Indonesia: Sự sụp đổ của thị trường, sự cố truyền thông của chính phủ và sự bất ổn của nhà đầu tư với Gita Sjahrir – E555
“I will say, with Indonesia, I really have faith in the people—because not only can they still create a living and make the economy run (MSMEs are the lifeblood of this economy too), but also, we are the type of people that can go against dictatorships. We can push back against things. We're known for it. Due to a viral online situation, we stopped the previous president's son from running for governor, right? So we can do things, actually.” - Gita Sjahrir, Head of Investment at BNI Ventures
“Just in order to bring everybody down to zero and make everybody go, ‘Hey, oh shoot, we're here now. We're back down to zero. Maybe we should start working together.’ And I think that's a really big issue here—lots of people not working together, lots of misunderstanding, lack of communication, lack of dialogue, and just constant assumptions about the other side—whatever the other side is, right? Public, private, pro-this political party, pro-that political party. And I think that, in the end, causes that much chaos over time. So you're right—macros-wise, we haven't really changed. Fundamentally speaking, we're actually still quite strong. But again, we need to just have more consistent and cooperative dialogue with each other, spanning the different factions and the different interests, and really be sure that we're still in a nation-building phase.” - Gita Sjahrir, Head of Investment at BNI Ventures
“We've had the high-speed rails, we've built toll roads—it's not like we cannot build infrastructure. But you're right, I think one of the ways is to keep things tight, to make sure there are not too many players, like too many hands in the game, right? But I would say, every time people get so upset about Indonesia, I will say, you know, like the leaders or the government or administration or whatever it is—you might be upset at them. But I'm actually extremely bullish, and I'm still bullish until today, on Indonesian people.” - Gita Sjahrir, Head of Investment at BNI Ventures
Gita Sjahrir, Senior Advisor at TBS Energi Utama, and Jeremy Au discussed Indonesia’s current macroeconomic conditions and policy landscape. They analyzed how inconsistent government communication, executional shortcomings, and short-term policymaking have contributed to uncertainty among investors and the public. They also explored infrastructure priorities, the structural incentives behind recent decisions, and the enduring resilience of Indonesian citizens and micro, small, and medium enterprises (MSMEs).
1. Market turmoil triggered by poor policy communication: Stock prices dropped, and the IDX temporarily halted trading after inconsistent government messaging on taxes and royalties.
2. Investor confidence shaken by opacity: The lack of clear direction and unified communication made both local and foreign investors wary of the policy environment.
3. Layoffs highlight deeper weaknesses: Mass layoffs by a major garment company raised concerns about weakening consumer demand and employment trends.
4. Sovereign wealth fund rollout lacks transparency: The introduction of Danantara, a new sovereign wealth fund, failed to clarify how infrastructure or job creation goals would be met.
5. Execution—not intent—is the policy bottleneck: While school lunch programs and stimulus plans aim to help, flawed rollout and budget tradeoffs create new public dissatisfaction.
6. Budget cuts send mixed signals: Programs for small and medium businesses have seen funding reduced, undermining growth for the sector that employs millions.
7. Controversial military law revision sparks unrest: The lack of draft transparency triggered fears over potential authoritarian shifts, adding to market and public anxiety.
(00:55) Jeremy Au: Hey, Gita. Good morning!
(00:57) Gita: Morning. Hi Jeremy, how are you?
(00:59) Jeremy Au: (01:00) Good. So today we wanted to talk about in the Indonesia economy. So I think since the last time we chatted, I think this is the first official news that the Indonesia economy beyond you know, shrinking as middle class, I think there's some kind of like headwinds that are happening right now. So Gita, could you share a little bit about what's going on right now?
(01:17) Gita: Well the Indonesian economy have been going through a very rocky road. We had a crash in which the stock price went down 5% and then IDX had to suspend trading for a while. So then I guess there were several just happened at communication from the government's office, the president's office, overall.
(01:41) So there was a lack of unity in the messaging and consistency in communications for both foreign and local investors, and that made the market really rocky.
(01:54) Jeremy Au: What's interesting of course is that you're mentioning the stock market. Could you share a little bit more about what the market was reacting (02:00) to?
(02:00) Gita: So for example, there was a government announcement from the Ministry of Energy that they will increase tariffs or royalty for gold and nickel by 3%. So that already increases your cost of doing business, right? And gold and nickel are two very big quantities in this country that made a lot of industry players very wary. At the same time, there was also a wave of very public layoffs. So the biggest one is this garment company called Street Tax, and they laid off, you know, 10,000 people and they had to close. That seems to be kind of like a indication for more layoffs to come in the future, right? Because basically when you have something as iconic and as large of a company as that garment company, which is quite legendary in this country closing off and laying off thousands of people, then the question is, okay, how is that gonna hit other industry (03:00) players? What about textile? And actually what does that say about consumer purchasing power? And so, that made a lot of people very wary. And that also means that our unemployment rate can keep climbing up. Then of course there's the Dara— the new sovereign wealth creation— when it launched there just simply wasn't enough communication on it. So I think overall the gist from investors, so I think several days ago, local investors and industry players went to the National Economic Council and relate the same message which is "we are not getting enough consistent and communication from the government." We don't know what policies are going to happen next. We don't know what tariffs or royalties you'll end up implementing. Basically, we are just not getting enough information to be able to predict what our next moves will be as investors, and that really was the big, so (04:00) things just crashed
(04:01) left and right, and it was just a very bad movement. At the same time, in true form with really terrible Indonesian government communication, when the stock market crash, the communication from the president's office and from other people in the government was, oh, the stock market is not that important. We need to focus on our mission and on our programs.
(04:25) And so, overall, people were just very very upset, there's just a lack of communication, lack of clarity, lack of understanding where the country is going policy-wise; I think that was what caused so much of this market rockiness and also just not great communications about what a crash in the stock market means, right? It is not great when the government says, "Oh, you know, the stock market is basically just foreign investors, they're not that important." That's really not great to (05:00) hear from a country who really needs to attract foreign investment. So I think we are seeing a lot of defensiveness and also a lot of unclear communication, and that really was what all investors, be it foreign or local were asking for just constant and clear communication.
(05:19) Jeremy Au: I think that's really interesting here because you know, Indonesia is still on track for, you know, kind of like 5% growth year on year. So I think the strong demographic fundamentals are still there, and I don't think the economists have revised those projections.
(05:33) Gita: Yeah.
(05:34) Jeremy Au: Is this interesting to hear that this is a kind of like set of conversation about the, you know, domestic policies, right?
(05:42) Of the government. Could you share a little bit more about, you know, some of those things? Because, you know, some of these policies are, you know, should be stimulatory, right? So like providing free school lunches should be a stimulus. And you know, we previously talked about the desire to do more deficit spending which is a net (06:00) stimulus for the economy.
(06:01) How has that panned out?
(06:02) Gita: So there has been a lot of pushback about the execution of these programs, which was what we were talking about before, where I said, fundamentally speaking, do these programs make sense if you're trying to nation build, yes. I always say execution is the key. That's the real question. Like, that's the bread and butter. Can you execute this in a way that is effective? Right? So can you execute this in a way that is discipline with as little rent seeking behavior as possible? With, you know the most impact to the macros. Can you do all of those things? And right now there's been so much pushback because when you're reducing, spending, for example, they cut the spending from certain parts of the Department of Education in order to subsidize the, you know, free lunch program. That has gotten a lot of pushback because then wait, are you going to focus (07:00) on the nutrition? But then, children won't have as many options for, you know, free schooling. What other basically the cost benefit in these calculations, right? And so I think that's been the real problem.
(07:15) So for example, they have reduced the price per meal. They have reduced the cost quite considerably since the start of the program. Now it's becoming cheaper and cheaper which brings into question things like the quality, the freshness. There have been a lot of pushback from the recipients themselves with many students actually demonstrating in certain parts of East Indonesia saying that we prefer free schooling than free lunch. Because I guess due to the logistical issues with delivering these meals, some meals ended up being rotten. So, is that the majority of the meals? No. But is it an issue enough that perhaps we should start thinking, (08:00) how are these meals still being delivered?
(08:02) How is it working out logistically? Is this actually being delivered in the most equitable way possible? Because then the real question again becomes, okay, so if the meals are going to every single public schools, are there certain public schools that perhaps because they cater to a much higher demographic, do they quote unquote, "deserve these free meals?" Or should we start balancing our budget in a much more equitable way so that you get the impact of what these meals can be for those most potentially affected by things like stunting or, you know, do you then balance it out with free education, free educational materials, etcetera? Yeah, there's been quite a lot that's been happening here.
(08:49) Jeremy Au: Yeah, and I think it's interesting because then the move towards like a means testing of the school program is a little bit different from a universal program. And I think generally, I (09:00) think there's some sense there I would say, right, because you know, I think that's where a challenge for all universal programs kind of fall apart is like,
(09:08) Gita: Right.
(09:08) Jeremy Au: I think Universal Programs supposed make it look easier by end up being more difficult in some ways.
(09:13) But it's interesting to see that this push towards fiscal responsibility is a new push, right? Because I think previously there was a perception that the administration was go for more deficit spending, which was a recommendation. And now there's this push for net neutral, you know, kind of like save.
(09:28) And in fact, you know, it's kind of interesting. It's more spending on some things, but it's less spending other things, which is a different position. Yeah.
(09:34) Gita: Right. You are absolutely right. So now there's also a lot of budget cuts in the government, which by the way I am not against budget cuts usually in general because In many administrations there can be bloated spending over time, right? So let's say you haven't really revised your spending over time.
(09:56) I can understand if there needs to be some efficiencies (10:00) within the system, but, and this is the big "but" again, it boils down to the execution and the details. What are you cutting? Does it even make sense to cut that? Right? So for example, finding out that the ministry of small medium businesses like their spending was cut by quite a lot and they are responsible for millions of these micro small medium businesses. So will that make sense? It's more about trying to understand the drive towards these types of efficiencies because it does have a strong trickle down effect for the rest of the economy. So for example, by this very large deficit cut, you also affect hotels, conference centers that usually host a lot of government events,
(10:46) government meetings, and things like that. So that affects a lot of these local businesses, and I think that is where a lot of the pushback also comes in.
(10:55) Jeremy Au: Yeah.
(10:56) Gita: This is not to say that the whole hotel industry (11:00) pushing back against all these government cuts, this is not to say that they all suffer equally because recently there was also a very big scandal.
(11:11) And actually until now we still have demonstrations against it. An expedited emergency meeting to revise this very controversial bill. It is freakishly controversial. And now that I'm talking about it, yes, that's probably part of why the market also got rocky because lack of pro-business policies that are communicated clearly and consistently. And then there's the revision for this new law. And it's basically the law for bringing back the military into faults of you know, civil society and government. And if you're gonna ask me what this bill is, problem is no one really knows either, because the draft was never really circulated until now.
(11:56) So don't know what to say about it, you (12:00) know? But I can only just fear the worst because that's the problem when the government doesn't even communicate what it's trying to do. Usually the mass fears the worst.
(12:10) Jeremy Au: Yeah, so lots of different, right? News things, right. I think, you know, one is like I said, even though the macro fundamentals are still the same, even though the economists believe that growth is there 5%, like you said, there's a lot of bad news that happening in a short period of time.
(12:23) And maybe somebody who's twitchy will look at this and say, okay, the government is not going to be stimulating economy, it's actually increasing taxes, it's actually pulling back, its spending as well. So this of course is pulling money out the system. Plus the various aspects about the various communications.
(12:40) How is infrastructure spending? Is that still, going, pushing through? Because I know that was something that was a consensus I would say, during a campaign that infrastructure is good and that's what especially the deficit spending supposed to do. How has that panned out from your perspective?
(12:54) Yeah.
(12:55) Gita: I mean it really should get going. But basically the government has also (13:00) spent so much time trying to centralize all the SOEs into this DARA fund, which is the new sovereign wealth and a lot of the infrastructure spending, I think we'll only follow after that because right now there's not even clarity on that. They keep saying, we promise 8 million new jobs, we promise all these new spending. But again that hasn't really come to light. I can't think of, you know, one very large project that is actively being as we speak, that is being built.
(13:36) Jeremy Au: You know, from your perspective, I'm just kind of curious, what do you think are the no-brainers for infrastructure development for Indonesia?
(13:42) Gita: The no-brainers, like the ones where I think, why aren't we doing this right now?
(13:46) Jeremy Au: Yeah, I'm just kind of curious, right? Because I think everybody agrees that Indonesia infrastructure could be better. So it feels like a no-brainer for everybody from a local perspective, what you think would be the no-brainers?
(13:55) Gita: Right. So I mean, look, I'm a very big (14:00) believer in developing human resources. I'm a very, very big believer in that. Because if you're going through the current playbook of if we follow a growth pattern that is similar to let's say, China, you know, create manufacturing more value added, yes, all of those are very relevant. But the problem with how fast technology is moving too, is that many of these can also be automated fairly quickly. So a lot of jobs I think are on the line and it's all about how do we create or educated, more informed, and flexible workforce that can withstand a lot of technological changes over time especially with the growth of AI and really any technology, right? So for me, the real infra is always how do we make humans better and able to reach for what they want. So rather than just saying, oh, that's like immediately education, but also we have to think about, well, do we (15:00) have the necessary energy infrastructure to have that? Because right now, if you think of energy, Java Bali really dominates conversation, right?
(15:08) And then if you think about, oh, but transmission lines are very expensive, very hard to do, but you eventually will need it in every part of Indonesia. So again, it boils back to just really like the basic like energy. And then I still really am a big believer in clean water infrastructure. We really need to solve this problem.
(15:30) Clean water infra will help reduce, you know, sickness, diseases, and create a healthier human resource over time, like just cleaner you know, environment. You need to fix air, you need to fix the environment first so humans become healthier. Preferably you do all as quickly as possible, but then you can have education infrastructure and not just we're talking traditional pathway to a four-year college but (16:00) vocational schools, more specialized schools where people have a clear career path coupled with health infrastructure. So those are my big ones. So first energy, basic needs, then the environment, education, and health.
(16:16) Jeremy Au: It feels like a,
(16:17) Gita: terms of importance, by the way.
(16:19) Jeremy Au: yeah.
(16:19) Not
(16:19) Gita: in terms of
(16:20) Jeremy Au: of
(16:20) Gita: important like, oh, if you have energy, we stop having education and no, like they're all the same.
(16:26) Jeremy Au: I mean, yes. You know, mutually reinforcing, right? If families have more energy they have the ability to create wealth for the families to study, to even be able to read books at night.
(16:35) Gita: Yep.
(16:35) Jeremy Au: So they're all mutually reinforcing. I don't know. This feels like a no-brainer like, wouldn't it just be so simple to be like, Hey guys, you know, what we wanna do is we wanna put in, let's just say, you know
(16:45) $10 billion per year of debt spending through issuing government bonds through public-private partnerships you know, we guarantee the long-term financing, we do some government guarantees and the downside risk of these loans. There's a lot of (17:00) multilateral institutions like both the Asian Development Bank and the World Bank.
(17:03) You know, they're both kind of like competing to expand credit. So I'm just kind of curious how, I don't know it just feels like, you know, for every island, you know tree projects, everybody's happy, markets are thumbs up. Yeah. It'll take, you know, 10 to 20 years to happen.
(17:19) Gita: Well, Jeremy I always say, Indonesian's biggest enemy is usually ourselves. And when I say that, it's because unfortunately you know you're talking about the system. There's just so much rent seeking behavior that happens. And it happens because of two reasons, right? One is short-term thinking. Let's be super real,
(17:41) it's happening in the US too. It happens everywhere. It's very short-term thinking, right? And you kinda
(17:46) Jeremy Au: Mm.
(17:47) can't you know,
(17:47) yeah.
(17:48) Gita: fault voters for that because voters are going to be as short term or as limited as whoever their leaders are. So if you're looking at the top of the leadership proster,there's a (18:00) lot of short-term thinking. There's a lot of thinking, how do I keep this position? How do I go up next? How do I make sure that I get paid in the however many years I serve? How do I maximize my access? So there's a lot of short-term thinking which breeds a lot of rent seeking behavior. Second of all, and this is also worrisome, a lot of people working in the civil service or working in public service in Indonesia— actually, I've never worked in private sector ever before— like they've never been in private. So there's often a clash between public and private where they both don't understand each other's point of view. Because I've been in both and I can say that, you know, as a public sector servant, sometimes you look at the private sector and for you that looks like such an incredible wealth, it's such a nice life, and you're thinking to yourself, why should I (19:00) work a crazy amount of time making your life easier so that you can make more than me? And where do I stand here? You know, and it's very hard to really make other people see the other side unless you have better dialogues with each other. But right now, unfortunately, there's just so much clashing and so much short-term thinking which breeds rent seeking behavior from both sides. It's not that private sector is innocent in any way.
(19:28) No, but it's coming out in parties, right? And I think that is the problem. If we were to press pause for a minute and just go, Hey, what should we do to Nation Build? Which we've done before, right? 1998, there was a lot of work towards nation building. My dad was an economist at the time, was one of the people helping the nation building part.
(19:49) But then again, we were starting basically from scratch again hopefully we've learned enough from history, which is why it's so important to always know some history so that you're just not repeating (20:00) whatever it was before. Because the last thing this country needs is to go back to square one just in order to bring everybody down to zero and make everybody go, Hey, oh shoot, we're here now we're back down to zero, maybe we should start working together. And I think that's a really big issue here. Lots of people not working together. Lots of misunderstanding, lack of communication, lack of dialogue, and just constant assumptions about the other side, whatever the other side is.
(20:27) Right? Public, private, pro, this political party pro, that political party. And I think that in the end causes that much chaos over time. So you are right. Macros wise, we haven't really changed. Fundamentally speaking, we're actually still quite strong. But again, we need to just have more consistent and cooperative dialogue with each other, spanning the different factions and the different interests. And really start that we're still in a nation building (21:00) phase.
(21:00) Jeremy Au: You know, I think what's interesting is that, you know, it's kind of like, has there been any harm? You know, the answer is not yet. At least based on what you shared. I mean, obviously, the tricky part is like the gains that we're hoped for in terms of like, you know, kind of like a mandate by the people to further improve the economy.
(21:21) And I don't think we've seen some changes. And I think it hasn't been, in a direction that the markets we're expecting fully, right? Like you said. I think if you look at it charitably, obviously there's a few ways we look at it, right? Like raising taxes or the mineral sector does,
(21:35) improve government capabilities, then that should give them ability to spend more over time. But the question is how would they spend it? Right? And I think the real structure for me is, feels like infrastructure feels like such a no-brainer that you know, everybody complains about Indonesian infrastructure,
(21:50) right? You know, so it just feels like, I don't know, we're doing so many moves, but we're like, guys, the no brainer move is not being done. And everyone's kind of like, we're not disagreeing that we should do all these (22:00) things. Like You know, government efficiency, no one's really complaints about that.
(22:03) you know, infrastructure spend. I don't know, to me it just feels like the most obvious good move that's not done. So it's always like, it is like a puzzling component to me, I guess.
(22:12) So, you know, I think there's a lot of, moves that obviously can be seen as positive which is about government efficiency.
(22:20) Obviously I think it can be a good thing as well. Nothing wrong with that per se. It's just feels like there's such an obvious good move which is infrastructure development which nobody feels is, at a level it needs to be. And there's a lot of straightforward good examples of it happening.
(22:33) I think we saw that in Japan, in Vietnam, in China, everybody's racing to.
(22:38) Gita: Right.
(22:39) Jeremy Au: Build infrastructure. And obviously there's a risk of overbuilding infrastructure. It's just that nobody will ever argue that Indonesia has overbuilt its infrastructure at all, right? You know?
(22:48) Gita: No.
(22:48) Jeremy Au: So I think there's a bit of a infrastructure.
(22:51) Gita: But again, infrastructure is a long-term play. And if players, especially at the top have always been very short-term (23:00) thinking, and therefore having rent seeking behavior infiltrate many parts of the system, yeah, it's going to be very hard to have a unified vision on infrastructure, right? So a really big homework that this country needs to keep doing is basically law reform. Which is why lots of people until now have been so upset with the new revision to the military rule. Which again, no one really knows the details, it only assume either the best or the worst, you know?
(23:32) And I think that's the thing, like when we can infrastructure spending? When we can do very no brainer things? Why is the government rushing for other types of changes such as revision to the military law? Like is that a no-brainer? And I think that is a lot of this discontent happening right now. Which is exactly what you're saying. Why aren't we doing the no-brainer type of projects? Why aren't we really (24:00) building the economy? Why aren't we allowing people to open businesses and operate MSMEs efficiently? Why aren't we opening access to education, healthcare? Why aren't we fixing our air and our water?
(24:14) And these are just basic things, right? And why are we pursuing the short term political more political focus gains such as, you know, military law or whatever law it is that people tend to pursue? I think that's a problem when you have a lot of short-term thinking that it obscures the long-term vision.
(24:36) Jeremy Au: Oh, that's such a shame. I mean, it feels like, you know one of those like, you know, headlines where you could just imagine " Indonesia dash China strikes, you know, infrastructure deal". Chinese company comes in and builds everything for cheap and then using Chinese loans.
(24:50) You know, it's like that belt and road
(24:52) you know, for me it just feels like, you know, the headline is just waiting to happen, right? Which is like Indonesia and China strikes infrastructure deal, prior success (25:00) of high speed rail has allowed, you know
(25:02) Gita: speed
(25:03) Jeremy Au: As a, has made a decision that because we're gonna make 10 of these projects in different islands and we are gonna use Chinese construction labor, Chinese loans and you know, we just had to guarantee, you know, and then everyone's gonna be like, yep,
(25:18) you know that works because the Chinese have been able to build infrastructure in Africa as well where rent seeking behavior is also a concern and the way they have solved it is by, you know, keeping it very tight, if that makes sense. Within that ecosystem, which is obviously, I think, you know, optically it looks, sometimes it can look bad as like this is just a Chinese thing but on the other hand, they have been able to deliver on those projects as well.
(25:41) Yeah. Look, we've had successes too, right? We've had the high speed rails. We've built toll roads. It's not like we cannot build infrastructure. But you are right, I think one of the ways is to keep things tight to make sure there are not too many players, like too many hands in the game, right? But I would say, (26:00) you know, every time people get so upset about Indonesia, I will say, you know like the leaders or the government or administration or whatever it is you might be upset at them. But I'm actually extremely bullish and I'm still bullish until today on Indonesian people. Because if we look at the people, I honestly don't know very many places where the people can still make a living, eke out small businesses, create products, do things despite all the challenging business environment and policies. I'll give them that. Right? They're able to really create something out of basically nothing in a lot of ways. And I'm not talking the Nine Dragons or anything like that. I'm talking with, you know, with my own eyes and seeing like in my own personal experience, meeting hundreds of these MSMEs, just creating something with all the challenges despite how hard it is, for example, to create an LLC, right?
(26:58) In Indonesia you need to (27:00) invest so much for licenses, for random certifications that sometimes you don't realize you need 'cause they just came up with the law yesterday. You know, it takes you one to two years to create a trademark which is crazy. So all of these challenges, and yet you still see small businesses growing. That's insane to me. So I think whenever people go, oh, how could you still stay there? You know? Indonesia makes so many bad policies. Yeah. Okay. So do a lot of other countries. It's not like the United States have been winning the game in making great economic policies these days, right? I mean, look at their SMP 500, like look at their markets right now. But I will say with Indonesia, I really have faith in the people because not only can they still create a living, make the economy run, MSMEs are the lifeblood of this economy too. But also, we are the type of people that can go against dictatorships. We can (28:00) push back against things. We're known for it due to a viral online situation.
(28:06) We stopped the previous president's son from running for governor, right? So we can do things actually. It's just, again, you know, for us, I always wonder if the government becomes more pro people and more pro businesses, how much can this country really grow?
(28:26) I think that's a wonderful way to wrap up the conversation here is you're still bullish on the Indonesian people. And I think that's something that we have to continue working on. On that note, let's wrap things up. Thanks Gita for sharing your perspective.
(28:40) Gita: No problem. Thank you for having this regular talk and hopefully this can be one of those things that shed light onto why I actually really love Indonesia.