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The Diplomat
10-07-2025
- Business
- The Diplomat
Jakarta-Riyadh Convergence: Prabowo's Saudi Outreach and the Pursuit of Foreign Investment
Last week, Indonesian President Prabowo Subianto visited Jeddah, marking his first official visit to Saudi Arabia since taking office in October 2024. The visit comes against the backdrop of Prabowo's attempts to increase foreign investments, especially from the Gulf states, as part of a broader strategy to boost economic growth in Indonesia. During the recent visit, Prabowo met Saudi Crown Prince Mohammed bin Salman and discussed mechanisms to strengthen bilateral ties and bolster cooperation across key sectors. The bilateral trade between both countries has grown steadily in recent years, and Indonesia remains one of the largest trading partners of Saudi Arabia in Southeast Asia. Moreover, the overall trade between the Gulf Cooperation Council (GCC) and ASEAN has also grown in recent years, reaching $123 billion, constituting about 8 percent of the GCC's total trade. Saudi Arabia's trade dynamics with ASEAN are dominated by energy and petrochemicals, and Riyadh intends to increase the potential for cooperation and investments in non-oil sectors in which Indonesia features prominently. Indonesia's economy has maintained steady growth in recent years under the former President Joko Widodo. Jokowi's tenure was characterized by an infrastructure push and an ambitious vision of economic transformation aimed at turning Indonesia into a regional manufacturing and investment hub. Prabowo rallied support during his campaign and came to power promising economic growth, reducing unemployment and poverty rates, and increasing public welfare initiatives. While Prabowo seeks to continue Indonesia's development trajectory, his policies mark a shift toward expansive social spending and a more populist approach, which has been criticized by the opposition and has raised concerns, especially regarding his ambitious $28 billion Free Nutritious Meal Program. Reports indicate that investors are anxious about the current economic trends as the Jakarta Composite Index dropped by over 10 percent since Prabowo took office, while the rupiah has weakened by 7 percent against the U.S. dollar. However, Prabowo remains confident about his target of achieving 8 percent growth by 2029, for which foreign investments into the country will be critical. During Prabowo's recent visit, Indonesia and Saudi Arabia signed deals worth around $27 billion, focusing on clean energy, petrochemicals, and mineral resources. Both countries also established a Supreme Coordination Council — an important step toward identifying new areas of collaboration and advancing efforts to enhance and diversify bilateral cooperation, particularly through joint initiatives in trade, energy, infrastructure, and strategic investments. Saudi Arabia's ACWA Power signed preliminary agreements with Indonesia's new sovereign wealth fund, Danantara Indonesia, and state energy firm Pertamina to explore renewable energy projects worth up to $10 billion. Indonesia and the Gulf Cooperation Council (GCC) had earlier officially launched free trade agreement (FTA) negotiations, with the first round scheduled for September 2025. This is a part of the wider trend between ASEAN and GCC countries to strengthen their economic ties. During the 2nd ASEAN-GCC Summit in Kuala Lumpur in May 2025, a joint declaration was adopted to deepen ties across transport, food security, and sustainable development. For Jakarta, this offers an avenue not only to expand market access but also to position itself as the bridge between Southeast Asia and the Gulf. Converging interests in energy, technology, AI, halal food business, and Islamic finance further anchor this cooperation. For Saudi Arabia, expanding investments in Southeast Asia, particularly in Indonesia, aligns with its Vision 2030 objective of diversifying away from traditional Western markets and expanding its economic and political footprint in Asia. Indonesia, as the largest economy and most populous nation in ASEAN, also holds substantial geopolitical weight, making it an increasingly valuable partner for Riyadh. Both countries also hold significant influence in the Islamic world — Indonesia as the largest Muslim-majority nation, and Saudi Arabia as the custodian of Islam's holiest sites. Indonesia sends the highest number of Hajj pilgrims annually, making the logistics, healthcare, and spiritual preparation a massive effort that demands strong bilateral coordination, especially amid recent challenges, such as the abrupt visa suspension and coordination lapses that left many pilgrims stranded. Moreover, both countries share aligned perspectives on key regional and global issues, and during the recent visit, both leaders emphasized their mutual concern for the Palestinian cause, echoing ASEAN's recent statement in support of Palestinian self-determination and a two-state solution. In the current circumstances, Indonesia faces external risks in maintaining economic growth momentum, especially with U.S. President Donald Trump's transactional approach toward the region and trade matters. The Trump administration threatened steep 'reciprocal' tariffs, and Indonesia filed a second proposal to the U.S. to avert the possibility of a hefty tariff. Nevertheless, on July 7, the Trump administration sent a letter stating that tariffs for Indonesia would be raised to 32 percent as of August 1. As part of its efforts to reduce the trade surplus with the U.S. and ease bilateral tensions, Indonesia is planning to ramp up imports of American crude and LPG, aimed at both narrowing the trade gap and diversifying its energy basket. This shift could gradually lessen Indonesia's dependence on Middle Eastern imports. Amid growing concerns over tariffs and their impact on domestic markets, Jakarta must strengthen ties with other major powers that offer long-term investment potential and align with its strategic interests. In this context, Gulf powers have become increasingly relevant as they have, in recent years, increasingly looked at Asian markets for strategic investments, seeking to position themselves within this broader landscape of diversified economic partnerships. Indonesia is deepening its cooperation with Gulf countries beyond traditional energy ties, pivoting toward non-oil sectors that align with both nations' national development agendas and domestic reform priorities. Both Saudi Arabia and Indonesia have carefully calibrated their foreign policies to avoid provoking the U.S. while insulating themselves from the unpredictability of the Trump administration, all while maintaining a balanced approach toward other major powers. This delicate balancing act, particularly in the context of evolving ASEAN-GCC-China trilateral dynamics, reflects Jakarta's broader objective: to safeguard its economic future from great power volatility while asserting itself more confidently in the growing space for middle-power diplomacy. The growing synergy between Jakarta and Riyadh reflects not only economic alignment but also a stronger convergence in navigating the evolving global order, including shared positions on key issues in the Islamic world.
Voice of America
09-02-2025
- Business
- Voice of America
Economists raise concern over sustainability of Indonesian meal program
Economists are raising concerns about the viability of Indonesian President Prabowo Subianto's program launched this year to combat child nutrition. According to an Indonesian Ministry of Health Nutritional Status Study report, 21.6% of children ages 3 and 4 experienced stunting caused by malnutrition in 2022. The first stage of the Free Nutritious Meal Program, extending through March, is intended to provide around 20 million Indonesian school children, pregnant women and breastfeeding mothers meals to improve their health and prevent stunting. The effort was initially projected to cost $28 billion over five years. However, Coordinating Minister for Food Zulkifli Hasan said on Jan. 9 during a meeting on food security that the $4.4 billion budgeted for this year will run out in June and that $8.5 billion more will be requested to fund the program through December. China, Japan, the United States and India have expressed support for the program, although it is unclear how much money will be provided or what form that support will take. Japan and India have said their help will be in the form of training. Officials plan to implement the program in stages, eventually reaching 83 million people — more than a quarter of Indonesia's 280 million population — by 2029, Muhammad Qodari, deputy chief of the presidential staff told reporters on Feb. 3. The program is part of a long-term strategy to develop the nation's youth to achieve a 'Golden Indonesia' generation, referring to a plan to make Indonesia a sovereign, advanced and prosperous nation by its 2045 centennial. The program's cost could make Prabowo politically vulnerable, according to Dinna Prapto Raharja, a professor of international relations at Jakarta's Bina Nusantara University and a senior policy adviser at Jakarta consulting firm Synergy Policies. 'In order to finance this program, Prabowo has taken steps to implement major cutbacks in his government budget with some ministries seeing 50% cuts,' Dinna said. 'Now he is forced to seek financial assistance from overseas sources.' she told VOA on Jan. 31. The Finance Ministry said the spending cuts would amount to $18.7 billion, 8% of this fiscal year's approved spending. While other nations said they would support the program, officials from the National Nutrition Agency — which manages the program — said internal talks about the level of foreign aid, type of assistance and technical aspects of its implementation have not begun. Support from China, Japan, US and India In November, China committed to supporting free nutritious meals but did not pledge a specific amount. The Chinese Embassy in Jakarta did not respond to VOA requests for further information on the value and form of the assistance. It remains unclear whether China's financial assistance will be in the form of a loan or grant. The United States is providing training to Indonesian dairy farmers to support the program, which has increased the demand for locally produced milk. Indonesia, so far, can provide milk only two to three times a week to school children, according to Deddy Fachrudin Kurniawan, CEO of Dairy Pro Indonesia and project leader of U.S. Dairy Export Council training. Deddy told VOA on Jan. 8 that Indonesia has had to import 84% of its milk in the past, and that demand will double because of the food program. In January, Japanese Prime Minister Shigeru Ishiba announced Japan will support the meal program by helping the Indonesian government increase its ability to combat childhood malnutrition. Ishiba offered Japan's support by training Indonesian cooks and sending Japanese chefs to assist. Prabowo added that Japan will also assist in improving the fishery and agriculture sectors, based on Japan's experience. More recently, India reaffirmed support for the program through the sharing of knowledge of the government's Food Corporation of India and other institutions with Indonesian officials. 'India shares its experiences in the fields of health and food security, including the [free] lunch scheme and public [service] distribution system to the Indonesia government,' Prime Minister Narendra Modi said on his YouTube channel on Jan. 25. Other support and reaction Other countries have said they support the program. France and Brazil expressed their support on the sidelines of the recent G20 Leaders Summit in Rio de Janeiro. Prabowo instructed his team to arrange a visit of an Indonesian delegation to Brazil to take notes from the South American country's similar program. France, which has a similar school feeding program, intends to share its expertise and help Indonesia modernize its agricultural sector. Teuku Rezasyah, an associate professor of international relations at Bandung's Universitas Padjajaran, noted that India exported 20,000 metric tons of water buffalo meat to Indonesia last year while Brazil exported 100,000 metric tons of beef to Indonesia. British Deputy Prime Minister Angela Reynar showed similar interest during her meeting with Prabowo in London in November. However, it remains unclear what type of support the U.K will offer. Mohammad Faisal, executive director of the Center of Reform on Economics, told VOA in Jakarta on Jan. 31 that countries offering support will have their own interests in mind, as well. 'I believe there's no free lunch,' Faisal said. 'The donations may be partly altruistic, but not entirely. Donor countries consider it as strengthening bilateral ties, but they may also expect to reap the benefits in the future, such as enjoying ease of investing in Indonesia through incentives and getting better penetration of export markets as a reward.' Rezasyah agreed. 'Donor countries are probably hoping Indonesia will import more products from their countries to support this multibillion-dollar supplemental food program,' he said. 'On the other hand, they see Indonesia becoming a middle power that could contribute to finding solutions to global affairs.'
