondary data yet measuring whether the disbursement of JHT or other benefits genuinely improves the long-term welfare of their recipients.” As it stands, the JHT program serves more as a short-term severance safety net than a long-term retirement protection.

This is all happening despite the agency also administering separate protections for job loss (JKP) and pension (JP).

Towards a protected labor force

Manpower Minister Yassierli has framed these challenges in terms that gesture at the right diagnosis—that BPJS Ketenegakerjaan must be inclusive and equitable, measured by an increase in membership. But increasing membership alone, without improving enforcement against non-compliant employers, raising mass awareness among informal workers, and revisiting the agency’s fundamental policies, can only go so far.

Vice President Gibran Rakabuming Raka promised 19 million jobs during the 2024 elections campaign. President Prabowo Subianto has, on many occasions, positioned himself as an ally of the country’s labor union and workforce, including by hosting his own May Day rallies at the National Monument last year and this year. But promises of job creation and rally-day handouts cannot be the end of the story.

Are you a part of the protected or unprotected workforce? What do you think about BPJS Ketenagakerjaan - and how can it be made better, in your opinion?

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Last year, Jakarta topped the list of the world’s most populous cities, according to the United Nations (UN), with a population of 42 million residents, beating major metropolises like Tokyo, Shanghai, and New Delhi.

But this number includes people living in satellite cities surrounding the capital. In reality, only 12 million actually reside in the administrative region of Jakarta, and the rest are commuters who enter and exit the metropolitan area daily to work. They are victims of urban sprawl, driven out of Jakarta by the rising cost of housing.

Kompas estimates the average rent in Jakarta (Rp 3.976 million) rounds up to 75 percent of the average salary (Rp 5.25 million) a worker makes in the city. For the same salaryman to then purchase a home, they would need to save 13 years’ worth of their salary without spending a single dime, according to 2025 statistics.

This reality is compounded by Statistics Indonesia’s (BPS) 2022 survey, showing that only 36.69 percent of all Jakarta households have access to adequate housing. A more recent BPS survey conducted in 2025 has even revealed that the city currently lacks over 1.39 million housing units for its citizens.

What if we told you that the city is actually not dense enough, and that there are still many policy mechanisms the provincial government can do to make Jakarta more affordable and hospitable for each one of its citizens?

In this edition of The Reformist, we go hyperlocal to cover Jakarta’s housing crisis. We investigate the outdated zoning regulations that have largely disincentivized the construction of vertical housing units, the regressive tax regime that benefits rich landowners with multiple plots of land, and how political will, or lack thereof, has prevented any sustainable housing solutions from succeeding.

Jakarta is not dense enough

In reality, the city is far less dense than it should be. Most of Jakarta’s residential land is legally barred from creating buildings over four storeys. Here is why.

Across Jakarta, housing projects must comply with the city’s Floor Area Ratio (KLB) regulation. The KLB limits the total floor area a building can have on a given plot of land, which effectively controls building height and intensity.

A 100-square-meter plot of land with a KLB of 2, for example, could have a total building capacity of 200 square meters. These 200 square meters can be distributed horizontally or vertically by dividing the building into four floors, for example, with each floor being 50 square meters large.

The higher the KLB, the more housing units can be built under a single plot of land. KLBs vary by district depending on multiple factors like land use classifications and geographical location. Areas in close proximity to public transport are given higher KLBs due to their perceived economic benefits, while residential plots are designated lower KLBs to control density and maintain neighborhood character.

The Jakarta provincial government administers these zoning regulations under a two-tiered hierarchical system. First, the overarching spatial master plan is governed by the Regional Spatial Plan (RTRW), which designates broad land-use classifications such as residential, commercial, and non-residential zones.

Second, this is then regulated at the micro level under a Detailed Spatial Plan (RDTR), which specifies the zoning of individual streets, sets height limits for buildings, determines green space to building ratios, and establishes other detailed provisions governing Jakarta’s urban landscape.

Jakarta’s RTRW is currently governed under Regional Regulation No.7/2024, whereas the RDTR was released in 2022 through Gubernatorial Regulation No.31/2022.

Under the 2022 RDTR, residential plots in Jakarta’s Very High Density Residential zone (classified as R-1) face surprisingly low ceilings, despite the name. A plot between 240 and 400 square meters in this zone is capped at a KLB of 2 with a maximum height of four floors. For plots greater than 400 square meters, the ceiling drops further to KLB 1.6 with the same four-floor cap.

According to Elisa Sutanudjaja, executive director of the Rujak Center for Urban Studies, 89.37 percent of residential-designated land in Jakarta carries a KLB below 2 in 2022. In practice, this means most of the city’s residential blocks are restricted to single-family home units that are no more than three floors on any given plot.

That said, Jakarta’s zoning regulations do contain some progressive intensification schemes. Plots of land within 1.2 kilometers of Jakarta’s major public transportation lines (Commuter train, MRT, and Bus) are given a KLB between 7 and 11 if they are repurposed for vertical housing units. This provision, however, is limited to vertical housing units, which are an entirely separate zone classification from residential plots that dominate Jakarta’s total landscape.

According to another study by University of Indonesia scholars that examines the impacts of zoning regulations on Jakarta’s property prices, raising the KLB for residential plots by just one unit can decrease housing prices in the city by 10 percent. This would provide more accessible prices for the average Jakartan.

Hong Kong, for example, is just as dense as Jakarta—if not more—but its KLB levels can reach around 8 to 10 for residential buildings. In Jakarta, the same intensity is reserved for narrow patches of land hugging the city’s main public transport lines. The rest of the capital is zoned for two to four-story development that favors the creation of single-family housing units.

Overly stringent zoning regulations in residential plots have made affordable housing nearly impossible to deliver at scale in the city.

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Is regressive land value tax to blame? Only the rich benefit from it

Apart from the need to reform zoning regulations, Jakarta remains too lax on rich landowners. At present, affluent citizens with multiple plots of land throughout the city are able to hold onto their assets without any significant economic pressure.

Jakarta’s land value tax (PBB-P2) regime remains regressive, incentivizing these landowners to hold onto their assets as the appreciation in land value offsets the losses from taxes. The PBB-P2 tax rate is currently set at a flat 0.5 percent for all land categories, regardless of whether the land is productive or idle, as regulated by Jakarta’s Regional Regulation No. 1/2024.

Compare this with Jakarta’s vehicle ownership tax (PKB). Under the same 2024 regulation, the minimum PKB rate is not only larger than the PBB-P2 but also progressive, increasing with each additional vehicle a person owns. Owning one car costs you two percent, two at three percent, three at four percent, climbing all the way to six percent for owning five or more vehicles. Before the 2024 tax regulation, owning 17 or more vehicles would’ve triggered a 10 percent PKB tax rate, so perhaps even this tax regime has become less progressive over time.

However, there have been past efforts to introduce schemes resembling a progressive PBB-P2. In 2019, then-governor Anies Baswedan increased the PBB-P2 by 200 percent for idle land to incentivize the creation of new open green spaces in Jakarta’s main arterial roads, namely Sudirman, Thamrin, Rasuna Said, Gatot Subroto, and MT Haryono. Landowners who opted to convert their land to open green spaces would then be given a 50 percent tax break for that financial year. It was either let your land sit and pay double, or turn it into a park and pay half the taxes.

These regulations, however, failed to systemically change how the city’s landowners manage their idle assets, as they only targeted a small segment of the city and lasted for only a year. Now, every Jakarta citizen is subject to the flat 0.5 percent rate.

Let’s paint a real-life example of Jakarta’s current PBB-P2 tax regime. A 576 square meter plot of vacant land is currently on the market in Menteng, Central Jakarta, described in the listing as situated in a “strategic and commercial location.” The asking price is Rp 21 billion. The plot sits in the middle of one of Jakarta’s oldest neighborhoods, an area close to every public transport option Jakarta has to offer.

After running the numbers, the owner of this Menteng kavling would pay Rp 56.82 million in PBB-P2 taxes, which sounds substantial until you compare it to what the land is actually worth.

With a Rp 21 billion asset, the effective annual tax rate boils down to only 0.27 percent of market value. Meanwhile, land prices in Menteng continue to climb at astronomical rates year after year. While the landowner has chosen to put their asset on the market today, they have already accumulated wealth far beyond what the PBB-P2 levy can do to hurt their pockets.

Real estate math aside, the 0.27 percent figure highlights the city’s regressive tax regime. Without a more progressive tax regime that directly incentivizes the construction of new residential units, Jakarta’s housing crisis will continue as supply remains constrained.

The regressive tax regime also extends to a large amount of old, unused, or idle plots of land owned by government entities like state-owned corporations, ministries, and even law enforcement bodies that spread throughout the city. These types of idle land are subject to even looser tax regulations, or even worse, exempted from them entirely.

On top of that, the recent influx of padel courts in the city can also be attributed to this regressive tax regime. With landowners having no reason to sell their idle land or use it to build residential units, they can simply wait for the next viable business venture. Padel courts today happen to be the most lucrative economic opportunity for landowners without any significant costs.

One abandoned program after the other

Moving away from rigid city policy, any reform effort to tackle this issue will never succeed without institutional continuity that outlasts any individual governor. Promises to address Jakarta’s housing are not novel. Every governor who has worked at city hall has pledged, in one form or another, to solve the housing crisis.

Before ascending to the presidency, then-Jakarta governor Joko “Jokowi” Widodo championed vertical housing as his solution to the city’s housing crisis. When his deputy, Basuki “Ahok” Tjahaja Purnama, took over in 2014, he continued these housing projects but drew fierce backlash for his “inhumane” relocation programs, which forcefully cleared “illegal” neighborhoods.

Under former governor Anies Baswedan, the administration oversaw the creation of dozens of vertical housing units on top of his flagship “zero down payment” housing project. He initially planned to construct over 200 thousand units, but by the end of his term in 2022, that number had gone down to only 9 thousand. Since then, subsequent administrations have effectively sidelined the program with no signs of rebooting it.

Perhaps with current Governor Pramono Anung, who has publicly stated that he would continue any good policy that his predecessors had come up with in the past, regardless of partisan lines, things might be different. The technical solutions, in theory, already exist. Every piece of this puzzle has been debated, drafted, piloted, and abandoned. The question for Pramono, and whoever succeeds him in the future, is whether Jakarta can finally build a housing institution that outlasts the governor who promised it.

Towards a more affordable Jakarta

Although Jakarta’s land area spans just 664 square kilometers, it commands a fiscal capacity unmatched by any other regional administration in the country at Rp 81.32 trillion. Yet despite the city’s vast resources, the city’s housing affordability crisis has only deepened, with land prices climbing faster than wages and homeownership slipping further out of reach for the average Jakartan.

Now, it is up to the provincial government to use the policy mechanisms at its disposal to make affordable housing more viable in the city. Just a few days ago, Governor Pramono pledged to cover tuition costs at 103 private schools. The same political will to improve the city’s education should also be directed toward reforming Jakarta’s housing policy. By doing so, the city can finally make steps to mitigate the plaguing urban sprawl phenomenon and begin housing Jakarta’s 12 million residents, or even the “42 million” figure the UN reported.

Governor Pramono and the Jakarta government must revisit the city’s existing KLB policy to allow taller residential buildings alongside a more progressive land tax regime that benefits the majority of Jakartans rather than just the affluent, reduce housing costs, and create a denser, more affordable city.

For those of you living in Jakarta or facing similar housing and livability challenges in your city, what housing reforms could help your city’s current situation?

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Last year, President Prabowo Subianto returned home from his visit to the Netherlands with a repatriation agreement. The Dutch government was to return about 30,000 artifacts that had been taken by the Dutch during their occupation of Indonesia.

This was great news—right?

Well, not according to the netizens. When the news broke, instead of high praise, the agreement was met with hefty skepticism on social media, with statements like “the artifacts will be safer in the Netherlands” and “can we even take care of them…?”

Some others went as far as expressing concerns that the artifacts will end up lost, decayed, destroyed, or stolen—be it in a museum fire, collection theft, or pure neglect—if they are returned to Indonesia.

These reservations are not unfounded. In 2020, a government report revealed that only 8 percent of Indonesia’s 439 museums are well-managed or “type A,” according to the government’s own museum management standards. Several museums—including the National Museum, Maritime Museum, and Clay Museum—have caught fire in the past decade, destroying invaluable collections. Museum lootings are also relatively common, as some museums have no security guards, some lack CCTVs, and many cases remain unsolved. The National Museum in Jakarta has been robbed five times throughout its history, most recently in 2013.

But the state of our museums and the lack of trust Indonesians have in their government to take good care of our treasured artifacts may have unearthed more pressing issues to discuss: Why haven’t we made culture and heritage preservation a priority? What reforms have been made since our independence to make sure we are getting better at caring for the items that carry our collective memories?

In this edition of The Reformist, we look into the evolution of Indonesia’s cultural and heritage sector from the colonial period to the present: through the regulations that were passed, the institutions that were built, the diplomatic struggles to reclaim what was taken, and the reforms that have only recently begun to test whether the country can do better.

Decades of colonial-style preservation

Before Indonesia gained its independence in 1945, the field of cultural heritage preservation existed under the colonial Dutch East Indies administration. The Dutch understood that the land they were occupying had centuries’ worth of history to preserve, though their approach was fundamentally orientalist.

The Batavian Society of Arts and Sciences, founded in 1778, was created by the Dutch East India Company (VOC) officials to study the cultural and scientific aspects of the archipelago. They conducted ethnographic and archaeological research, accumulating collections of objects of significant cultural and prehistoric importance to the archipelago. The society sat where the National Museum exists today in Central Jakarta.

Furthermore, the Dutch focused on restoring monuments to their former condition, preventing the removal of artifacts. It was under the Dutch that the Prambanan and Borobudur temples began to be restored in the 1910s. Their preservation principles were codified in 1931 through Monumenten Ordonnantie (MO) regulation, with cultural objects divided into three categories: (1) man-made objects of great importance for prehistory, history, or art; (2) palaeoanthropology objects; and (3) historical sites.

It was only six decades later that the colonial regulation was changed through the passage of Law No. 5/1992 on Cultural Heritage Objects. It officially designates every cultural heritage object as state property, regardless of its actual whereabouts and ownership, while permitting private citizens and foundations to possess them as long as their “social functions” are intact. Cultural heritage items and sites were defined similarly along the lines of “man-made” objects with significant historical importance and aged at least 50 years old.

Addressing the elephant in the room: Culture’s history of neglect

After the New Order fell in 1998 under the Reformasi movement, the spirit of decentralization carried hope that regional governments could participate in managing their own cultural heritage. This would only come in 2010—twelve years into Reformasi—through the passage of Law No. 11/2010.

It would take another 12 years and three different ministers to complete and promulgate the implementing regulation for that law, Government Regulation No. 1/2022. According to a former official involved in the process, this was due to ministries and government bodies repeatedly deprioritizing provisions requiring their sign-offs. A telling reflection of how cultural heritage preservation has long been neglected by the government.

Over the past decade, and likely for long before that, cultural affairs have consistently received less than 0.1 percent of Indonesia’s national budget. Even after the Directorate General for Culture was elevated into a standalone ministry in 2024, its fiscal standing has stagnated.

That said, there is a bright spot. When it comes to Indonesia’s cultural heritage, repatriation from abroad, particularly the Netherlands, is a selling point.

Reclaiming our collective memory from the colonial gaze

Repatriation of Indonesian heritage items was among the demands of the new Republic in the 1949 Round Table Conference. While the transfer of sovereignty was formalized, the tense relations between the infant country and its former colonizer prevented any act of repatriation at the time. In fact, one of the articles in the conference agreement stipulated that the Dutch must return every Indonesian cultural heritage item it possesses.

It was under President Suharto that Indonesia’s first significant repatriation efforts with the Netherlands took shape. During his state visit to The Hague in 1970, Suharto was received by then-Queen Juliana, and the Nagarakretagama—a 14th-century Majapahit manuscript of enormous historical significance—was eventually returned to Indonesian hands. In 1978, the Dutch returned the famous 13th-century Prajnaparamita statue from the Singhasari Kingdom.

These returns were framed entirely within a Dutch paradigm of benevolence. The Netherlands decided what would be returned and how the narrative would be framed. According to archival research by heritage scholar Jos van Beurden, when talks of returning the Nagarakretagama manuscript surfaced, then-Dutch Prime Minister Piet De Jong supported its return as it would allow the Dutch to retrieve valuable VOC archives located in Indonesia’s National Archives building.

There was no overarching policy guiding what Indonesia should claim or what would happen to objects once they returned home.

The tides only began to shift 40 years later in the late 2010s. Former Western colonizers started to reckon more seriously with their colonial past. In 2017, French President Emmanuel Macron publicly vowed to return African heritage items looted by the French colonial forces. This reckoning added pressure on the Netherlands to do right by its own colonial history. For the first time, the Dutch cultural sector began engaging with its Indonesian counterparts in a fundamentally different register.

It was in this context that the Nusantara Museum in Delft, facing bankruptcy, offered its entire collection of 14,000 artifacts to Indonesia without charge. Then-Director General for Culture Kacung Marijan accepted the offer swiftly. A year later, his successor Hilmar Farid annulled the agreement, drawing confusion from both Indonesian and Dutch observers.

He called for the deal to begin from scratch, mandating that provenance research be conducted first to trace the historical and ownership origins of each object in the collection. Of the 14,000 items from the initial agreement, Indonesia agreed to receive 1,500 of them under the new agreement.

“It’s not simply about the return of objects; it’s about knowledge production. It’s about rewriting history; it’s about dealing with past injustices. That’s where I would locate the discussion of returning objects,” said Hilmar on the significance of provenance research.

Hilmar’s insistence on joint provenance research, rather than passive acceptance of whatever the Dutch offered, directly led to the creation of the Pilot Provenance Research on Objects of the Colonial Era (PPROCE), a joint project by Dutch cultural institutions, including the Rijksmuseum. It was the first-ever Dutch state-sponsored provenance research program for colonial artifacts, funded and commissioned by the Dutch Education, Culture, and Science Ministry. Over two and a half years, the project produced fifty provenance reports on 65 objects from Indonesia and Sri Lanka.

What followed from the methodological reset was a cascade of returns rooted in provenance. In July 2023, the Netherlands returned 472 cultural artifacts to Indonesia in a ceremony at the Museum Volkenkunde in Leiden. Among them were four 13th-century Singhasari statues depicting Hindu deities held in Dutch collections since the 19th century, as well as objects looted during colonial military campaigns in Java and Bali.

A second return followed in September 2024, when 288 more objects were handed over at the Wereldmuseum in Amsterdam, including 284 items from the Puputan Badung collection—weapons, coins, jewellery, and textiles taken after the Dutch conquest of southern Bali in 1906. In total, over 800 objects were returned under the 2022 repatriation deal by the end of 2024, with the Indonesian government committing to dedicated conservation programs, scholarly research, and public exhibitions to give the returned objects meaning beyond their display cases.

Despite the modality shift in repatriation efforts, the lingering concern about whether these artifacts could actually be cared for at home persisted. The Indonesian government had gained diplomatic leverage in negotiations with the Netherlands, but the domestic infrastructure to safeguard what came remained a work in progress.

Getting our museums in check

It is simply impossible for the state to maintain every museum and heritage site, given the sector’s political and financial neglect. Museums and heritage sites are often poorly managed, forgotten, or left to rot.

In 2020, the former education and culture minister Nadiem Makarim declared that only 39 museums, or 8 percent of Indonesia’s total museums nationwide, met the government’s own highest standard of management and service. Of the 288 government-managed museums at the time, the majority were categorized as Type C, meaning they had buildings and collections but minimal funding, no digital infrastructure, and inadequate conservation facilities.

Nadiem noted that a flawed governance system and the lack of competent human capital within the bureaucracy explained the troubling situation. Before his regime, government-run museums and heritage buildings were directed by third-echelon civil servants from the ministry, under a rigid bureaucratic system. Human capital for museum management was also obsolete, lacking adequate experts and professionals.

The term “museumkan,” which literally translates to “to museum” (verb), was widely used to describe ageing or disgraced civil servants who were transferred into museum management because it was seen as an undesirable sector.

“Most museum staff are themselves ‘museumified’, those who are no longer useful elsewhere, who are about to retire or are underperforming, get stationed in a museum,” said Irmawati Marwoto, archeology professor at Universitas Indonesia.

These historic challenges became the reason why the former Education and Culture Ministry created the Indonesian Heritage Agency (IHA) in 2023. The IHA was made to introduce an innovative public-private partnership model for museum and heritage site governance. It designated 34 museums and heritage sites as autonomous Public Service Agencies (BLUs). The National Museum in Jakarta, Fort Vredeburg in Yogyakarta, Sangiran Early Man Site in Srangen, and many more notable museums and heritage sites were all turned into autonomous institutions under the IHA.

The BLU model can be seen as a push towards enterprising the public sector without the for-profit motive of the private sector. Management of BLUs is rooted in maximizing efficiency and self-sufficiency for public service, allowing these agencies the freedom to reel in new funding models and acquire talent from outside the bureaucracy. This model is most common in the healthcare sector, wherein public hospitals are turned into BLUs to reel in healthcare specialists from the private sector who are absent from the bureaucratic talent pool.

In the cultural heritage context, the BLU model allows for greater independence for historical institutions to govern efficiently without the constraints of bureaucratic inertia. Cultural experts, museum curators, academics, and other professionals from the private sector can now be recruited to participate in conservation and preservation efforts. BLUs can also directly receive grants and donations from the private sector to help fund their operations.

This public-private partnership model is a step towards raising Indonesia’s museum governance to international standards. In the United Kingdom, major national museums incorporate a blended governance model, pooling funds from private endowment and government support.

The British Museum, for example, is also an independent non-departmental public body, a structurally similar model to Indonesian BLUs. The museum is governed by an independent Board of Trustees and funded through a combination of government aid from the Department for Culture, Media and Sport and income it generates through commercial activities, private donations, endowments, and exhibition fees.

This dual-funding structure gives the museum financial flexibility to operate autonomously without being wholly dependent on the state, while remaining publicly accountable as an institution that is adjacent to the government.

While it may take years or even decades before museums in Indonesia can reach the institutional standards of the British Museum, the IHA is a significant step towards realizing that dream, with cultural heritage items that actually belong to the land they originated from.

Where to go from here

Under the current Prabowo administration, creating a standalone Culture Ministry is a start. It signals political will and is a good sign that cultural affairs will hopefully be taken more seriously. However controversial, perhaps having a figure like Minister Fadli Zon, who has close ties to the President, may also help in sustaining said political will.

Political appeal, however, should come with grace and humility. The current regime should follow through with what its predecessor has done for the sector without shaking things up too fast out of ego. It is too soon to tell how effective the IHA will be, but it is important to allow the agency and the cultural institutions inside of it time to work autonomously without interference from the ministry.

Perhaps, in time, more museums and heritage sites can follow suit, revitalizing the industry and opening up more jobs for cultural practitioners and experts in a field that has historically been neglected.

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We consulted the former Director-General for Culture at the then-Education and Culture Ministry, Hilmar Farid, in the writing of this article.

What does an ideal family look like to you? Is having a life partner with two or three children just the right amount? Or are kids not at all in the picture? If your answer happened to be a family of four with two children, this preference may not entirely be authentic. Instead, it may have come from decades of social engineering.

Sixty years ago, Indonesian women were having nearly six children on average, doubling the population every generation. But what followed was one of the most successful family planning programs of the 20th century, dubbed Keluarga Berencana (KB).

Politically neglected by Indonesia’s first president, Sukarno, family planning became a flagship program under Suharto’s authoritarian New Order regime—perhaps not out of goodwill but of necessity. Despite being top-down in nature, the program employed innovative social campaigns and bottom-up approaches, which contributed significantly to its overall success: reducing the country’s total fertility rate (TFR) from 5.8 children per woman in the 1950s to 2.1 by 2025, reaching the global standard.

In this edition of The Reformist, we look back six decades to understand what made Indonesia’s family planning program work as a reform.

But first, let’s talk about why it didn’t happen during Sukarno’s Old Order.

Dissecting Sukarno’s pro-natalist Old Order

After gaining independence in 1945, Indonesia’s population was growing at a rate that would cost the government significantly in the long run. By the mid-20th century, the country’s population was expanding at roughly 2.8 percent per year, with an infant mortality rate of 145 deaths per 1,000 births, contraceptive prevalence among women below 5 percent, and a Total Fertility Rate (TFR) of 5.8 children per woman.

As an infant nation with a fragile economy, development would have been difficult if no action were taken. Something had to give, and founding father Sukarno was not budging.

Sukarno was known for his pro-natalist stance, often flaunting Indonesia’s power by highlighting its large population. He once boasted that “Indonesian people breed like rabbits. Ten, twelve, fourteen children. This is normal, and we have a large country.”

Instead, family planning initiatives under the Old Order were mostly driven by private actors. Doctors, academics, physicians, and progressive elites quietly promoted birth control from the early 1950s despite the unfavorable political climate. In 1952, a group of prominent women in Yogyakarta established a Family Welfare Foundation that included contraception among its services, carefully avoiding the phrase “birth control” for fear of its social implications. By 1957, the Indonesian Family Planning Association (PKBI) was formally established, notably with Sukarno’s own personal physician as its head.

Things changed rapidly once Sukarno fell and Suharto came into power.

Here are three takeaways on how Indonesia launched a relatively successful family planning program in the new era:

I. Technocratic approach supported by strong political will

Foundations of state-sponsored family planning

The zeitgeist of the mid-20th century was the perceived existential threat that Earth’s available natural resources would not sustain the rapidly growing human population. This phenomenon was coined Neo-Malthusian, after the English economist Thomas Malthus, whose theory stated that food supply would never be able to keep pace with unregulated population growth, inevitably causing widespread poverty, famine, and war.

This craze spread across Western governments and international institutions alike, driving a wave of donor-funded population control programs across the developing world.

In addition to international pressure, local technocrats from the National Development Planning Agency (Bappenas) also warned President Suharto that Indonesia’s population growth rate had to be controlled for sustained economic development to happen.

Having just seized power under an economic development platform, Suharto gave the family planning initiative high priority, showcasing that ‘political will’ does factor into whether a policy can or cannot work.

Political and economic structure behind family planning

After signing the United Nations (UN) declaration on the World Population in 1967, Suharto kick-started his family planning program through Presidential Instruction No. 26/1968, creating the National Family Planning Institute (LKBN). The National Family Planning Coordinating Board (BKKBN) was then established under Presidential Regulation No. 8/1970 and listed among the priorities in the New Order’s first five-year development plan (Repelita).

Financial endowments from both the state budget and international donors were crucial to the longevity of this program. In the BKKBN’s infancy, the government provided US$ 1.3 million to the program, with an additional US$3 million from international donors. This figure rose steadily year after year. In 1977, US$28.5 million from the state budget was used, rising further to US$34.3 million the following year.

The large bulk of the program’s funding, however, came from different international donor sources. Countries like the United States, through USAID, the Netherlands, and institutions like the World Bank and the United Nations Population Fund (UNFPA), have all endowed the Indonesian government and BKKBN since the program’s founding. From 1968 to 1998, these four donors contributed more than half a billion US dollars for the family planning program.

II. Top-down objective, bottom-up implementation

The program had two official objectives from the outset. The first was improving the health and welfare of mothers, children, and the family at large. The second was raising the standard of living by reducing the birth rate, ensuring that population growth would not outpace economic production. In practice, the program pursued these goals through two main channels: contraceptive service delivery and information, education, and communication—known within the program as KIE.

On the services side, the program began as a clinic-based operation concentrated in Java and Bali. Clinics provided contraceptives—primarily IUDs and birth control pills—through the Health Ministry’s network of community health centers (‘Puskesmas’). But officials quickly realized that clinics alone could not reach the tens of millions of eligible couples spread across 22,000 villages.

By the second Repelita in 1974, the BKKBN had pivoted to a community-based model. Trained fieldworkers were deployed to live and work in the communities they served. Village-level contraceptive distribution centers were established, stocking pills and condoms so that women could access them locally rather than traveling to distant clinics. Village volunteers—often recipients themselves—ran monthly meetings where supplies were distributed, motivation was reinforced, and community activities like nutrition courses and savings lotteries were held alongside family planning discussions.

The KIE effort was equally ambitious. The BKKBN went out of its way to change the way Indonesians thought about family size altogether. Fieldworkers went door to door. Community and religious leaders were enlisted to carry the message. The program made use of traditional local institutions. In Bali, for example, the banjar (a hamlet-level cooperative unit) was recruited to normalize family planning as a community matter, with household heads required to publicly report the contraceptive status of every married woman of reproductive age under their roof.

The BKKBN’s role within all this was formally that of a coordinator rather than a direct implementer. Its major functions were to set policy guidelines, channel funds, and monitor the work of implementing units.

III. Amassing public support: Grounded campaigns and threading religious sensitivities

Even with Suharto’s nod of approval, extensive social engineering had to be done to normalize the program among the masses. Given Indonesia’s large rural and religious population, acceptance of the program meant having to shift national social norms that had been centuries in the making.

Before family planning was initiated, the phrase “banyak anak banyak rezeki” (many children equal many blessings) was the dominant belief. Children were seen as gifts from God and a telltale sign of future prosperity. Under Suharto, this framework was systematically reframed. The new slogan of “dua anak cukup” (two children are enough) was plastered, directly and indirectly, across state-sponsored advertisements, postcards, stamps, national speeches, and every other available medium.

PSA campaigns aside, the regime also understood that the program could not succeed through government messaging alone. With Muslims making up nearly 90 percent of Indonesia’s population, the moral authority of Islamic leaders was not something the BKKBN could afford to work against.

As early as 1968, before the BKKBN was even formally established, Suharto’s government held closed-door discussions with national religious leaders to reach a consensus on which contraceptive methods could be religiously sanctioned. Abortion and sterilization were ruled out and kept off the official program. The IUD raised extensive debate, but was gradually accepted by religious authorities, provided insertion was performed by a female doctor or, in emergencies, a male doctor in the presence of the woman’s husband. By the end of the New Order, birth control pills and injections were the main contraceptives used in the program

The two major Islamic mass organizations—the Nahdlatul Ulama (NU) and Muhammadiyah—were the primary targets of this outreach. NU, the organization with a larger rural base, issued a declaration in 1969 framing family planning “not as limiting family size but as spacing pregnancies for the welfare of mothers and children.” Muhammadiyah followed a similar path, ruling in 1971 that family planning was permissible provided it served the well-being of families and society.

Once national religious leaders were on board, the BKKBN worked downward. Family planning fieldworkers were instructed to actively involve local religious figures—the kyai, or Muslim clerics—in their outreach activities. In known strongholds of orthodox Islam, such as East Java, Madura, and Aceh, the legitimizing power of these local leaders was especially critical. For ordinary villagers, whether modern contraception was morally permissible depended in large part on what their local kyais said.

While largely effective in securing local support, the approach was not without friction. Religious opposition never fully disappeared, and family planning would often become a proxy for broader resistance to the New Order regime.

The result speaks for itself

Indonesia’s total fertility rate dropped from 5.6 children per woman in the mid-1960s to 2.1 in 2025. Accompanying this was a parallel drop in infant mortality, from 146 deaths per 1,000 live births in 1960 to around 17 per 1,000 in the present day. In achieving its stated goal of controlling population growth, the program was, by conventional measures, a success.

The program’s emphasis on reaching rural areas has also left lingering effects in the present day. In a 2018 survey conducted by BKKBN, the agency found that contraception use in rural areas stood at 64.2 percent, slightly higher than the 63 percent in urban areas, making villagers more “woke” than their metropolitan counterparts.

Beyond fertility rates, the program reshaped Indonesia’s population growth to a much more sustainable rate. The population growth rate, which stood at 2.8 percent in the mid-1960s, fell to 1.49 percent by the 1990s and 2000s, and has since declined further to around 1.1 percent between 2020 and 2025. The contraceptive prevalence rate, which had been below 5 percent when the program launched, reached 57 percent among married women by the end of the New Order, and around 61 percent by 2025.

Objectively, the family planning program was a major success in achieving its goal of meeting demographic targets. With a controlled fertility rate, Indonesia positions itself strategically as a country that is young enough to continue existing while not growing fast enough to significantly strain the nation’s budget and its limited natural resources.

But it came with a cost

It is unjust to laud the program’s success without mentioning its glaring social costs. Given Suharto’s top-down approach, methods of coercion were commonplace throughout the program’s implementation. This was most evident in the experiences of women—the overwhelming majority of program recipients—who were treated not as individuals with agency but as targets of a demographic goal.

The BKKBN’s conception of women was narrow: wives and mothers, not individuals with independent reproductive rights. It wasn’t uncommon to hear stories of women coerced, pressured, or manipulated into accepting contraception—particularly IUDs—without informed consent.

The military conducted annual “social service” visits called Safari, in which soldiers descended on villages to recruit family planning acceptors, often arriving with quotas to fill. Their presence alone was enough to intimidate; in areas where Safaris were announced, women would hide in their homes to avoid being pressured on the spot.

A lesson for the current administration

President Prabowo Subianto has ambitions arguably grander than family planning, like ensuring free meals for millions of students and developing Indonesia’s village-level economy through 80,000 cooperatives. These are programs that cost our taxpayers hundreds of trillions of Rupiah, whose implementation has been questionable at best and burdensome at worst.

We think the three lessons outlined in this piece could be useful for how these flagship programs should be implemented: careful planning and technocratic solutioning, balancing top-down and bottom-up approaches, and getting widespread public support through understanding local contexts.

Editor’s note: Most of the information gathered for this analysis came from the book Two Is Enough. Family Planning in Indonesia under the New Order 1968-1998, edited by Anke Niehof and Firman Lubis. We cannot recommend this book enough as a comprehensive deep dive into Indonesia’s family planning program.

Do any of our readers work within the public health and family planning sector? We would love to hear your take on this issue and any on-ground stories that could enrich this discourse with more context and nuance! Comment below or reply to this email.

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In our previous edition, we asked why Indonesia’s decentralization feels like a myth. Why, despite the autonomy, have our localities not succeeded economically? We argued that centralized fiscal structures have largely disincentivized regional governments from creating any meaningful economic growth for their respective localities. But what if one of our regions does have a special privilege over most and is actually allowed larger fiscal autonomy? Would it be more economically successful?

These questions have been asked more frequently in the wake of last year’s Sumatra disaster. Many viewed the government’s response as slow and inadequate, including us. But a major debate particularly ensued on the old-age motion of whether the primary duty ultimately falls on the central or local government. In Aceh, specifically, this debate struck a nerve given its special autonomy status.

To answer these questions, we took a closer look at the special autonomous region of Aceh. In theory, it should be the antithesis of our proposition that decentralization is a myth. It has greater ‘autonomy’ by law, enacts Sharia Law, has its own local political parties, and is even allowed to represent itself in international sports competitions separate from the Indonesian national team.

Quick context

After decades of bloodshed and separatist ambitions, the Free Aceh Movement (GAM) and the Indonesian government negotiated in Helsinki, Finland. With the historic Helsinki Memorandum of Understanding (MOU) in 2025, Indonesia did not just agree to an administrative ‘anomaly’. Jakarta’s decision to grant Aceh special autonomy did not just end decades of armed struggle for independence, but redefined what it means to be a united republic.

The following year, these commitments were codified under Law No. 11/2006 on the Governance of Aceh (’UUPA’). This became the constitutional backbone of Aceh’s special autonomy.

With UUPA set to be revised this year by the House of Representatives, we believe it would be helpful to look back at what has happened over the past 20 years—what worked and what didn’t—to ensure that any changes made by the House uphold the values of Aceh’s long march towards decentralization.

I. Hyperlocal politics, beyond Sharia Law

Most people know Aceh for being one of the only administrative regions in the world that enacts Sharia Law. Yet, there is so much more to it, including a political landscape that allows for a level of self-governance found nowhere else in Indonesia.

While Sharia Law is a significant pillar of this identity, mentioned 34 times in UUPA, another distinctive political feature of Aceh is the right to establish and field local political parties.

Local Political Parties

The Aceh Party, founded in 2007 and the political vehicle for a majority of former GAM combatants, has dominated the local legislature, consistently gaining a plurality in Aceh’s Provincial Legislative Council (DPRA) since local legislative elections were held in 2009.

Of the four Aceh governors who have come to power since 2005, three were former senior GAM officials, and all were fielded by local parties. This includes incumbent governor, Muzakir “Mualem” Manaf, who was GAM’s commander-in-chief during the height of the insurgency in the early 2000s and became Chair of the Aceh Party since its inception in 2007 following the Helsinki MOU.

If there is one success that can be attributed to the peace treaty, it is its ability to shift the way former rebels demanded political change, away from the battlefields and into the local political structure.

This raises the question of whether a similar model could be applied elsewhere in Indonesia. While not tested at scale, this decentralized model provides a more direct channel for societal aspirations that often get diluted within the default framework offered by ‘national’ political parties.

Qanun and the Wali Nanggroe

Administratively, the province is governed similarly to other provinces in the country. The governor leads the executive branch, while the DPRA drafts local regulations (‘Perda’), known as qanun in Aceh. While other localities base their regulations on the 1945 Constitution (‘UUD’) and laws (‘UU’), qanuns are shaped by Sharia Law and local customs. Under Article 23 of the UUPA, the DPRA possesses sole authority in drafting qanuns, with the governor acting as a deliberating partner.

The province also has a special customary body, the Wali Nanggroe, which is led by a senior Acehnese figure of high standing. Its mandate is given under Article 96 of the UUPA to protect the unity and integrity of the Acehnese people.

While the role of Wali Nanggroe remains symbolic, its creation is an important prerequisite in the Helsinki peace talks.

Twenty years on, the presence of local political parties and the Wali Nanggroe is now fully entrenched within Aceh’s version of democracy. By restoring traditional terminologies (e.g., subdistricts to Mukim and villages to Gampong), Aceh ensured the integration of its historic identity into the present. Culture and customs that were once repressed are now able to take center stage. That said, these cultural victories have yet to translate into functional governance and material gains for every Acehnese to enjoy.

II. The rights to woo foreign investors

From the outset, the UUPA grants several autonomous rights allowing for greater Acehnese representation abroad. The provincial government is not only allowed to create and seek economic partnerships with foreign institutions, but also represent itself in international cultural forums and sports competitions, as well as regulate its own foreign investment.

Article 9 (1): The Aceh Government may establish cooperation with foreign institutions or agencies, except for those falling under the authority of the Central Government.

Article 9 (2): The Aceh Government may participate directly in international arts, cultural, and sporting activities.

Article 165 (2): The Aceh Government and regency/city governments, in accordance with their authority, may attract foreign tourists and grant permits related to investment in the form of domestic investment, foreign investment, exports, and imports, while observing nationally applicable norms, standards, and procedures.

Presidential Regulation No. 11/2010 further regulates international cooperation between Aceh and foreign entities, granting them “full power” to finalize overseas partnerships independent of the Indonesian Foreign Ministry. Meanwhile, Article 186 of the UUPA allows Aceh to seek external loans from outside Indonesia, albeit with the central government as an intermediary and prior approval from the Finance and Home Ministries.

As a caveat to this newfound freedom, the provincial government is prohibited from managing and engaging in cooperation that is “national in nature,” which includes “foreign policy, defense, security, justice, national monetary and fiscal matters, and certain matters in the field of religion.”

But despite its special autonomous rights, foreign direct investment (FDI) remains significantly low.

Source: GRDP, FDI (FDI values were converted to IDR at January 1, 2024’s exchange rate of Rp 15,510/USD)

In 2023, Aceh’s FDI to Gross Regional Domestic Product (GRDP) ratio of 1.7 percent ranked 23rd among Indonesia’s 38 provinces. Legal uncertainty, pervasive corruption, central government overreach, and ambiguity over how foreign capital aligns with Sharia Law continue to constrain its economic growth.

III. Special fiscal structure

Extractive sector revenue-sharing

The UUPA prescribes a special revenue-sharing scheme for the exploitation of Aceh’s vast oil and gas reserves.

To an extent, the creation of GAM could be attributed to Aceh’s historic inability to claim credit for its own natural resources. As this grievance paved the way for a structural overhaul of Aceh’s finances, reclaiming a favorable revenue split with Jakarta became a non-negotiable prerequisite during the Helsinki peace talks, eventually granting Aceh a 70-percent share.

Yet, even with these hard-earned concessions, oil and gas revenues contribute an insignificant amount to Aceh’s regional income in the present day, accounting for only a pitiful 0.6 percent of Aceh’s total budget.

Aceh must face the reality of its resource trap. As natural reserves deplete, the energy sector no longer provides a significant boost to the local economy.

​​Over the past decade, economic growth excluding oil and gas has performed better than with it included. Even when growth is larger with oil and gas, its effect on the overall economy is minimal at best. Except for 2022, when oil production exceeded the annual target, oil and gas production have dragged the local economy significantly.

Simply put, Aceh’s extractive sector is shrinking faster than the rest of the economy is growing. Diversification is therefore essential if Aceh wishes to realize its economic potential, especially considering how much oil and gas prices fluctuate in the global market.

Special autonomy fund

The true backbone of Aceh’s economy lies in its dependence on central government aid. On top of the normal central government cash transfers (‘TKD’), Article 183 (2) of the UUPA guarantees 20 years of special autonomy fund allocation from the national budget. These comprise an equivalent of 2 percent of the state’s general allocation fund (DAU) for the first 15 years and one percent for the final five years.

The special autonomy fund has profoundly shaped Aceh’s public finances to this day. In 2022, the final year of the two-percent allocation, the province generated Rp 13.7 trillion in local revenue. Of that amount, Rp 7.5 trillion (54 percent) came from the special autonomy fund. When the allocation was reduced to one percent the following year, Aceh’s annual revenue fell by approximately Rp 3 trillion.

For Aceh to become sustainable moving forward, it must find ways to maximize the different provisions endowed to it in the UUPA. It simply cannot rely solely on the special autonomy fund if it wishes to truly be self-governing.

But Jakarta is hardly an innocent party here as it uses the special autonomy fund to exert control on the local government apparatus.

Jakarta’s encroaching hand

It is important to preface that Aceh’s 20-year development cannot be separated from its proneness to natural disasters. After ratification of the UUPA in 2006, the local government only began inheriting the economy from the Aceh-Nias Reconstruction and Rehabilitation Agency (BRR) in 2009.

Since then, Aceh’s economy has grown steadily, albeit rather slowly, at around 4 percent in the last decade. Significant work remains to truly realize Aceh’s unfulfilled potential, especially on these three stubborn problems:

Pervasive corruption

Nothing illustrates systemic corruption in Aceh better than the case of Irwandi Yusuf, its first directly elected governor post-Helsinki. In 2018, during his second term in office, Irwandi was arrested by the Corruption Eradication Committee (KPK) in a high-profile sting operation. He was convicted of accepting bribes and embezzling over Rp 42 billion, including from the special autonomy fund.

The absence of technocrats

However, “bad actors” only account for half of the story. The second hurdle is a lack of technocratic capacity within Aceh’s bureaucracy. While the peace treaty successfully moved former combatants from the battlefields to the bureaucracy, it did not automatically endow them with the technical expertise required to govern and develop the region. Most especially, the province lacks economists and practitioners capable of implementing long-term development programs.

Half-hearted decentralization

As established in our previous volume, Jakarta tends to half-heartedly grant true autonomy to local governments. Aceh is no exception, even with its special autonomy. Over the last decade, a wave of centralizing national regulations quietly chipped away at Aceh’s special autonomy. In 2013, then-President Susilo Bambang Yudhoyono threatened to revoke Qanun No. 3/2013 for using the GAM symbol in Aceh’s official flag. It was eventually revoked by the Home Affairs Ministry in 2016 without prior consultation with the DPRA.

Jakarta’s “invisible hand” came into play again in the saga of PT Emas Mineral Murni (PT EMM), which received a 10,000-hectare gold mine concession across Nagan Raya and Central Aceh in 2017 from the Investment Coordinating Board (BKPM).

Using Law No. 23 of 2014 on Local Governments (‘UU Pemda’), Jakarta bypassed Aceh’s local authority, arguing that it possessed complete authority to issue permits for foreign investment. The DPRA viewed this as Jakarta undermining Aceh’s special autonomy as mandated by Article 156 of the UUPA.

In 2019, the controversial Omnibus Law on Job Creation was opposed by the local labor force on the basis of Qanun No.7/2014, which provided fairer work hours to Acehnese women, bank holidays to commemorate the tsunami, different compensation schemes for bonuses, and stricter regulations on foreign workers. This, however, fell on deaf ears.

Meanwhile, Government Regulation No. 3/2015 shrinks Aceh’s autonomy by unilaterally rendering an additional 32 areas of governance as national affairs. Among others, these include land administration, education, health, environment, forestry, as well as energy and mineral resources. Central government oversight varies from leading direct implementation to setting norms and best practices for local government to comply with.

While the UUPA was a breakthrough in reimagining decentralization, Jakarta’s overreach and inconsistent regulatory approach showcase the central government’s reluctance to release its tight grip on the region.

The way forward

With revision of the UUPA already underway, the main talking point will center around Aceh’s special autonomy fund. Some factions within the House of Representatives in Jakarta will seek to reduce it, while the Acehnese government and its few allies will seek to retain it, especially as the region rebuilds after the 2025 disasters.

What we do know for sure is that any changes to the special autonomy rule must be paired with greater decentralization in practice. Jakarta needs to trust Aceh to address its corruption problem, reform its bureaucratic ranks, and attract investment within the agreed corridors.

Politically, the UUPA revision must seek to strengthen and fortify local political parties in Aceh, which have played a pivotal role in ushering peace for the last 20 years.

While nowhere near perfect, Aceh is a reminder that autonomy is possible under Indonesia’s unitary framework. And for that to continue to be the case, Jakarta must fulfill its end of the bargain and refrain from reclaiming power back to the central government.

Special mentions:

We consulted Muhadam Labolo, Chair of the Indonesian Society for Government Science (MIPI), and Rozi Beni, an alumnus from the Faculty of Law at Universitas Indonesia, to ground our analyses in the writing of this piece.

Writer/Researcher:

Editors: , , Ravio Patra

Visual designer:

Local autonomy in Indonesia has been under continuous attack since President Prabowo Subianto took office, from the 2025 austerity measures that devastated local budgets to the recently growing talks of scrapping direct local elections. While local governments are frequently blamed for weak and corruption-ridden governance, a more fundamental question is often ignored: are they politically inadequate, or were they never given the economic space to succeed in the first place?

Two decades ago, decentralization was hailed as a new hope for post-reform Indonesia. When students marched their way onto the steps of the House of Representatives in 1998, the call for greater political liberty was at the forefront. After decades of authoritarian rule, local governments were finally able to dictate how they wished to govern themselves and their people without the outstretched control of the central government.

After assuming the presidency in 1998, B.J. Habibie introduced sweeping reforms to stabilize Indonesia’s fragile political landscape and restore public trust in government. A year into power, Habibie introduced Law No. 22/1999 on Local Governments, giving provincial, regency, and municipal administrations greater political and, in theory, economic freedom.

Article 7 of the law states that local governments are given full autonomy to plan and formulate their own development plans aside from the fields of foreign policy, defense and security, the judiciary, monetary and fiscal affairs, and religion.

Under Megawati Soekarnoputri’s presidency in 2004, the same Law was revised to introduce direct local elections, providing local communities the right to choose their governors, regents, and mayors.

While this era of political liberalization opened new civic opportunities for the Indonesian people, economic freedom and decentralization, on the other hand, have remained a constant hurdle, as a large majority of local administrations in the country are fiscally dependent on central government transfers (TKD).

Decentralization is not a static endpoint. It’s a pendulum that swings through financial crises and political power struggles. The question we seek to answer in this piece is not whether decentralization works, but whether its implementation has honored the objective set out after Reformasi.

In this edition of The Reformist, we unearth the hidden economic realities of Indonesia’s subnational governments and the lessons Indonesia can take from an unlikely neighbor up North.

Political autonomy without fiscal capacity

The issue of economic decentralization lies in the amount of revenue that flows away from local governments and into the hands of the central government. While industries, factories, and mines are built on local land, their tax revenues are fully directed to the national government. Levies like the income tax (PPh), value-added tax (VAT/PPN), and luxury tax (PPnBM) are all managed by the central government, leaving subnational governments with no money to show for their labor.

Within the income tax regime itself, central control extends across nearly all major subsectors. Personal income tax (PPh Orang Pribadi), corporate income tax (PPh Badan), and income taxes derived from strategic sectors such as oil and gas (PPh Migas) are all collected by the national government. While portions of these revenues are later redistributed to provinces and districts through revenue-sharing arrangements (DBH, Dana Bagi Hasil), these transfers are deliberated without the involvement of local governments.

Taxes collected by the central government constitute an overwhelming majority of total government revenue, amounting to Rp 2,309 trillion in 2024, around eight times the Rp 273.15 trillion collected by all local governments combined.

The following table summarizes how taxes collected by the central government are distributed back to the localities. While the term “revenue sharing” implies fair redistribution, the real revenue-making heavyweights, the VAT and corporate income tax, are enjoyed solely by the central government.

As a result, local governments are left with a narrow, commercially driven tax base for their locally-sourced income (PAD). Local governments rely on hotel, restaurant, entertainment, advertising, parking, and street-lighting taxes, alongside vehicle-related levies such as the motor vehicle tax (PKB), vehicle title transfer fees (BBNKB), and fuel taxes (PBBKB).

While local governments have also gained authority over land-based taxes such as the land and building tax (PBB) and the land and building title transfer duty (BPHTB) since 2014, these sources have been insufficient to increase fiscal autonomy—how much expenditure (not revenue) budget is available for local governments to spend at their own discretion.

What has occurred in recent times is not a reinvention of what it means to have fiscal autonomy, but a gradual erosion of resource availability. This makes localities depend much more on TKD, as was the case with President Prabowo’s sweeping austerity measures, but without a corresponding reduction in responsibilities.

The disparity between high local production and low revenues can be visualized through the graph below.

Public expenditures from all three levels of local government amount to only around six percent of the country’s total GDP. This is despite the economic activities occurring at the subnational level and the hundreds of trillions of rupiah that flow to localities through the DBH and TKD. In contrast, central government spending accounts for over 11 percent of Indonesia’s total GDP, almost double the combined local share, underscoring how fiscal capacity remains overwhelmingly concentrated in the hands of the central government.

This stark divergence illustrates the core imbalance of Indonesia’s decentralization framework: while economic activity is geographically dispersed across localities, fiscal power remains highly concentrated at the center. In other words, the current local autonomy setup effectively decentralizes political risks but not fiscal responsibility.

Without fiscal independence, politics are messy

Data from the Finance Ministry reinforces how far economic decentralization has lagged behind its political counterpart. Despite a gradual rise in average local fiscal independence, most local governments remain structurally dependent on TKD.

This structural dependence became painfully visible when President Prabowo rolled out the aforementioned austerity measures in early 2025, slashing local transfers by up to Rp 50.59 trillion from Rp 919 trillion to Rp 848.52 trillion. For many local governments, the cuts exposed how little room they had to maneuver fiscally.

The fallout was most vividly illustrated in Pati, East Java, where regent Sudewo raised the PBB tax by as much as 250 percent after the locality struggled to meet its Rp 2.87 trillion revenue target, which largely came from already-reduced central transfers.

The tax hike in Pati snowballed into one of the largest political scandals last year when over 100 thousand protestors filled the streets calling for Sudewo’s impeachment. The protests generated nationwide sympathy and amplified public distrust of the central government’s lackluster economic policies, culminating in the August 2025 demonstrations.

Instead of reconfigurating its fiscal policies, the 2026 APBN has reduced local transfers even further, falling to Rp 693 trillion. While the current administration has framed these measures as necessary “shock therapy” for poor-performing local administrations, they are unlikely to resolve Indonesia’s long-term structural problems.

If anything, President Prabowo’s approach signals a renewed inclination toward economic centralization rather than a serious push to strengthen local fiscal capacity.

Economic decentralization, the Chinese way

Critics have often labeled local governments’ economic dependency on the central government as a mere symptom of the unitary system under which Indonesia operates. A federal system is often seen as a just alternative, given its foundation on greater separation of powers. In the United States, each of the 50 different states is allowed to enact its own set of taxes and regulate intrastate commerce.

While the system has its merits, improving local economic autonomy doesn’t have to begin with such a drastic constitutional overhaul. A more pragmatic set of lessons can be drawn from Indonesia’s giant neighbor to the north: China.

China is a unitary, authoritarian one-party state that often finds itself at odds with the West. Yet, at the same time, it is one of the most economically diverse and dynamic countries in the world. Following Deng Xiaoping’s “Opening Up” reforms in 1979, China experienced decades of rapid growth, driven in no small part by reforms that reshaped the fiscal relationship between Beijing and its provincial-level governments.

Under China’s economic model, local governments are strongly incentivized to grow their own economies. Provinces and cities retain substantial portions of locally generated revenues and are encouraged to attract foreign investment, expand industrial bases, and increase employment.

Local administrations are even permitted and encouraged to seek foreign investment abroad, equipped with their own foreign affairs delegation. The more companies, industries, and investors that enter a locality, the greater its fiscal returns. This makes local governments thrive economically, though we acknowledge that there is a separate debate to have on democratic accountability.

In one example from last year, a local delegation from the export-heavy Zhejiang province was sent to the United States to seek business opportunities for its local industries, despite growing geopolitical tensions between Beijing and Washington over tariff disputes.

Funnily enough, Aceh province’s special status allows the country’s westernmost locality to do just this.

Under Article 165(2) of Law No.11/2006 on Aceh, the provincial Aceh government is legally allowed to “attract foreign tourists, and issue permits related to investment in the form of domestic investment, foreign investment, exports, and imports, while observing nationally applicable norms, standards, and procedures.”

We will reserve our analysis of Aceh for now. Stay tuned for our next volume, where we will be covering Aceh’s special autonomous status, 20 years on. Be sure to subscribe!

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Indonesia’s local governments do control a wide range of commercial-based levies. which contrasts with China’s far greater emphasis on industrial-based taxation. Through its 1994 tax reform policy, China’s local governments were introduced to new levies like the urban real estate taxes, housing taxes, state-owned land-use taxes, cultivated land occupation taxes, and deed taxes.

They also benefit from a business tax, individual income tax, income tax from locally based enterprises, and profits from local state-owned enterprises, further strengthening the link between industrial activity and local revenue.

China also has a unique tax-sharing scheme, splitting VAT revenues evenly between the central and local governments. When taking into account that VAT contributes the most to China’s total tax revenue at 38 percent, it is clear that fiscal design is shaped with local governments in mind. These administrations benefit directly from expanding their economic base, creating strong incentives to industrialize.

It’s time we take decentralization seriously

Indonesia should aspire for a reality in which a regent in Nusa Tenggara Timur or a mayor in Sulawesi has the fiscal capacity to plan, invest, and innovate without depending on annual transfers from the central government. China’s model is by no means without flaws, especially noting the ongoing local debt stress, but it at least gives local administrations fiscal autonomy.

Indonesia’s opportunity is not to replicate China’s approach altogether, but to borrow its incentive scheme, so that localities could drive up local tax revenue, while carefully mitigating the debt trap. This means giving local governments both the opportunity to benefit from local economic growth and the responsibility to bear the consequences otherwise.

Without genuine decentralization, local governments will continue to operate at a deficit: accountable for service delivery without the fiscal capacity to drive outcomes. Prabowo’s growing centralization efforts certainly don’t help address this systemic hurdle.

If the President and his administration are serious about uplifting the welfare of local communities across the country, updating the decentralization model—instead of ransacking it completely—may prove far more effective in realizing Prabowo’s ambitious economic goals.

What are your takes on Indonesia’s state of decentralization today? Discuss below!

Writer, researcher:

Editors: , , Ravio Patra

Expert advisor: Paramagarjito Budi Irtanto

Graphic designer:

To corrupt politicians, the Corruption Eradication Committee (KPK), at its peak, was perhaps like a group of pesky mosquitoes. Tiny, loud, and somehow always around, lurking in the corner, ready to attack anyone.

Since its birth, the KPK has challenged longstanding norms within the country’s bureaucracy. Established in 2002, it was a radical reform trying to tackle a stubborn problem: widespread graft plaguing the system. It acted as a powerful watchdog; a deterrent for ruling elites from acting out of order.

We’ve covered the devious details in the corruption law before, but let’s now go back in time to trace the story of a little giant that was the KPK. In this edition of The Reformist, we track the foundations of Indonesia’s once iconic anti-corruption body, from its hopeful inception to its tragic downfall. As parroted countless times before, reinstating the entity to its former powers must be done if anti-corruption is to be taken seriously by this current administration.

Here is the story of the rise and fall of the KPK, in four acts.

Act I: The birth of a new hope, in times of turbulence

After an economic crisis and a series of mass protests that toppled then-president Suharto and his New Order regime in 1998, the Indonesian public demanded that corruption eradication be at the forefront of any successive administration’s goals.

When Suharto’s successor B.J.Habibie rose to power, he began codifying anti-corruption demands to ease tensions with the disenfranchised public. The Consultative People’s Assembly (MPR) unveiled decree (TAP) XI/1998, explicitly condemning his troublesome predecessor and vowed to run an administration free from corruption, collusion, and nepotism. This decree set the normative framework for Law No.28/1999 on State Administration, which is “Clean and Free from Corruption, Collusion, and Nepotism”.

His administration later doubled down on this agenda by passing Law No. 31/1999 on Anti-Corruption, which established the foundations for investigating and prosecuting graft. For more of an in-depth analysis of the bylaws, namely the ubiquitous ‘state losses’ argument, read our previous article on the topic here.

Under Article 43, the Law also obliged the State to create an independent corruption eradication commission within the next two years. This ruling became the legal DNA for an institution like the KPK to exist.

The former aerospace engineer-turned head of state was never able to create this commission after he resigned a year into his tenure due to a lack of internal political support and being hit with, ironically, graft allegations.

His successor, Abdurrahman ‘Gus Dur’ Wahid, was never able to establish an institution either, due in part to his impeachment two years into his tenure. Yet, despite the political turbulence that defined his final days in office, Gus Dur ensured the foundation for a permanent body remained intact. On 5 June 2001, just weeks before his impeachment, he signed and sent Presidential Letter No. R-13/PU/VI/2001 to the House of Representatives to formally introduce the bill that would eventually become the KPK Law.

This legal baton was passed over to his successor, Megawati Sukarnoputri, when she assumed the presidency in 2001. By then, the “two-year deadline” established under Habibie’s Law No. 31/1999 had already passed with no anti-graft institution in place.

In December 2002, her administration passed Law No. 30/2002, which officially established the KPK as an independent government institution. This law granted the commission extraordinary powers that set it apart from any previous anti-corruption body, including:

• Independent wiretapping: The ability to intercept communications without a prior court warrant

• Prosecutorial autonomy: The power to both investigate and prosecute cases, ensuring that graft suspects wouldn’t “disappear” in the handoff between agencies.

• Precedence: The authority to take over corruption cases handled by the police or prosecutors if those investigations were deemed stalled or compromised.

Act II: Glory days of corruption crackdowns

To mention the KPK in present-day Indonesia often evokes a sense of nostalgia for an era where no one, regardless of their political proximity to the presidential palace, seemed “untouchable.” This era of accountability was prevalent throughout Susilo Bambang Yudhyono’s two-term presidency.

In 2009, Aulia Pohan, the former Deputy Governor of Bank Indonesia and the father of SBY’s daughter-in-law, was convicted for his role in the misappropriation of Rp 100 billion from the Indonesian Banking Development Foundation (YPPI), a move that signaled the KPK’s fearlessness to target individuals within president SBY’s extended family.

In 2012, the KPK brought down Miranda Goeltom, former Senior Deputy Governor of Bank Indonesia, who was found guilty of orchestrating the distribution of Rp 24 billion in checks to dozens of House members to secure her selection for the post.

This era of crackdowns also targeted the regional “little kings” who had flourished under post-1998 decentralization. The most prominent of these was Ratu Atut Chosiyah, the once-powerful “Queen of Banten,” after she was caught bribing Constitutional Court Chief Justice Akil Mochtar with Rp 1 billion to swing a local election dispute.

Apart from its eagerness to target high-profile elites, the KPK was equipped with a powerful institutional ability to conduct sting operations, allowing KPK prosecutors to apprehend suspects in the act. Coupled with their ability to wiretap, this power sets them apart from other law enforcement agencies like the Attorney General’s Office (AGO), which is limited to conventional investigative methods and relies on the police to conduct arrests.

Under president Joko ‘Jokowi’ Widodo’s first term, from 2015 to 2019, the KPK, chaired by Agus Rahardjo, recorded all-time highs of over 87 sting operations. This statistic plummeted to 37 operations under chairman Firli Bahuri from 2019 to 2023, after the second Jokowi administration stripped the KPK of its independence.

Prosecutionary powers aside, the KPK’s prestige was so high that it was asked to vet potential cabinet members for Jokowi’s first administration in 2014. Using a “red label/yellow label” system, the anti-graft body screened ministerial candidates, forcing Jokowi to drop several names from his initial list to maintain a clean image of his incoming administration.

Act III: Mass exodus and the downfall of a powerhouse

Who would’ve thought that going after influential elites would have its consequences?

While many would point to 2019 as the year the KPK officially lost its independence into the hands of the central government, attacks against the graft committee had already been underway a decade prior.

Since 2010, the House has actively pushed to revise the KPK Law, with politicians from SBY’s own Democratic Party leading the charge to add the bill into the House’s National Legislation Program (Prolegnas).

These early attempts were largely unsuccessful, primarily because they were met with fierce public resistance and SBY’s own public objections to weakening the agency. Although SBY ended up rejecting any talks of ransacking the agency, he was notoriously wary of the KPK’s growing powers. During a 2009 visit to Kompas Media’s office, he captured this concern bluntly:

“Regarding the KPK, I’m very cautious. Power must not go unchecked. The KPK is already an extraordinary power holder. Its accountability lies solely with God.”

Beyond legislative maneuvers, institutional clashes between the KPK and the National Police (Polri) were commonplace. Police officials publicly criticized what they described as the KPK’s unchecked “superbody” authority to investigate and prosecute anyone it deemed suspicious.

Tensions escalated sharply in 2009 when the KPK investigated Susno Duadji, then-head of Polri’s Criminal Investigation Agency, for misappropriating funds from the 2008 West Java Gubernatorial election. Susno responded with open attacks on the commission, further polarizing public opinion and heating institutional rivalries.

The conflict reached its peak with the criminal prosecution of two KPK leadership officials, Bibit Samad Rianto and Chandra M. Hamzah, by the police on allegations of bribery and abuse of power. Public outrage was overwhelming, culminating in demonstrations and a presidential fact-finding team that ultimately cleared both men of wrongdoing.

The political tide, however, shifted significantly during the transition to the Jokowi administration. The real “fall from grace” arguably began in 2015 when the revision bill finally secured its place in the Prolegnas with virtually no political opposition within the House. Ironically, while the KPK was established under Megawati’s presidency, her Indonesian Democratic Party of Struggle (PDI-P) would go on to become the leading force in revising the law 13 years later.

Although the Law would not be formally ratified for another three years, talks of the bill triggered loud opposition from civil society and a quiet internal collapse, where hundreds of KPK officials left their posts after the bill’s introduction into the Prolegnas.

The final blow arrived in September 2019 with the official passage of Law No. 19/2019. The revision fundamentally altered the DNA of the KPK, transforming its employees into civil servants and establishing a “supervisory board” appointed by the former president. This board was granted the power to approve or deny the independent wiretaps and sting operations that made the KPK so powerful.

In a symbolic yet disheartening homage, protestors laid placards and flowers across the entrance of the KPK headquarters to proclaim the ‘death’ of the KPK.

Saut Sitomorang, then-commissioner of the anti-graft body, resigned in protest of the law’s revision. Two years later, in 2021, dozens of KPK officials were dismissed for “failing” the controversial Civic Awareness Test (TWK), a move widely seen as a mechanism for the central government to sideline outspoken anti-corruption figures. Among those dismissed was prosecutor Novel Baswedan, a widely respected figure who had previously survived an acid attack that left him permanently blind in one eye.

After a decade of attacks, the institutional collapse of the KPK was finally in motion, leaving the central government with greater authority over who and what is allowed to be targeted for graft.

Act IV: Lessons from a fallen giant

Perhaps the days of a feared KPK are now merely fleeting moments of the past. While reinstating the anti-graft body to its former powers remains a sustained demand, its early legal and political foundations can be used as two key lessons for how reform can tackle widespread issues within the system.

#1 When the problem is systemic, you need a radical reform

The KPK proved how bureaucratic norms can be disrupted through shock therapy. After the corrupt New Order, an agency like the KPK was created out of necessity; its bold legal mandates were the product of decades of pent-up public discontent with the government. With mass demonstrations that led to the downfall of the New Order regime still fresh in the minds of the government, they had to come up with an institution that would satisfy the demands of the public to build a cleaner government.

The KPK was then given powers that ensured it could really be effective in its graft crackdowns, and it took full advantage of them and managed to instil fear in less-than-honest officials and politicians. They were so effective in instilling fear that public officials had to spend decades trying to dismantle it altogether.

#2 Public confidence and support are essential

The KPK won the hearts of many not only by virtue of their work and investigating a lot of cases annually, but also by prosecuting a lot of high-profile cases and widely publicized sting operations. In 2019, the KPK was Indonesia’s most trusted public institution. They have unfortunately lost this title in subsequent years. Without this sustained support, their downfall would have occurred way sooner, given how unpopular they were among politicians. Even Jokowi did not dare touch the KPK Law until his re-election was secure with a lot of political capital to burn.

Can we go back to 2018, please?

If President Prabowo Subianto and his administration are genuine about tackling corruption, it needs to move beyond rhetoric and think about revising the institution back to its original 2002 state, galvanizing the institution from its death. This means returning the agency’s full independence and its specific powers, such as autonomous wiretapping and the freedom to conduct sting operations without a supervisor’s green light. Thus making it, once again, a feared and trusted anti-graft institution.

Only then can we hope for a return to real accountability, where no official feels “untouchable” simply because they have the right connections. Without a powerful KPK that is allowed to do its job, any talk of corruption ‘reform’ is only a matter of political window dressing.

How do you view the KPK’s standing in today’s anti-corruption efforts? Comment below!

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Editors: ,

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Prabowo Subianto is a man of ambition. We get it. From the Free Nutritious Meal Program to 80 thousand village cooperatives, the President has been proclaiming sensational numbers that seem too good to be true. Most of the time, it invites skeptical glares. But if there’s a goal we can actually get behind, it would be his proposal to develop 100 gigawatts (GW) of solar energy in the next 10 years—especially if it opens the door for a potentially progressive and inclusive transition towards energy sovereignty.

How ‘big’ is this target, exactly? Given Indonesia’s current 1 GW of installed solar energy, this ambition translates to a 100-fold increase in capacity. Between 2015 and 2024, Indonesia has only been able to increase its capacity from 79 to 942 megawatts (MW). This time around, the plan is to combine a centralized-decentralized approach, with 80 GW dispersed at 1 MW increments throughout 80 thousand villages, and the other 20 GW created through central government control.

Are plans already in place? To date, no official roadmap explains how this will be delivered. In addition, this target coexists with PLN’s 2025–2034 National Electricity Supply Business Plan (RUPTL), which aims for 17.1 GW of solar energy over the next decade—roughly 68% of which is going to extend beyond Prabowo’s first term in office. It remains a question how these two targets will reconcile.

So why are we doing this in the first place? The obvious reason is that this transition is essential to achieve Indonesia’s Net-Zero Emissions target by 2060. But it also makes sense economically: solar technology has reached the lowest production cost in history, making it cheaper than any other source of energy.

The proof? Everyone else has been picking up the pace. Countries like India went from 5.6 GW (2015) to over 135 GW (2025). China, a pioneer of the solar energy boom, increased its solar capacity from 43.5 GW (2015) to over 887 GW (2024). Both countries now top the list of the world’s largest solar energy producers alongside the United States. In Southeast Asia, Vietnam increased its solar energy capacity by 3,733 percent—from a mere 5 MW (2015) to over 18.6 GW (2024).

In this edition of The Reformist, we unpack Indonesia’s energy sector and outline what must change for a solar energy revolution to begin:

1. Stop making coal artificially cheap

Currently, the pricing point of solar-based energy is not yet competitive. Not because it is inherently expensive, but because its main competitor—coal—is kept artificially cheap. The Domestic Market Obligation (DMO) model mandates coal mining companies to sell 25 percent of their production at a capped price of US$70 per ton, much lower than the international standard of US$100 per ton. With rising coal production over the last five years, companies appear more than willing to abide by this as they remain competitive in global markets. Meanwhile, the government is already spending north of Rp200 trillion in electricity subsidies and compensation in 2025 alone.

Yet even as renewables operate under no such advantage, ongoing projects do indicate encouraging signs. The Cirata Floating Solar Power Plant, for example, operates at around US$5.8 cents per kWh, signalling that solar is approaching—if not already reaching—cost competitiveness amid heavy subsidies.

If Indonesia is serious about accelerating solar deployment, its falling production costs should be complemented by demand-side subsidies. India, for instance, offers an effective precedent through its Renewable Consumption Obligation (RCO), which mandates that a growing share of electricity consumption—43 percent by 2030—must come from renewable sources.

2. Tackle the intermittency and distribution problem

While being on the equator, Indonesia is not completely free of the intermittency challenge. Due to long periods of monsoon season, it enjoys a limited amount of sunlight in a year. To get ahead of this, Battery Energy Storage Systems (BESS) should be included in any solar project to store and generate electricity when sunlight is absent. To the administration’s credit, it has promised that for every 1 MW of solar capacity in every village, 4 MW of battery will be installed.

Given Indonesia’s archipelagic nature, another inherent challenge is distribution, especially to remote areas in the outer islands. The government seems to be adamant that 80 of the 100 GW capacity be delivered through 80 thousand village cooperatives because of operational feasibility concerns. These align with the need to plan microgrids, create new demands that do not compete with coal on larger grids, and mitigate the slow pace of coal-fired power plants’ early retirement.

3. Consider the economics of scale

Taking lessons from India and China’s solar booms, capacity expansion is more affordable when driven primarily by centralized large-scale solar projects. In India, around 85.7 of the 135 GW installed solar capacity comes from large-scale grid-connected plants. China goes even further: it hosts more such projects than any other country and, in 2024 alone, added 277 GW of new utility-scale solar capacity.

The argument for scale is an economic one. India’s Bhadla Solar Park operates at $3.7 cents per kWh with a 2 GW capacity and 56-square kilometers plant. The early success of Cirata Floating Solar Park is also similarly enabled by its scale.

Simply put: The larger the solar power plant, the cheaper the costs will be. With scale, Indonesia could potentially achieve a production cost much cheaper than the price cap set under Presidential Regulation No. 112/2022, where solar projects with capacities of up to 1 MW are subject to the highest price ceiling of US$11.47 cents per kWh, while projects exceeding 20 MW are capped at US$6.95 cents per kWh.

4. De-risk private investment, don’t strain the state budget

While village cooperatives are mandated with the development of solar initiatives, there remains no clarity on additional budget allocation, causing more questions on how exactly the government will help fund the initiative. The current scheme revolves around greater involvement of state-owned banks to lend capital into the project and the use of Rp240 trillion in government funds as liabilities for repayment.

State finances aside, this 100 GW dream doesn’t have to come at the expense of straining the state budget. Instead, foreign investment can play a role in realizing this ambition. There is no need for new innovative financing schemes to woo new investors. They will inject capital when risks can be calculated and given the security that their projects won’t incur losses from factors out of their control.

De-risking projects can take the form of clear and enforceable Power Purchase Agreements (PPA), aided land acquisition, streamlined permitting processes, and state-backed guarantees that shield projects from sudden regulatory shifts. Threats from non-state actors should also be accounted for. It shouldn’t be the case that solar farms are subjected to extortion in the same way an electric vehicle manufacturing factory was threatened in Subang, West Java. Eradicating these ‘hidden fees’ will substantially reduce capital expenditure and increase investor confidence.

5. Untangle the wire of state control in the electricity market

PLN is the only utility company that exists in the country and holds complete control over the Indonesian energy sector. This is by design and, from an idealist perspective, for good reason. The state views electricity as an essential commodity and public good, taking the sole responsibility for distributing it to every Indonesian at an affordable price. Across the four functions of generating, transmitting, distributing, and retailing electricity, private companies are only allowed to generate, while the rest is essentially monopolized by PLN.

In an effort to rapidly expand generation capacity, PLN entered into long-term PPAs with independent power producers (IPPs) through a take-or-pay scheme. These IPPs mainly use fossil fuels as their source of energy, and the take-or-pay agreements often range from 10 to 20 years. These contracts guarantee fixed prices and obligate PLN to purchase agreed volumes of electricity regardless of actual demand.

When power demand projections fail to rise to intended levels, PLN is forced to pay for unsold electricity. This is what’s been happening in the past decade: Indonesia suffered from an average oversupply of 33 GW caused by a mismatch in demand projection in 2015. Analysts estimate that for every gigawatt unsold, PLN incurs losses of roughly Rp3 trillion, placing a heavy fiscal burden both on the company and the country. Only recently, in 2025, did the ESDM Ministry reveal that the electricity demand in the island of Java and Bali, which makes up 70 percent of national energy consumption, had caught up with existing supply.

This leaves little incentive for the PLN to create new renewable energy plants. As a result, private parties remain dependent on the willingness of PLN to collaborate, creating a glaring bottleneck for realizing 100 GW worth of new energy.

In comparison, India, Vietnam, and China have implemented varying degrees of energy sector unbundling. In these countries, while the state retains control over transmission networks, private actors are permitted to compete more freely in generation and retail, allowing for greater renewable energy uptake. The results speak for themselves. As a result, these countries were able to capitalize on the 90-percent decrease in solar panel prices in the last decade because they understood the need for structural reform in their electricity sector. One could argue that Indonesia could easily catch up as well if the government is serious about achieving its stated goals.

Power wheeling could be an entry point to generate evidence of impact in reforming the market without immediately dismantling government control of the national energy grid. It allows electricity generators to sell power directly to consumers by paying a fee to use existing national transmission and distribution networks, without requiring the state utility to act as the sole buyer and seller. This provision is pushed for by renewable energy groups to be included in the New and Renewable Energy Bill, which remains stalled in parliament. However, because this act would allow for greater private sector involvement in the distribution of electricity, power wheeling remains contentious as it is seen as a step towards unbundling the electricity sector.

100 GW dream, one step at a time

Our message is that Indonesia’s ambitious solar power revolution is possible with proper planning and commitment to systemic reform. It should be about building the essential infrastructure for energy transition—from pricing distortions, resolving grid bottlenecks, sustaining access to financing, and creating an ecosystem where public and private partnerships can truly thrive. These may look less flashy, but will determine whether the ambitions manifest into reality or remain another pipe dream.

Writer, researcher:

Editors: Ravio Patra, ,

Expert advisors: , Mahawira Dillon, Talitha Dwitiyasih

Graphic designer:

After more than a year in power, President Prabowo Subianto and his current administration enter 2026 carrying unanswered problems of the past while attempting to meet ambitious goals of the future.

In 2025, the government underwent sweeping austerity measures, establishing the country’s sovereign wealth fund, and introduced grand flagship programs; all with the stated goal of laying the foundation for an 8-percent economic growth. However, last year also saw creeping militarization in civic space, opaque lawmaking processes, and blatant abuse of law enforcement powers.

If 2025 was the year of grand introductions, then 2026 will be one of setting precedent and patterns of what is to be expected of this administration in the foreseeable future.

This edition of The Reformist will preview the year ahead as President Prabowo begins his second year in office amid growing concerns of democratic backsliding, lackluster policy management, and escalating geopolitical turmoil—with extra attention on these five issues:

1. What’s next for Prabowo’s ‘grand’ flagship programs

In Prabowo’s second year in office, all eyes will be on the flagship programs he promised during his election campaign; the most notable being the Free Nutritious Meal (Makan Bergizi Gratis, or ‘MBG’). Throughout 2025, the initiative was scrutinized for a variety of reasons, from its lack of oversight, cases of food poisoning, and the involvement of law enforcement in its implementation, which has raised conflict of interests criticisms.

This year, the ‘MBG’ program will drain Rp 335 trillion from the state budget to finance its operations, up from the Rp 71 trillion allocated in its inaugural year. Notably, only around 72 percent of the budget last year was spent, raising further questions on how a fivefold increase will be used, and more importantly, why it is needed for this program.

Prabowo’s 80-thousand Red and White Village Cooperatives (Koperasi Merah Putih) program was also reworked late last year to ramp up its operations going into 2026. Through Presidential Regulation No. 17/2025, the Finance Ministry redirected village funds (Dana Desa), sourced directly from the state budget, toward financing cooperative infrastructure through state-owned banks.

In total, up to Rp 240 trillion in village funds will be used to build warehouses, retail outlets, and supporting facilities, with local governments required to repay around Rp 40 trillion annually over six years. Each cooperative is eligible for a bank loan of up to Rp 3 billion, allocated for both physical construction and operational costs, while state-owned PT Agrinas Pangan, alongside the Indonesian military, has been tasked with accelerating construction to make up for limited technical capacity.

Lastly, food security (‘food estate’) will take center stage this year as the Prabowo administration pledged to expand agricultural production in land-rich Papua. Environmental groups warn that this approach risks accelerating deforestation and ecological collapse. Greenpeace estimated that up to 2.4 million hectares of natural forests, wetlands, and savannas could be affected.

As of October 2025, land clearing for these projects had already reached around 36 thousand hectares, with nearly 20 thousand hectares classified as deforestation. Human rights violations over the forced displacement of indigenous Papuans will also continue to rise as more land is cleared for this program.

2. Electoral politics and democratic backsliding: Welcome back, New Order?

Indirect local elections have made headlines early in the year as President Prabowo and his government coalition continue to spearhead the plan for governors, mayors, and regents to no longer be directly voted by the public but instead by the Regional House of Representatives (‘DPRD’).

According to Prabowo’s coalition, this move would substantially lower the cost of politics, allowing fairer competition in Indonesia’s democracy. They further contend that these local leaders, as part of the executive branch, function primarily as extensions of the central government.

These claims, however, are widely challenged as a superficial response to money politics while masking hidden intentions. By restricting voter choice of locally elected leaders, power becomes even more centralized as political party elites gain greater political ground to lobby amongst themselves on who gets to govern a region. This reality further distances citizens from the democratic process and politicians from accountability.

The current administration has now garnered support from all but two political parties in the House of Representatives (‘DPR’), namely coalition-mate Prosperous Justice Party (‘PKS’) and quasi-opposition Indonesian Democratic Party of Struggle (‘PDI-P’). However, as the President consolidates more of his power politically, this year might just be the moment he attempts to realize this ambition.

Additionally, while elites in the administration have only called for indirect elections at the local level, Prabowo and his Gerindra party have long advocated for the reinstatement of the original 1945 Constitution to replace the current amended Constitution, which among other things would erase direct presidential elections. This isn’t just hearsay, it is explicitly written in Article 10 of the party’s bylaws.

Under the original Constitution, direct presidential elections would cease to exist as the Consultative People’s Assembly (‘MPR’) would have the authority to select the country’s President, reverting the process to how it was done throughout the New Order regime.

The signs of democratic backsliding are there, and if left unchecked, Indonesia risks a return to authoritarianism.

3. Energy transition: Big ambition, but what of the execution?

Indonesia’s energy transition narrative continues to clash with policy reality. Last year in Brazil, President Prabowo publicly pledged that Indonesia would source 100 percent of its energy from renewable sources in the next ten years. In front of the United Nations’ General Assembly, he affirmed Indonesia’s commitment to Net Zero Emissions by 2060.

Domestically, he has also promised an ambitious goal of creating 100 gigawatts (GW) of solar energy capacity. While this promise is good on paper, a roadmap on how this will be done does not yet exist. At present, Indonesia has less than 1 GW of solar capacity in its energy mix.

The initiative will delegate 80 GW to be created through village cooperatives, whereas the other 20 GW will be managed by the central government. Without addressing concerns of scale, technical capacity, good governance, and proper financing models, this solar power dream risks becoming another one of the President’s grand yet lackluster ambitions.

Grand ambitions aside, the 2025–2034 Electricity Procurement Business Plan (RUPTL) is also set to schedule new coal-fired power plants, even though Presidential Regulation No. 112/2022 formally bans the construction of new coal facilities. Talks of revising this regulation to allow coal plants under the pretext of ‘energy sovereignty’ have led to public backlash as a step back towards meaningful decarbonization, especially since the current text already permits captive coal power plants for industrial use.

Meanwhile, Indonesia’s sovereign wealth fund, Danantara, has announced plans for geothermal and waste-to-energy power plants, whose “renewable” classifications are often challenged by experts and advocates. While these investments allow the government to signal progress on clean energy, they do little to dispel concerns that Indonesia’s transition strategy continues to rely on grey-area solutions rather than a decisive step towards investing in proven clean energy.

4. With a collapsing international order, where does Indonesia stand?

Last year was marked by further signs of a decaying rules-based international order. A multipolar world built on the foundations of international law and collaboration has been undermined in favor of arrogance from global powers. The United States, under President Donald Trump, resumed an aggressive unilateral foreign policy that included withdrawing from longstanding agreements and deepening skepticism about collective approaches to global challenges.

Geopolitical tensions continue to evolve, including deepening conflicts between China and Taiwan, border disputes and military aggression among ASEAN member states, and the lack of a real solution for Israel’s ongoing genocide in Palestine.

Indonesia, as a middle power, could stand as a key actor in this changing geopolitical structure—one shaped by the advocacy of international law. Yet, while President Prabowo publicly boasts a ‘free and active’ foreign policy motto, Indonesia’s current diplomatic model appears pragmatic at best and unprincipled at worst. These stand in stark contrast as Indonesia assumes the Presidency of the UN Human Rights Council for 2026.

Last year, President Prabowo showed this by applying for Indonesia’s membership into BRICS, while still finding ways to cozy up with US President Donald Trump. His administration also broke a decade-long deadlock by securing an economic partnership agreement with the European Union, even as it pursued deeper security and defense cooperation with countries like Türkiye and China.

Entering 2026, this unprincipled approach sees no signs of slowing down. On 3 January, after the US launched a unilateral military attack on Venezuela, capturing President Nicolás Maduro and First Lady Cilia Flores into US captivity, foreign leaders across the Global South and middle powers were quick to condemn Washington’s actions. Indonesia, however, chose to remain neutral, with the Foreign Ministry expressing ‘grave concern’ without explicitly mentioning the US or Donald Trump as aggressors. President Prabowo himself has yet to issue an official statement on the incident.

This approach is far from accidental. With unfinished tariff negotiations between the US and Indonesia, explicitly condemning the US now goes against the trust the President is actively cultivating with his American counterpart.

Indonesia’s foreign policy has thus evolved into one that subordinates the enforcement of international law to the pursuit of narrowly defined national interests. Keeping up this balancing act, however, will only become more difficult as the world becomes more polarized under a dysfunctional international order.

5. Corruption eradication effort, politicized?

Debates over what constitutes corruption came into focus last year after a series of high-profile graft cases. From adulterated gasoline sold at inflated prices, ‘illegal’ sugar import policies, to the purchase of old naval fleets, corruption continues to dominate Indonesia’s news cycle.

In many of these cases, prosecutors centered their allegations on the notion of ‘state losses’, as stated in Articles 2 and 3 of Law No. 20/2001 on Anti–Corruption. The argument was used to justify indictment even in the absence of clear paper trails or evidence that the suspects benefited personally. (We wrote in-depth about the contested articles last year in this piece)

This was exactly what happened in the highly politicized graft case against former trade minister Tom Lembong. The trial almost ended with Tom being sent to prison for four and a half years, until President Prabowo intervened at the last minute to provide legal clemency to the former trade minister.

Utilizing anti-corruption law to criminalize policy and business decisions undermine the ultimate goal of addressing theft and large-scale embezzlement more detrimental to the economy.

Yet, the same ‘state losses’ argument continues to be used as former education minister Nadiem Makarim currently sits on trial for the Rp 2.1 trillion Google Chromebook procurement graft case. Nadiem and his legal team have rejected these claims, arguing that there was no personal enrichment. Google representatives have also denied involvement in any quid pro quo arrangements between the tech giant and the former minister.

While Nadiem’s tenure as education minister is viewed in a controversial light due to his ‘out of touch’ approach in reforming the country’s education system, the graft case itself reeks of foul play. In 2026, attention will remain on whether the Corruption Eradication Committee (KPK) and the Attorney General’s Office will tackle genuine corruption cases, or if they will continue getting dragged into high-profile, politicized cases.

Buckling up for 2026

This next year will not be easy or smooth sailing. As the current administration continues to push out new and controversial policies, it is important that civil society remains as a vanguard of political accountability to ruling elites.

Empathetic solutions exist if those in power choose to wield their political power in a just manner. Achieving policy continuation does not have to come at the cost of authoritarianism and nor does economic growth have to come at the expense of environmental degradation or human rights violations.

If you are interested in watching Indonesia’s 2026 under Prabowo’s second year in office with us, The Reformist is opening up more spots this year for our readers to contribute to our opinion column. Write to us: connect@thinkpolicy.id

Writer, Researcher:

Editors: , , Ravio Patra

Visual designer:

Dear readers,

What an eventful year 2025 has been. On behalf of The Reformist editorial desk, we would like to thank our readers for navigating this tumultuous first year of the new administration with us.

This year, The Reformist published 15 volumes from our editorial room and 15 opinion pieces sent to us from guest writers. Looking back, these writings are markers of what the nation withstood throughout the year, in one way or another.

What we wrote

Turbulent times call for structural reforms

Indonesia has been through strong turbulence this year. Demonstrations came in waves, protesting one thing after the other: from costly programs that angered taxpayers to the government’s inability to respond aptly to a crisis.

In March, The Reformist wrote about President Prabowo Subianto’s campaign centrepiece, the Free Meal Program, a.k.a ‘MBG’. The program’s rollout, launched in January, sparked controversy after the government cut approximately Rp 300 trillion from critical budgets in an ‘austerity’ measure, reportedly to fund MBG. We asked in our article: Is MBG worth the hefty budget cuts?

Then comes August, when a series of protests broke out in the capital and other regions when the people’s economic struggles were met with elite arrogance instead of empathy. Public anger reached a boiling point after a police tactical vehicle ran over and killed a young ojol (online ride-hailing) driver, Affan Kurniawan. We wrote about the prevalence of police brutality in times of protests and the impunity that followed, calling for fundamental police reforms.

A few weeks ago, an unlikely cyclone ‘Senyar’ formed near the equator and wreaked havoc in three provinces of Sumatra, causing flash floods and landslides that killed thousands and displaced millions. In our November volume, we wrote about what the government must do about the Sumatra tragedy.

On past reforms

Throughout the year, we reflected on notable past reforms such as the country’s universal health coverage BPJS, the New Order-era school expansion program ‘SD Inpres’, the capital’s public transportation breakthrough ‘Transjakarta’, and the beloved digital payment system ‘QRIS’.

With all their merits and shortcomings, we sought to find lessons about what made them work (and what didn’t) as structural reforms. Hopefully, you also learned a thing or two about how reform can be done inside an established system.

The reform hits and misses

When a window of opportunity opens, it gives way for substantial reform to take place. At The Reformist, we identified instances when reforms either could (or should) happen, or when they did happen but missed some marks.

On education, we questioned in this volume the efficacy of decentralized autonomy and whether or not we missed the opportunity to address disparity in quality education.

Speaking of opportunities: In this article, we looked back to the 1998 financial crisis—interrogating the IMF bailout that, while many saw it as ‘selling our soul to the devil’, might have provided us a push for institutional reforms in our banking system.

More recently, we wrote about a possible great reform that could change the public policy sphere: several experts and scholars are petitioning the Constitutional Court (MK) to review provisions in the corruption law that have deterred policymakers from initiating groundbreaking reforms, fearing criminalization.

In our last volume of the year, we reviewed Indonesia’s participation in the COP30 climate conference, which has tested our commitment to meaningful climate action. This was an opportunity for Prabowo’s administration to prove its seriousness in achieving our climate targets, but a few things have gone in the other direction.

Welcoming our guest writers to The Reformist Opinion

We realize our readers aren’t just observers; they are practitioners and experts shaping the fields they work in. To tap into this collective intelligence, we opened our pages to guest contributors, turning The Reformist into a collaborative forum for policy debates. We published 13 The Reformist Opinion pieces this year, including:

• When sugar imports become a crime: Putting trade policy on trial, by Vid Adrison and Meuti Mohsin

• Danantara’s expensive waste-to-energy plan won’t solve any problems by Donny Julius

• Prabowo’s self-fulfilling disaster relief plan, patriotic or biased? by Alanda Kariza

• More on our page

We thank our contributing writers for their enthusiasm and trust in our publication. In 2026, we will open more spots for guest writers to publish their articles in The Reformist. We really hope more of you would like to share your thoughts with fellow readers.

Read our terms and conditions before sending your pitch on this page.

We started a podcast!

2025 is also the year The Reformist ventured into a new medium, podcasts! In our inaugural year, we had seven meaningful conversations with guests from around the world. From senior Indonesian technocrats to neighboring countries’ young reformists, we created our Reformist podcast to bring you all closer to the necessary policy, political, and historical dialogues needed for structural change.

We talked to former Energy and Resources Minister Sudirman Said about the reforms to dismantle the oil and gas ‘mafia’. In another episode, we revisited the post-2004 tsunami reconstruction efforts in Aceh and Nias with William Sabandar (this particular episode is now more relevant than ever as we witness the government’s lackluster Sumatra disaster management efforts).

Other episodes include:

• On President’s delivery unit with Yanuar Nugroho

• On Jakarta’s digital service reform with Atika Nur Rahmania

Then, we went international.

We had Thailand’s (almost) Prime Minister Pita Limjaroenrat talk about what it takes for the idealist youth to build and sustain a political movement. We spoke with Belgian historian and author of Revolusi David Van Reybrouck, who shared the human stories behind Indonesia’s independence movement. We also gathered insights from Malaysia’s up-and-coming reformist politician and founder of the MUDA political party, Amira Aisya.

We are looking forward to more conversations about reforms and policy issues next year!

The Reformist in 2026

2025 has been a defining year for The Reformist.

As this year comes to a close, we would like to express our gratitude to all of you for reading, watching, and listening to our work throughout 2025.

In 2026, we are establishing “The Reformist” as the brand for all media released by Think Policy. We will continue to grow and, hopefully, be your sanctuary when you need a break from the overstimulating, bottomless short-form content ‘feed’.

Starting next year, you can expect more regular release of our long-form media:

• The Reformist Insights: A weekly newsletter from our editorial desk; an analysis, editorial view, or resume of past, current, and possibly interesting policy reforms.

• The Reformist Opinion: A weekly opinion column for guest writers—experts, observers, practitioners, students, you—to publish their pieces in our publication.

• The Reformist Podcast: A monthly conversation with reformist figures in and outside of the system—from home and abroad.

We are excited for the year ahead and looking forward to your continued support in 2026!

See you next year,

The Reformist Editorial Team

The recent flood catastrophe in Sumatra is a direct consequence of the ongoing climate crisis. While the death toll keeps increasing and conditions in Aceh, West, and North Sumatra are far from being restored, the government’s response to necessary mitigation and adaptation efforts in the past decade has also been lukewarm at best. In many ways, the country has been misguided in reducing its economic dependence on environmentally damaging sectors.

Evidently, at the United Nations’ (UN) 30th Conference of the Parties (COP) climate summit in Belém, Brazil, Indonesia came not to cooperate in rooting out carbon emissions but to advertise itself as a ‘green’ investment partner to legitimize them.

As a platform meant to keep the world from exceeding a limit of 1.5°C temperature increase—to prevent catastrophic and irreversible damage—COP has failed to deliver this goal even after 30 iterations, warned the UN Environment Programme. Instead, COP offers us insight into the perils of collective action and raises a question of whether the international community needs a different approach altogether in achieving the indispensable mission to stabilize the Earth’s temperature.

In this edition of The Reformist, read along to a summary of what transpired over COP30 and Indonesia’s hodgepodge climate commitments under President Prabowo Subianto’s administration.

From Rio to Belém: 30+ years of climate diplomacy ended up in avoidant leadership

It was in Rio de Janeiro in 1992 where the United Nations Framework Convention on Climate Change (UNFCCC) was born, the treaty that would give rise to these annual gatherings and spark three decades of climate negotiations.

COP30 arrived at a critical juncture where COP21’s binding Paris Agreement is at risk of falling through. Under this accord, signed in 2015 by 196 countries, signatory nations agreed to limit the Earth’s temperature rise to well below 2°C above pre-industrial levels, with efforts to limit the increase to 1.5°C.

To achieve this goal, each country must submit a Nationally Determined Contribution (NDC), a climate action plan outlining its emissions reduction targets and strategies by 2030. COP30 marked a pivotal moment as it was the deadline for countries to submit their updated commitments post-2030, referred to as the Second NDC.

Before COP30 in Belém, countries were meant to submit their post-2030 climate NDCs by 10 February 2025. About 13 out of 194 participating countries met this deadline, with 103 more countries turning theirs in by the end of COP 30, including Indonesia.

Beyond the formal commitments, however, Belém found itself tangled with avoidant leadership.

I. The fossil fuel phase-out avoidance

While countries like the Netherlands and Colombia were steadfast in pushing for the creation of a national roadmap for phasing out fossil fuels, their proposal never made it into the final COP30 accord. The support from over 80 countries (including host Brazil) was lost to the majority of participating nations, including Indonesia, that refused to commit to language that would legally bind them to a fossil fuel phaseout.

Domestically, President Prabowo’s ambitions of realizing energy sovereignty and 8 percent economic growth drew fears about whether sustainability and a green transition were even possible. While the President pledged to reach Net Zero Emissions before 2050 and the complete phase out of non-renewable power plants in the next 15 years at the G20 Summit in Rio last year, his administration’s domestic policies yield significant doubts.

It began when Energy and Mineral Resources Minister Bahlil Lahadalia released the 2025-2034 Electricity Procurement Business Plan (RUPTL), a document that sets out how the state-owned electrical company (PLN) will source and expand the country’s power supply over the next decade.

Despite Presidential Regulation No. 112/2022 banning new coal-fired power plants from being built after 2030, the new RUPTL circumvented this regulation by reinstating plans for additional coal and gas capacity throughout the decade. Of the 69.5 gigawatts (GW) of new energy planned, 16.6 GW will come from non-renewables, including new coal units, 42.5 GW is slated for renewables, and 10.3 GW from energy storage. The plan, however, front-loads fossil fuel development from 2025 to 2029, delaying the bulk of renewable additions until 2030–2034, only after Prabowo finishes his term as President.

Yet, a month later, in a state visit to Brazil, the President confidently affirmed in front of an international audience that in ten years, the nation would be completely supplied with electricity from renewable energy. Things are just not adding up.

II. The financing avoidance

The ‘Baku-to-Belém Roadmap Report for US$1.3 Trillion’ was a key talking point, outlining an ambition to mobilize that amount annually by 2035 for climate action in developing countries.

The roadmap provides five mechanisms: replenishing (grants and concessional finance), rebalancing (debt and fiscal space), rechanneling (private finance), revamping (capacity and coordination), and reshaping (systems and structures for equitable capital flows). Under this framework, funds can be mobilised through both public and private sources, encompassing foreign aid, private investment, and international financial institutions.

However, while participating countries endorsed the plan, geopolitical squabbles have dimmed its projected efficacy. Developing countries, such as China and India, argue that developed countries must shoulder a clearer and larger share of responsibility, in line with Article 9(1) of the Paris Agreement. They argue that the roadmap places excessive reliance on mobilising private finance, which shifts pressure away from public funding from developed countries.

In contrast, richer countries such as Canada advocate for a broader approach that leans more heavily on private investment and innovative financial instruments to meet the US$1.3 trillion aspiration.

Another climate-finance pledge introduced at COP30 is the Tropical Forest Forever Facility (TFFF). The facility was launched as an innovative financing model to support the conservation and protection of tropical forest ecosystems through performance-based payments and blended financing mechanisms.

While the initiative has been widely welcomed, the commitments made so far fall short of the TFFF’s target of US$125 billion. Indonesia, Brazil, and Portugal affirmed their intention to contribute US$1 billion each, but developed countries such as Norway, France, and Germany have announced varying contribution levels or have yet to determine their commitments.

III. The enforcement avoidance

The crux of the problem lies in the Paris Agreement’s structure. While it is legally binding in terms of participation and reporting, its climate targets are entirely self-determined. This flexibility was designed to secure universal participation, but it also means that national ambition is deeply vulnerable to domestic politics, as demonstrated by the United States, which has withdrawn from and re-entered the agreement depending on who occupies the White House.

A contrast can be seen in the Kyoto Protocol. Adopted at COP3 in 1997, it was the world’s first attempt at a legally binding, top-down climate action protocol. Kyoto assigned emissions-reduction targets only to developed nations under the principle of “common but differentiated responsibilities.” On paper, this created a clearer plan than Paris. In practice, however, it proved politically unworkable.

One of the obstacles was the reluctance of developed nations, particularly the United States, to bind themselves to legally binding climate commitments when countries such as India and China were not subject to the same obligations.

Indonesia’s climate pledges and their dependencies

Indonesia submitted its Second Nationally Determined Contribution (SNDC) on October 27, two weeks before the start of COP30. The country’s last submitted commitment was through its Enhanced NDC in 2022. The new SNDC marks an unambiguous outlook into Indonesia’s climate commitments, with a few notes.

First, the SNDC’s projected 19 to 23 percent renewables share within the country’s energy mix by 2030 is far below the President’s 100 percent ambition in 2035. It also pledges an 8 to 17,5 percent emission reduction in Indonesia’s total greenhouse gas (GHG) emissions across all sectors, including Forestry and other Land-Use (FOLU) and non-CO₂ gases, compared with the previous NDC.

Under the new SNDC, Indonesia also aims to peak its GHG emissions in 2030 at 1.35 gigatons of carbon dioxide equivalent (CO₂e) in the low-economic-growth scenario and 1.49 gigatons of CO₂e in the high-economic-growth scenario.

Critics, however, point to the SNDC’s overreliance on reducing emissions through the FOLU sector. While the government claims the sector will reach a “FOLU Net Sink” by 2030—meaning land use will absorb more carbon than it emits—relying on FOLU-based emission cuts allows the government greater leeway to justify continued fossil-fuel usage, as reflected in the RUPTL.

Even then, at the lower peak, Climate Action Tracker warned that if every country were to follow Indonesia’s climate plan, the world would overshoot the 2°C limit and instead surpass 4°C. According to their analysis, Indonesia has to decrease its peak to as low as 0,72 gigatons of CO₂e by 2035, outside of the government’s FOLU net sink pledge.

While the outcome is filled with question marks, the administration’s methods of getting there also present glaring dependencies:

I. The carbon-trading dependence

Instead of tightening pathways to reduce fossil fuel emissions, the Prabowo administration has opted to double down on carbon trading. This turn toward commercialization was formalized through Presidential Regulation No. 110/2025, which establishes Indonesia’s national carbon-market architecture and places nature-based conservation solutions at the center of its climate strategy.

Under this Presidential Regulation, trading carbon emissions became the ‘selling point’ of Indonesia’s time at COP30. The market-based mechanism allows domestic and international companies to offset their emissions by purchasing carbon credits or paying a carbon tax, rather than reducing their reliance on fossil fuels.

While the system presents a mutually beneficial solution by offering additional revenue for the state and a compliance pathway for emitters, it is also the least disruptive option for Indonesia’s fossil-fuel industry.

The delegation carrying this agenda reflected these priorities. Prabowo appointed his brother and climate envoy, Hashim Djojohadikusumo, to lead the Indonesian team at COP30. Notably, Hashim has had a longstanding business career in the mining and extraction industry through his Arsari Group conglomerate.

He was joined by Forestry Minister Raja Juli Antoni and Environment Minister Hanif Faisol Nurofiq, who publicly stated that Indonesia was prepared to “sell a large portion” of its carbon emissions on the international market.

Even before setting foot in Bélem, the Indonesian delegation had set an internal target of selling over Rp 16 trillion (≈US$1 billion) worth of carbon credits. They ended up coming home with Rp 7 trillion in sales.

Carbon trading, however, has faced criticism and doubt from civil society groups on whether it can create real emissions reductions. By trading carbon emissions, rich countries can continue their business-as-usual operations and not have to reduce their own emissions by simply offsetting them through the purchase of carbon credits abroad.

Once traded, monitoring the results tends to become a castaway. A 2023 study showed that over 90 percent of issued carbon credits from 26 global forest conservation projects were either overcounted or unable to produce real emissions cuts. Environmentalists also note growing concerns over Indonesia’s conservation pledges amid growing peat degradation and deforestation. The tragedy in Sumatra–which was largely attributed to mass deforestation and rising oil palm plantations– certainly doesn’t help in shaping Indonesia’s legitimacy.

II. The fossil fuel dependence

This year, the Indonesian delegation was awarded the ‘Fossil of the Day’ title by activists at COP30. Their criticism centered on Indonesia’s inclusion of 46 fossil-fuel lobbyists and the delegation’s decision to use the conference to market carbon credits as a way to legitimize emissions at the same summit where negotiators were convening to eliminate them. Companies such as state-owned Pertamina, Golden Energy Mines, Adaro Energy, MedCo Energy, Vale Indonesia, and many more are listed as the official sponsors of this year’s Indonesian delegation.

Indeed, for years, lobbyists from the fossil fuel corporations have been given access to mingle with world leaders at the meeting that seeks to phase out the industry. Historically, the rising emergence of fossil fuel lobbyists began at COP26, five years after the Paris Agreement. The Guardian reported that from COP26 to COP29, over 5,000 fossil fuel lobbyists were present in COP summits. In COP30 alone, over 1,600 fossil fuel lobbyists participated in the event.

III. A global north dependence?

The truth is that climate financing has always been fraught, as seen through the Baku-to-Belem roadmap. Since COP1 in Berlin, the global fight against climate change has relied on one fragile premise: that wealthy, industrialized nations would help developing countries in their climate action through either financial aid or technical transfer of knowledge. The former has always been the hardest to materialize.

Speaking of climate financing, the current administration has bold energy transition ambitions that have raised concerns over its unclear sources of funding. A few months back, the government introduced a new ambitious pledge to build 80 GW of solar energy projects in rural villages. For context, Indonesia has yet to reach 1 GW of solar energy in its energy mix. This responsibility will now fall on the 80 thousand village cooperatives created through the President’s flagship Red and White Village Cooperatives program.

The theatrics of climate financing deserve a separate article in itself, which is why we will be extending this article into a two-part series on climate change. For our next edition in January, The Reformist will take a closer look at the nuances of climate financing and just how ambitious, and perhaps unrealistic, this solar energy plan really is.

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Cyclones don’t usually form near the equator, but an anomaly birthed tropical cyclone ‘Senyar’ that has triggered a series of deadly floods across Southeast Asia. The human death toll is staggering: as of 2 December 2025, nearly 1,000 deaths have been reported—708 in Indonesia, 181 in Thailand, 98 in Vietnam, and three in Malaysia; while hundreds remain missing and over one million displaced.

Based on the death toll alone, Senyar seems to have hit Indonesia the hardest, wreaking havoc on three major provinces: Aceh, North Sumatra, and West Sumatra. Sustained heavy rains, flash floods, and landslides wiped out entire villages, destroyed homes, and crippled infrastructure. The severe damage was intensified by widespread deforestation, which has removed the natural barriers that might have absorbed the rainfall before reaching populated areas.

The scale of devastation raises urgent questions about preparedness, response capacity, and ecological health. More could—and should—have been done to reduce risks, strengthen resilience, and prevent the loss of so many lives.

Today, 3 December 2025, at 13:00 Western Indonesia Time, President Prabowo will hold a press conference at the presidential palace to address the nation on this tragedy. In this edition of The Reformist, we list five key reforms that the government can and must do, from emergency relief to fundamental reforms:

1. Declare a state of national emergency

The very first order of business should be for the President to declare a state of national emergency.

Unlike Thailand’s swift response in declaring a state of emergency, Indonesia has been painfully slow at addressing the crisis. Prime Minister Anutin Charnvirakul was visibly remorseful for his government’s failure in preventing casualties and underscoring the urgency of the crisis.

Although the floods began on 25 November, it was not until 30 November that the central government initiated a coordinated response. The Head of National Disaster Management Agency (BNPB) Suharyanto admitted that he was “surprised” to see the scale of the disaster, having previously said it was not “as bad as social media made it seem.”

Some local governments have also raised white flags, declaring themselves overwhelmed amid limited capacity, budget, and their own families having been impacted by the flooding. This should have been enough to compel the central government to step in.

Yet, President Prabowo Subianto publicly stated that conditions on the ground were already improving and there wasn’t an urgent need to declare a state of emergency. After all, this disaster has already met the threshold of a “national disaster” per Law No. 24/2007: massive casualties, areas of impact, destruction of infrastructure, and economic losses across multiple provinces.

But it’s not too late: the central government can still right the wrongs of their slow early response by allocating the full capacity of the state to ensure no further casualties and provide urgent shelter, food, and relief.

2. Plan promptly to recover and reconstruct impacted areas

As relief efforts continue, the government must immediately begin planning for what comes after the waters recede. In an emotional presser, Aceh Governor Muzakir Manaf held back tears after noting that four entire villages were obliterated by the floods. In places where homes, schools, health centers, markets, and basic infrastructure used to stand, there are now only trails of thick mud. In total, more than 3.2 million people were affected, with 2,600 injured and at least 507 remaining missing.

If the political will is there, a lot can be done to recover from such devastation. There are past instances to learn from:

• Following the 2018 Central Sulawesi tsunami, then-president Joko Widodo issued Presidential Instruction No. 10 of 2018 within two months. The instruction laid out a coordinated rehabilitation and reconstruction roadmap involving multiple ministries and local governments. The swift decision helped reconstruct 2,952 houses in Palu, 1,238 in Sigi, and 1,396 in Donggala; rebuild the Pantoloan and Wani international ports; and reopen hospitals, universities, roads, and bridges.

• After the 2004 Aceh tsunami, the SBY administration established the Aceh-Nias Rehabilitation and Reconstruction Agency (BRR) with special authority, budget, and coordination power to rebuild from the ground up within three months, led by seasoned technocrat Kuntoro Mangkusobroto. BRR mapped the full extent of the damages and rebuilt over 140,000 houses, 3,700 kilometers of roads, 1,700 schools, 1,000 government buildings, and 36 airports and seaports in collaboration with international donors and aid projects. (Watch our conversation with then-Head of BRR Nias William Sabandar)

The government must ensure the rapid plan also encompasses not only physical reconstruction, but also comprehensive social and human recovery, including: psychosocial support (trauma healing), livelihood restoration, and guaranteed access to education for all victims.

3. Invest more in disaster prevention, mitigation, and resilience

If this disaster does not give the government a wake-up call to invest and allocate more budget to managing disasters, nothing will.

Earlier this year, President Prabowo’s austerity measures hit Indonesia’s disaster response and early warning capacities hard. Funding had been slashed for BNPB, the National Search and Rescue Agency (Basarnas), and the Meteorology, Climatology, and Geophysics Agency (BMKG), even as disaster risks escalated.

According to 2026 budget data, BNPB’s allocation will drop from this year’s Rp 1.43 trillion to just Rp 491 billion (-65%). Previously, Basarnas already saw a sharp fall in its emergency response budget from Rp 995.5 billion in 2024 to Rp 410.7 billion in 2025 (-59%). Similarly, BMKG’s budget was cut from Rp 3.114 trillion in 2024 to Rp 2.5 trillion in 2025 (-20%).

One researcher from the National Research and Innovation Agency (BRIN) has also questioned the government’s seriousness in natural disaster prevention, noting that the agency had already developed the early mid-term seasonal study of the Indonesian region (Kamajaya), a forecast system used to anticipate shifts in rainfall and extreme weather patterns to detect tropical cyclones months before their emergence.

In contrast to Indonesia’s budget cuts, neighboring Malaysia has instead pledged to increase its natural disaster prevention system by allocating RM 2.2 billion (approximately Rp 7.1 trillion) in 2026. The funds will be used to finance 43 flood mitigation projects, with 12 of them being new initiatives.

Reassessing the funding for Indonesia’s agencies shouldn’t involve comparing with neighboring countries. Indonesia is a tropical, archipelagic nation sitting dead center in the ring of fire, making the occurrence of environmental disasters inevitable, especially with the worsening climate crisis.

4. Halt new forest concessions and undo deforestation

Indonesia, including the island of Sumatra, has lost so much of its natural buffers and forest cover to rampant deforestation. President Prabowo must take urgent steps to end this and restore the much-needed natural defense system across Indonesia’s disaster-prone regions.

According to Greenpeace Indonesia, river basins across Aceh, North Sumatra, and West Sumatra are naturally narrow, steep, and deep, which give them little capacity to absorb overflow. Under these conditions, forest cover becomes the only buffer that can slow the movement of water. When rain hammers a healthy forest, the canopy breaks the fall, and the roots hold the earth. Conversely, without such canopies or roots, landslides and floods are almost a certainty.

This was evident as we watched the devastating videos of villages in North Sumatra being swallowed alive as stripped hillsides crumbled under heavy rainfall.

Decades of unfiltered extractive activities have depleted our forest cover, practically removing our natural ‘brakes’. The landslides and collapses we witnessed are not freak accidents of nature; they are the outcomes of policies that have allowed destructive industries to operate unchecked. Greenpeace estimates that less than 25 percent of forest cover remains in the three affected regions.

To this end, the government must immediately impose a moratorium on licensing in ecologically threatened areas and disaster-prone zones, reassess existing environmental and social impact assessments, and firmly revoke permits of companies that fail to comply with environmental sustainability requirements.

On the heels of Presidential Regulation No. 110/2025, which officially established the foundations of Indonesia’s carbon market, Indonesia’s delegation secured over Rp 7 trillion in carbon credits during the COP30 climate summit. The funds received from these credits must be earmarked for the protection and betterment of the country’s environment. It should not, by any means, be redirected to “greenwashing” projects that set us on a path of more tragedies.

5. Rethink how the environment and natural resources are managed

The government has to review and ensure adequate regulatory measures against land conversions for purposes of logging, oil palm plantations, mining, and other extractive industries.

Beyond issuing a moratorium, the government must rethink the existing legal and regulatory frameworks that govern land conversion, extractive industries, forest management, and spatial planning.

These include, but are not limited to:

• Government Regulation (PP) No. 23/2021 concerning Forest Areas (a derivative of the Job Creation Omnibus Law), which often facilitates large-scale land clearing through mechanisms such as “forest area release” and “forest area use approval” that disproportionately favor investment over conservation.

• Spatial Planning (RTRW) regulations under the Ministry of Agrarian Affairs (ATR/BPN) that govern “areas for other purposes” (APL) or natural forests that are not classified as forest estates. These regulations only loosely govern APL, leaving them vulnerable to conversion without the strict protections afforded to conservation areas.

• Environmental Impact Assessment (Amdal) processes, which are a pre-requisite for all extractive activities, must be rigorously and transparently enforced. What we have witnessed in Sumatra this past week is the consequence of weak environmental impact assessment—a failure that has left many more vulnerable to disasters that could have been better mitigated.

Protecting the environment means saving lives now

This is not the first time that we have found ourselves in this situation. We have mourned preventable deaths before. We have rebuilt cities from rubble before. And we have shown the world that when leadership responds appropriately to crises, Indonesia can rise stronger than before.

We cannot afford treating the environment and climate change as afterthoughts anymore. Evidently, the choice is no longer between development today versus saving the planet tomorrow. Environmental degradation and climate change are already affecting our lives today, and the cost of ignoring it is too high of a price to pay. For that, we must act now.

Whether through reforestation programs, stringent environmental requirements for extractive companies, or restricting land use permits, our government bears the responsibility to lead Indonesia with the climate problem in mind at all times. Not out of external pressure or international standing, but for the protection, safety, and livelihoods of all Indonesians.

The victims in this disastrous episode deserve more than just our sympathy: they—we—deserve change.

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In 2011, the World Bank’s Global Financial Inclusion Index revealed that only 20 percent of Indonesian adults owned a bank account. Fast forward to 2025, the figure almost tripled by reaching close to 60 percent of the total adult population. The biggest contributing factor to this sharp increase? The growing digitalization of the country’s financial system.

While there is still much to be done, the goal of promoting financial inclusion can largely be attributed to the adoption of mobile banking and financial technology (fintech) systems, which allow a greater proportion of the population from diverse socio-economic backgrounds to participate in the formal economy.

The reform that best represents this change is the nation’s beloved Quick Response Code Indonesia Standard (QRIS), introduced by Bank Indonesia (BI) in late 2019. QRIS has become a lifeline by offering a low-cost and easy-to-use payment method for communities often left out of mainstream financial services. From your local street vendor to the most luxurious designer stores, it is difficult to imagine a merchant that does not have these iconic QR codes plastered all over.

In this edition of The Reformist, we trace the origins of QRIS, from its scattered beginnings to universal nationwide adoption, and how threats from the Western world emerged as QRIS continues to grow and foster greater regionalization across Asia.

From private sector innovation to state adoption

In the mid-2010s, the emergence of fintech applications laid the foundation of what would become the QRIS payment system. From 2017-2018, e-wallets like GoPay, OVO, DANA, LinkAja, and many more began experimenting with QR-based payments to their customers as an online alternative form of payment.

In August 2018, OVO even lauded their system, claiming that over 9,000 small and medium-sized enterprises had already begun using their QR payment services. Conventional banks such as Bank BCA, Mandiri, and BNI with mobile banking features were also involved in this digital renaissance of QR-based payment systems.

Ironically, during that same year, BI demanded that GoPay temporarily shut down its QR payment system for rolling out its services en masse without prior approval from the central bank. The same instance occurred with Bank BCA, which halted its QR code rollout after BI demanded that it do so.

The aftermath of these Payment System Service Providers (PJPs) crowding the market with their own sets of QR payment systems required consumers to have different applications installed, depending on which PJP provided a merchant’s QR code. During this period, it wasn’t uncommon for consumers to have multiple mobile banking and fintech applications downloaded on their phones just to prepare for a situation like this.

Realizing this, the government, through BI, decided to intervene in the market and integrate all the different mobile banks and e-wallets into one standardized QR code. This is not to say that the central bank selfishly co-opted private sector innovation, as BI worked closely together with the Indonesian Payment Systems Association (ASPI) to create the policy behind QRIS and its subsequent implementation, marking this reform as an example of proper public and private sector cooperation.

On Independence Day, 17 August 2019, through BI Regulation No.21/2019, QRIS was officially released by BI and became the universal QR code payment system for all banks and e-wallets, and came into effect on 1 January 2020.

Why QRIS won over the hearts of Indonesians

Even in its novelty, how has QRIS risen to such popularity? The clearest answer lies in its simplicity. Before QRIS, if cash was not readily available, debit or credit cards were the alternative. This, however, comes at the cost of having to purchase an Electronic Data Capture (EDC) machine, which would cost a merchant anywhere from Rp 1 million to upwards of Rp 5 million. With QRIS, merchants are required to pay a one-off registration fee of Rp 30,000 to create a unique code. Afterwards, the payment system requires only a functioning phone and a printout version of the QR code for consumers to scan.

Moreover, creating a financial account through digital banks or e-wallets has never been easier. There is no longer a glaring red tape where individuals are required to physically visit a bank branch to create an account, as it can now be done through a smartphone. Coupled with the fact that Indonesia ranks 4th in the world in total phone ownership at 187,7 million users, the push towards a digital economy is also a step towards financial inclusion. This especially rings true for rural communities with no direct access to conventional banking other than the outstretched reach of Bank BRI through its rural-based agent BRILink.

QRIS also isn’t just easy or practical; it has clear economic incentives that promote its use among domestic vendors. When QRIS was first rolled out, merchants were levied a 0.7 percent Merchant Discount Rate (MDR) on all their transactions, regardless of business scale. This changed when the COVID-19 pandemic struck, and BI slashed its MDR to 0 percent.

In July 2023, the MDR was once again re-implemented as social restrictions were lifted. Currently, micro enterprises are charged 0.3 percent for transactions over Rp 500,000, with anything below exempted from fees. Most businesses, however, fall under the small and medium-sized enterprises classification. These businesses are charged a flat rate of 0.7 percent on all transactions.

Price fluctuations aside, BI’s admin fees for QRIS remain comparatively low in comparison to debit and credit card MDRs. Under the National Payment Gateway (GPN), Indonesia’s interoperable bank framework, all domestic debit card transactions are capped at 0.15 percent for intrabank transactions and 1 percent for interbank transactions. Credit card transactions are levied higher fees as payment systems are managed through international issuers like Visa, Mastercard, and American Express. MDR fees can vary anywhere between 1.8 percent to upwards of 3 percent, depending on the card issuer and the merchant’s EDC provider.

Beyond economics, the impact the COVID-19 pandemic had on shaping a digital–based economy cannot be underestimated. With people unable to interact with one another in real life due to mobility restrictions, the economy moved remote, prioritizing online merchants and digital-based payments. This behavioral shift carried after the end of the pandemic as easy-to-use digital methods like QRIS became a preferred form of payment.

With all of these factors combined, it is only right to highlight QRIS’s statistical growth. At the end of its first year, QRIS logged 124 million transactions, with a total nominal value of Rp 8,21 trillion. Half a decade later, in 2024, that number has skyrocketed to over 6,2 billion QRIS transactions, totalling Rp 659,94 trillion in value. That is a 4,900 percent increase in transactions and a 7,938 percent increase in total transaction value. More recently, in September 2025, BI announced that the QR-based payment system had amassed 58 million users and 41 million merchants, 90 percent of which are micro, small, and medium-sized enterprises.

Realizing digital sovereignty amid threats from Western vultures

Since United States President Donald Trump returned to power early this year, international trade has faced headwinds through the introduction of his unilateral tariff policy aimed at reducing the US’s trade deficit. This has led to Indonesia being hit with a hefty 19 percent tariff on all goods exported into the US, as well as inviting further scrutiny of domestic policies that have affected US-based companies.

In April, the United States Trade Representative (USTR) classified QRIS and GPN as a non-tariff trade barrier to US-Indonesian trade relations. It argued that US-based financial giants Visa and Mastercard were not consulted when BI first created its QRIS regulation.

This argument, however, fails to acknowledge that both companies have long been part of ASPI, who were heavily consulted in the creation of QRIS and continues to play a leading role in its implementation today.

The root of the problem predates the creation of QRIS. Through BI Regulation No. 19/8/PBI/2017, all domestic card transactions are required to go through GPN, mandating the use of domestic switching infrastructure. Under this ruling, foreign equity of switching institutions is capped at 20 percent, effectively sidelining Visa and Mastercard from establishing their own in-house operations. However, even if they were able to domesticate their switching system, their card-based model requires a radical change in behavior and an unrealistic fiscal barrier for local merchants.

Furthermore, controversies surrounding a high transaction fee of 2 to 2.5 percent have plagued Visa and Mastercard’s reputation in the US. Implementing such measures in Indonesia, when merchants are currently charged between 0.3 to 0.7 percent, would be simply untenable.

Friendly Asian countries and the internationalization of QRIS

While the US views Indonesian digital innovation as an adversary, the same attitude cannot be said for Indonesia’s friendly neighbors. In 2023, under the leadership of Indonesia, the Association of Southeast Asian Nations (ASEAN) pushed for greater international interoperability of each country’s QR payment system across the region.

The ‘ASEAN QR Code’ initiative saw Indonesia’s QRIS partnering with Thailand’s PromptPay, Malaysia’s DuitNow, and Singapore’s SGQR. These three countries remain the official partners that offer full interoperability with QRIS, offering a seamless interface and real-time exchange rates between currencies. Other ASEAN countries like Laos, Vietnam, Brunei, and the Philippines are also listed among the countries that accept Indonesia’s QRIS as a viable form of payment. However, the extent of their integration remains unclear, as BI continues to spotlight only the former three countries on its official channels.

At its core, QR interoperability between ASEAN countries not only eases international transactions but also promotes the direct exchange of local currencies between member states, reducing the region’s reliance on the US dollar.

Outside of Southeast Asia, the Indonesian government’s ambitions with its QR payment system have continuously expanded eastward. On this year’s Independence Day, BI announced that QRIS can now be used in Japan, albeit with a limited rollout to 35 official merchants. Concurrently, pilot tests in both China and South Korea are underway for QRIS to operate in both countries by 2026. BI also has its eyes set even further on India and Saudi Arabia as future targets for the QRIS market.

As Asia moves toward a cashless future, QR payment interoperability has fostered renewed regional cooperation built on a shared mission of financial inclusion, a collaborative spirit increasingly rare in today’s pragmatic international order.

What’s next for QRIS?

Since its inception, QRIS has continued to evolve year after year from its fragmented origins to international adoption. It is now experimenting with its new ‘QRIS Tap’ feature, where payments can be made by reading a smartphone’s internal Near Field Communication (NFC) chip on top of a card reader, making payments faster and easier than they already are.

Moving forward, sustained political will remains essential for both the central bank and government to ensure that every Indonesian has access to the formal economy. As it proceeds to grow, the Indonesian government must also remain firm in its stance to protect QRIS from foreign companies that will find ways to lobby their interests at the expense of the nation’s digital sovereignty. At the same time, the regional cooperation model proves that QRIS can expand internationally while preserving the principles of affordability and inclusion that made it successful.

After close to a decade of innovation and adoption, QRIS represents how policy reform isn’t always linear. Change does not have to happen from the public sector alone. When both the public and private sectors work together with a shared vision, private innovation can be uplifted through state promotion.

Correction Note: An earlier version of this article used the term ‘payment system’ too broadly to describe BI Regulation No. 19/8/PBI/2017. It has been updated to use ‘switching’ as per the BI regulation and USTR report. Switching refers to the network that connects different financial institutions, including banks and e-wallets, to process payments between them.

QRIS has become a reform Indonesians are unanimously proud of. What could (or should) be our next QRIS? Discuss below.

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Corruption has been one of Indonesia’s biggest demons. Since the 1998 Reformasi that toppled President Soeharto and his corrupt New Order regime, public officials have promised to root out the nation’s rampant problem. Yet, in this past year alone, the fight against systemic corruption has remained less about justice and more about who it gets to target.

Perhaps you remember two particular high-profile graft cases involving former trade minister Thomas ‘Tom’ Lembong and former education, culture, research, and technology minister Nadiem Makarim. Both were named under Article 2 Section 1 and Article 3 of the Anti-Corruption Act (Law No. 31/1999, later revised under Law No.20/2001), citing ‘state losses’ caused by a policy made during their tenure–without clear evidence of mens rea or malicious intent.

In August, a group of leading lawyers, experts, and scholars submitted an Amicus Curiae brief to the Constitutional Court (MK) to review and provide legal clarity on how to interpret both articles. They argue that the ‘state losses’ terminology in both articles has to be revisited, if not deleted entirely, as they see the articles to be a great deterrent to initiating reforms or making sound policy decisions for fear of criminalization, and that other provisions within the law are more than sufficient to charge actual malicious corruption cases.

Is it true? In this edition of The Reformist, we question our current standing in the fight against corruption and whether it comes with risks of being weaponized.

Criminalizing policy trade-offs?

Tom Lembong’s scandal is a case in point. Before he was pardoned by President Prabowo Subianto, Tom was sentenced to four and a half years in prison and a Rp 750 million fine for reportedly causing the state Rp 578 billion in losses. (Read: When sugar imports become a crime: Putting trade policy on trial)

When Indonesia was suffering a sugar supply shortage, Tom made the decision to import, which prosecutors later cited as causing state loss, leading to his sentence. But this line of thinking penalizes the very essence of public policy: trade-offs.

Much like Tom, former minister Nadiem is currently being tried by the Attorney General’s Office (AGO) under the same state losses argument. He is accused of causing the state around Rp 1.8 trillion in losses for his Covid-era Chromebook laptop distribution policy.

Even if one were to debate the nature of the procurement, the more pressing issue lies in the fact that his special staffer, Jurist Tan, is among the individuals charged under this trial.

When young officials become the target of prosecution, it sends a worrying message to the youth and future generations of reformists about even thinking of joining the public sector.

Government bureaucracy is already deeply hierarchical in itself. There is a structured chain of command where low-level employees are told what to do and are meant to obey. Even if Jurist was the individual who came up with the idea of choosing Chromebooks, her stakes in the matter are contingent on the approval she receives from her superiors and Nadiem himself.

With Jurist’s prosecution, an alarming message is sent to the future generation: either fall in line or risk spending time in prison.

Catch-all articles and the search for mens rea

Both Tom and Nadiem (as well as Jurist) were charged under the aforementioned Article 2 Section 1 and Article 3 of the Anti-Corruption Act, first introduced in 1999 under then-president B.J. Habibie’s reform government.

Article 2, section 1 states, “Anyone who unlawfully commits an act to enrich themselves, another person, or a corporation that may cause a loss to the state’s finances or the state’s economy…”

While article 3 states “Anyone who, with the intention of benefiting themselves, another person, or a corporation, abuses the authority, opportunity, or means available to them because of their position or office, thereby causing a loss to the state’s finances or the state’s economy…”

While both articles sound straightforward, former Corruption Eradication Committee (KPK) deputy head Chandra Hamzah warned that even street vendors could, in theory, be implicated under the two articles for selling their food on publicly owned sidewalks.

Is it illegal to set up a hawker stall without a proper permit? Yes. Does the vendor enrich himself by selling food? Yes. Can the state incur financial losses for minor damages on the sidewalk caused by the vendor? Also yes. Did the street vendor, however, have malicious intent in causing damage to the state? Well, no.

Through his analogy, Chandra argues that anyone — as stated in both articles — could be charged with corruption if malicious intent is ignored and state losses become the standard for prosecution.

In comparison, take the recent Riau corruption case: Governor Abdul Wahid was arrested last week by the KPK through a sting operation for planning an illicit kickback scheme of up to Rp 7 billion with the region’s Public Works agency to realize an infrastructure project.

Ignoring the glaring concern that he is the fourth Riau Governor to be arrested for corruption (seriously, get a grip, Riau), KPK prosecutors began their investigation after local whistleblowers warned of potential foul play between Governor Abdul and the public works agency. Only then were they able to find evidence of the illicit act.

Here, the sequence of work is clear:

Suspicion of malicious intent → Investigation → Data validation → Arrest

Conversely, the AGO’s approach in handling Tom and Nadiem’s case is hasty at best:

Identify state losses → Cursory investigation → Arrest → Further investigation

Notably, Abdul is currently being tried under Article 12B (gratification), 12E (abuse of power to obtain financial gain), and 12F (illicit request for payment) from the same act. So, there you go: The Anti-Corruption Act contains specific provisions that govern a wide range of corruption schemes. Yet, prosecutors continue to rely on the vague ‘state losses’ term in high-profile trials.

Let’s not fall into the same hole twice

Today, the AGO has effectively taken over as the administration’s main anti-corruption body. Further entrusting this executive institution with graft investigations risks repeating the same mistakes of allowing the president to dictate who and why a person is charged with corruption.

As the institution continues to exploit the vague ‘state losses’, we should ring the alarm to remind ourselves of how the same top-down procedure was used under the notoriously corrupt Soeharto:

In 1967, the ‘smiling general’ launched his own anti-corruption campaigns, creating the Corruption Eradication Team (TPK) with the Attorney General at the helm. The committee only lasted three years after uncovering some corruption rings, but was never able to properly investigate or prosecute high-level officials in state-owned companies who had direct relations to Soeharto.

In 1970, the TPK was dissolved and replaced by Komisi Empat (Fourth Commission) after student demonstrations demanded greater efforts in tackling widespread corruption. It was composed of notable ‘clean’ historic figures such as former prime minister Wilopo and former vice president Mohammad Hatta. Their greatest finding was unearthing the corrupt practices of state-owned oil company Pertamina. Under the leadership of Ibnu Sutowo, a close confidant of Soeharto, Pertamina deliberately withheld billions from the government and its development fund.

Lacking any legal power to act on its findings, Soeharto quietly disbanded the Fourth Commission shortly after. It wasn’t until Pertamina failed to pay its outstanding debt of USD 10,5 billion that Sutowo was fired from his position in 1975. He was never tried nor investigated further.

Fast forward to 2019, presidential overreach reemerged when the KPK was stripped away from its independence and redirected as a part of the executive branch through the controversial KPK revision bill. This controversial move allowed the president to oversee the graft committee and to have full authority to dictate who gets to govern it.

It’s disheartening to say the least, as it doesn’t take long to remember the KPK’s bravery in going after ruling elites, before it was neutered by this 2019 ruling.

In 2008, it went after former Bank Indonesia deputy head Aulia Pohan, the father of Susilo Bambang Yudhyono’s (SBY) daughter-in-law. In 2014, SBY’s confidant Andi Mallarangeng was arrested for his leading role in the Rp 464 billion Hambalang sports complex graft case. Three years later, House of Representatives speaker and then-Golkar party chairman Setya Novanto was sentenced to 15 years in prison for the infamous Rp 2.3 trillion electronic identification card (e-KTP) corruption scandal.

Unless the KPK is reinstated to its former powers, Indonesia risks replicating the mistakes of its corrupt autocrat instead of strengthening a proven anti-graft institution.

Legal clarity and KPK independence critical for genuine anticorruption efforts

In Riau, malicious intent was the precursor to investigation, whereas it was an afterthought in both Tom and Nadiem’s trials. When state losses become the standard for prosecution without taking into account the policy context in which it was made in the first place, Article 2 Section 1 and Article 3 risk being a tool for what it’s currently used for: a catch-all political trap.

Today (Tuesday, 11 November), the MK will decide on the Amicus Curiae through an official judicial review. Providing legal clarification on both articles can ensure that they are not used inappropriately and that tackling corruption means rooting out systemic graft, not acts of reform.

Moreover, what is needed is real independence, and the benevolence of the executive to restore the powers of the KPK as an independent anti-corruption committee, away from the outstretched hand of the executive branch.

The more the government ignores these pressing demands, the less likely it is for meaningful reform and change to occur under a state of legal uncertainty and latent fear of criminalization.

What is your take on the ‘state losses’ terminology? What do you think should be done to address systemic corruption in this country? Leave a comment.

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Today’s average Jakartans might not remember what commuting in the city was like before Transjakarta. The public transportation system has become the backbone of the city, serving an annual ridership of over 371 million (that’s 3.5 million people every day) - making it the biggest Bus Rapid Transit (BRT) network in the world.

But let’s take a step back and think about how far Transjakarta has come. What began as a controversial experiment two decades ago has evolved into what it is today. For a city notorious for its traffic jams and private cars, Transjakarta represents one of the most enduring and tangible public-sector reforms in modern Indonesia.

Much like Indonesia’s healthcare reform story we’ve covered before (read here), Transjakarta’s journey shows how reforms can succeed when driven by political courage, institutional continuity, financial commitment, and long-term vision.

This edition of The Reformist will probe into the contributing factors that made Transjakarta a successful reform - and what can we learn from it when thinking about future reforms.

A reform of this magnitude requires strong political will

The first chapter of Transjakarta’s story was written under then-Jakarta governor Sutiyoso’s leadership in 2004. After visiting Colombia to see Bogotá’s TransMilenio system, he became determined to create a similar network at home. Nine months later, his administration finished building the first corridor from blueprint to completion. For an infrastructure project of that scale, that pace was almost unheard of.

Residents initially resisted this project, complaining about road closures and reduced car lanes. The backlash delayed the launch, but Sutiyoso persisted. By 2007, the network had expanded to seven corridors, serving more than 74 million passengers in its first two years.

It’s hard to argue that Transjakarta would have succeeded without Sutiyoso’s stubborn determination. His top-down, risk-tolerant approach was often controversial, but scholars have argued that it was exactly what allowed the project to break through Jakarta’s bureaucratic inertia. Big reforms rarely happen without a political figure willing to take the heat and push through resistance.

Successors’ commitments are key to lasting change

While Bogotá’s TransMilenio stagnated under later mayors (mainly due to the project being too closely associated with former mayor Enrique Peñalosa) Jakarta’s BRT system continued to expand. Every governor since Sutiyoso has built upon his legacy by adding something new to Transjakarta, a proof that institutional resilience matters as much as individual vision.

Fauzi Bowo introduced an Intelligent Transport System with GPS tracking and smart traffic lights to improve bus operations. Though, it may be noted that he was criticized for not prioritizing building new corridors.

Joko Widodo, during his brief tenure as governor, focused on restoring public trust and professionalizing management by turning Transjakarta into a city-owned company (BUMD). He also introduced feeder services connecting the elite neighborhoods of North Jakarta to Transjakarta main corridors to persuade upper-middle class to switch from riding their cars to taking public transport.

Meanwhile, Jokowi’s successor, Basuki Tjahaja Purnama (famously known as Ahok), emphasized improving quality over expansion. He launched Corridor 13 (Jakarta’s first elevated BRT corridor) and began planning the integration of feeder fleets into the Transjakarta network, introducing formal Minitrans that replaced older bus systems with a buy-the-service model. His administration also laid the groundwork for the angkot (microbus) integration that was realized under the next administration.

Under the next governor Anies Baswedan, the city shifted focus from building new corridors to multimodal integration through what he dubbed Jak Lingko. He expanded the buy-the-service concept to angkots (Mikrotrans) and revitalized the passenger experience by improving service standards and eliminating the culture of ngetem (idling to wait for passengers). Anies’ administration also connected Transjakarta with MRT and LRT networks while also introducing the first electric bus fleet.

Acting Governor Heru Budi Hartono has since built on Anies’ foundation, targeting 200 e-buses by 2024.

What’s remarkable is that despite changes in leadership and political agendas, Transjakarta remained a shared civic priority. Each administration treated it not as a partisan legacy project but as essential urban infrastructure.

Clear and stable funding policy is critical

Jakarta’s financial commitment has been just as important if not more. The city continues to heavily subsidize Transjakarta through an annual Public Service Obligation (PSO), as of 2022 covering roughly 80 to 90 percent of its operating costs. In 2024, this amounted to Rp4.2 trillion, funding a fleet of over 4,300 buses.

The city’s consistent support has kept fares remarkably affordable. Since opening in 2004, ticket prices have risen only from Rp2,500 to Rp3,500, making Transjakarta one of the cheapest BRT systems in the world.

Last June, the administration announced that this year’s subsidy budget for Transjakarta would be increased by around Rp400 billion, which would go into adding inner city routes and electric bus fleets. However, the latest news reported that the Jakarta administration is now planning to increase the Transjakarta fare following regional transfers cut (from the state budget) that may impact public transport subsidies.

Nonetheless, heavily subsidizing public transport is not just a fiscal decision; it is a policy statement that mobility should remain accessible to everyone.

Flexible governance makes way through rigid bureaucracy

Transjakarta’s endurance also came from its ability to adapt institutionally. Initially managed as a Public Service Agency (BLU) under the city’s Department of Transportation, after years of advocacy, it was restructured in 2014 into PT Transportasi Jakarta, a city-owned enterprise (BUMD) with greater managerial autonomy.

This shift gave the agency more freedom in budgeting, hiring, and long-term planning while maintaining public ownership. The new structure allowed it to implement a “buy-the-service” model, where private bus operators are paid under fixed contracts tied to performance standards. This replaced the old “per passenger” system that once encouraged dangerous competition between drivers.

By balancing public oversight with private-sector efficiency, Transjakarta was able to professionalize operations without losing its social mandate.

The devil’s in the details: First and last mile integrations can’t be neglected

Between 2015 and 2020, Transjakarta’s routes expanded by over 850 percent, now covering more than 82 percent of Jakarta’s area. Much of this growth came through Jak Lingko (was OK-OTrip under the preceding administration), which unified Jakarta’s once-chaotic network of angkot (microbuses) and minibuses. Operators signed formal contracts with standardized routes and fares, all integrated with the BRT, MRT, and LRT through a single card system.

The city also invested in walkability and cycling infrastructure to support first- and last-mile connectivity. Between 2019 and 2021, it built or upgraded 87 kilometers of sidewalks near BRT stations, along with 63 kilometers of bike lanes and an 11-kilometer protected cycleway along Sudirman–Thamrin that links nine BRT and six MRT stations. These physical improvements helped propel Transjakarta’s role from a standalone bus system into the spine of a multimodal urban mobility network.

There’s always room for improvement

Transjakarta still faces growing pains. With just 4,388 buses serving roughly the same daily ridership as Singapore’s 5,800-bus public transport system, Jakarta’s BRT network often struggles with overcrowding and long wait times. Dedicated lanes are regularly encroached upon by private vehicles, eroding speed and reliability.

Notably, safety and inclusivity remain pressing issues. A survey by the Safe Public Space Coalition recorded over 3,500 cases of harassment in public areas, nearly a quarter of which occurred on public transport. Accessibility also needs improvement, as some stations have misplaced braille buttons and confusing gate layouts that make them difficult to navigate for visually impaired users.

Jakarta’s next phase of reform must focus less on expansion and more on quality: safer, cleaner, and more inclusive services that reflect the dignity of the millions who rely on them every day.

Two decades after its launch, Transjakarta stands as proof that persistence, not perfection, drives reform. From Sutiyoso’s stubborn determination to the steady improvements made by later governors, the system has evolved without losing its purpose: moving people, not just vehicles.

Jakarta still has a lot of homework ahead to make its transport system safer, more reliable, and more accessible. But Transjakarta’s story shows what is possible when a city keeps its eyes on the long game; when each administration builds on what came before instead of starting over.

In a city with veins often clogged by gridlock, that consistency might just be Jakarta’s most radical achievement.

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What other groundbreaking city-level reforms can we cover next? Comment below!