AGP Executive Report

Rupiah & Bonds: Indonesia’s bond selloff resumed as investors stayed wary after an earlier surprise rate hike only briefly steadied markets; the 10-year yield rose to 7.43% and the rupiah slipped, with analysts pointing to policy uncertainty and Middle East-driven oil risks that could widen the trade deficit and lift inflation. Sovereign Funding: Danantara, the state wealth fund, kicked off its debut global US dollar bond sale (5- and 10-year tranches, about $500m each) as policymakers scramble to restore investor confidence. Halal Push: Indonesia’s Mandatory Halal policy for October 2026 aims to turn the country into a bigger halal exporter, with SEHATI targeting 1.35m free certifications in 2026 and BPJPH overseeing certification and oversight. Entrepreneur Drive: The government targets 10m new entrepreneurs by 2029, rolling out expo-based support for training, business legality, and financing access. Data Centres in Jakarta: STT GDC expanded its Jakarta campus, adding STT Jakarta 2 (24MW) and advancing Jakarta 3, 5 and 6, lifting a pipeline beyond 360MW to meet AI demand. Trade & Diplomacy: Prabowo and Canada’s PM Mark Carney discussed deepening trade and investment under the ICA-CEPA framework, while Indonesia and Russia signaled broader industrial cooperation within BRICS. Energy & Food Link: Rising oil prices are expected to boost biofuel demand, but experts warn fertilizer constraints could worsen food-price pressure.

Rupiah & Rates: Bank Indonesia’s surprise off-cycle rate hike helped stabilize markets, with the rupiah edging back toward 18,000 per US dollar and the Jakarta benchmark index rising more than 2%, as BI also pushed higher yields to attract foreign funds. Cost of Living: Pertamina raised Pertamax and Pertamax Green prices by about 32% (effective 10 June), adding pressure to inflation concerns even as officials argue the impact will be limited. Payments & Tourism: BI will expand QRIS cross-border payments to Saudi Arabia and India, aiming to ease transactions for Indonesians traveling for umrah/hajj and for Indian tourists visiting Indonesia. AI Infrastructure: A UN report warns AI data centres could consume massive electricity and water by 2030, underscoring the resource strain behind Indonesia’s growing AI and data-centre buildout. Energy & Commodities: China’s commodity trade shows price moves driving flows, while nickel’s stock overhang suggests Indonesia’s nickel recovery hopes may face delays. Industry & Investment: Prabowo urged young entrepreneurs to back nationalism for growth and reiterated Indonesia’s non-aligned stance, while he also pushed back on claims the government is unfriendly to foreign investors. Trade & Regional Links: Indonesia’s RMG export competition theme appears in the week’s coverage, alongside broader regional trade shifts like RCEP discussions involving Sri Lanka.

Rupiah & Rates: Bank Indonesia delivered a surprise 25 bps off-cycle hike to 5.50% after the rupiah slid to record lows, and then briefed foreign and domestic investors on the move as the currency steadied around 18,000 per US dollar. Palm Oil Probe: Indonesia questioned Maybank Indonesia staff over suspected palm export flows tied to Salim Group, focusing on whether goods were invoiced below market prices to hide profits and cut taxes. Fiscal Discipline 2027: Finance Minister Purbaya said the government will keep budget efficiency and refocusing for the 2027 state budget, targeting spending productivity while supporting programs like free nutritious meals and people’s schools. Housing Push: President Prabowo approved expanding the home renovation program through 2027 to convert uninhabitable houses and accelerate subsidized housing delivery. ASEAN Centrality: Foreign Minister Sugiono urged ASEAN unity and centrality amid geopolitical tensions, calling for a whole-of-ASEAN approach. Digital Infrastructure: Indonesia and Singapore discussed optimizing a regional data center hub across the Singapore–Johor–Riau triangle, plus expansion of Batam’s digital parks. Workforce for AI: At the ILC in Geneva, Indonesia highlighted skills training, internships, and worker protections to prepare for AI-driven job shifts. Agribusiness Downstreaming: Maluku’s agriculture ministry approved downstream coconut and cassava processing plans to raise value, create jobs, and reduce reliance on raw-material sales.

Rupiah Defense & Rates: Bank Indonesia raised the BI-Rate by 25 bps to 5.5% to attract foreign portfolio inflows and steady the rupiah, while continuing FX interventions and reserve support. Free Meals Overhaul: President Prabowo reshuffled the National Nutrition Agency (BGN) leadership, aiming to fix SOP, governance and food-quality issues in the MBG program and refocus execution. Palm Oil Export Rules: The Trade Ministry issued Permendag 16/2026, tightening export channels and prioritizing designated state-owned exporters, with a transition period ahead of full enforcement in 2027. MSME Law Revision: The MSMEs minister pushed a revision to streamline fragmented rules and better protect, empower and boost competitiveness for Indonesia’s tens of millions of MSMEs. Digital & Green Cooperation: Singapore and Indonesia agreed to deepen collaboration on digital infrastructure, green energy and industrial supply chains, including a joint study for Batam-Bintan-Karimun’s tech sector. Embodied AI Push: Chinese embodied AI firm AGIBOT held its first partner conference in Indonesia, promoting humanoid robotics deployment and a Robot-as-a-Service leasing model. Retail Expansion: Marks & Spencer signed a franchise deal with MAP and plans to reopen in the Philippines later this year, expanding Southeast Asia growth. Regional Trade Signals: Indonesia and Eurasian partners advanced an agreement to reduce trade barriers under the EAEU framework, supporting wider market access.

Rupiah Shock & Rates: Bank Indonesia delivered an unexpected 25 bps hike to 5.50% to steady the rupiah after it slid past 18,000 per US dollar, citing global volatility and inflation risks. Food Price Shield: Bapanas and the Trade Ministry tightened food-supply and food-safety monitoring to prevent toxic pesticide residue and curb price shocks tied to currency weakness. Manufacturing Push: The Industry Ministry aims to lift manufacturing exports’ share to 30% (from 20%) to balance domestic demand and improve resilience. Digital Sovereignty: Indonesia moves to cut reliance on Singapore by diversifying international internet routes, as AI and data demand strain the current single-hub setup. Health Tech Deal: Actxa and LIF launched a co-branded smart ring with AI glucose scanning, betting on preventive health demand as diabetes risk rises. CIMB Eyes Indonesia M&A: CIMB said it’s open to deals in Indonesia despite investor jitters, pointing to long-term potential. Tourism & Events: The Tourism Ministry backed the BRI Jazz Gunung Series to boost mountain destinations and local MSMEs. Trade & Logistics: ECS Group expanded Asia air-cargo services with more offices and tech focus. Regional Spillover: A 7.8 quake hit the Philippines, with rescuers racing to reach trapped people; tremors were felt in Indonesia’s Sulawesi.

Indonesia–Philippines/ASEAN Connectivity: Maybank unveiled its next-generation Maybank2E platform to streamline regional business banking, cash management, trade finance and FX under one login, targeting SMEs to corporates across borders. Energy & Commodities: Eni and Petronas launched the Searah joint gas venture spanning Indonesia and Malaysia, starting with 300,000 boe/d and aiming for 500,000 boe/d within three years, backed by a $6bn revolving credit facility and $20bn+ investment plans. Trade Policy: The US USTR proposed Section 301 tariffs on imports from 60 economies over forced-labor concerns, with Indonesia included at a proposed 10% or 12.5% rate depending on progress, opening a comment window until July 6. Macroeconomic Pressure: Moody’s warned a stronger US dollar will test South and Southeast Asian corporates, though most rated firms in Indonesia, India and the Philippines still have buffers; the Indonesian rupiah slide remains a key risk channel. Food & Consumer Policy: Indonesia removed Minyakita from the food aid program, shifting distribution to traditional markets while keeping it under the DMO scheme. Sustainability & Environment: Telkomsel rolled out an integrated ESG strategy aligned with Telkom Group’s GoZero net-zero target by 2060, while Norway launched an ASEAN blue-economy collaboration in Jakarta and World Oceans Day highlighted MPAs now covering 10% of oceans. Humanitarian/Disaster: A 7.8 quake hit southern Philippines, killing at least 32 and displacing tens of thousands, with tsunami warnings affecting parts of the region.

Rupiah Pressure & Market Rout: Indonesia’s foreign-exchange reserves fell for a fifth straight month to US$144.9bn in May, the longest decline since 2018, as policymakers stepped up rupiah support while foreign investors kept selling local assets. Currency-to-Industry Spillover: The rupiah’s slide is squeezing manufacturers via higher import costs and a credit crunch, with analysts warning of growing deindustrialisation risk. Policy & Market Stabilisation: Bank Indonesia and the finance ministry pledged to boost investor appetite, including plans to raise remuneration on government deposits to lower borrowing costs. Trade Rules for Commodities: Indonesia issued technical regulations to centralise coal, palm oil and ferroalloy exports through a government-owned firm, requiring exporters to report activity from June 1. Logistics Push: The government targets cutting logistics costs to 12.5% of GDP by 2029 to improve connectivity and distribution. Regional Energy Integration: Sarawak Energy said cross-border power trade across Asean needs clear regulation, grid readiness and long-term investment certainty. Digital Infrastructure Investment: DayOne Data Centers closed a US$4.5bn Series C and plans to expand across Singapore and Indonesia, while Digital Realty announced Malaysia capacity growth—signalling continued data-centre momentum in the region. Disaster Watch: A 7.8 quake hit southern Philippines, triggering tsunami warnings across parts of Asia including Indonesia, with evacuations urged.

Indonesia-India Strategic Push: External Affairs Minister S. Jaishankar and Indonesian FM Sugiono co-chaired the 8th India–Indonesia Joint Commission Meeting in New Delhi, agreeing to deepen cooperation across defence, maritime security, trade, fintech, health, critical minerals, tourism and education, with both sides also looking ahead to PM Modi’s upcoming Jakarta visit. Aviation Costs Watch: Indonesia is finalizing a policy to exempt aircraft spare parts from import duties to cut airline operating costs, alongside refining the fuel surcharge mechanism for faster adjustments to jet fuel price changes. Free Meals Under Scrutiny: Indonesia’s Free Nutritious Meals (MBG) program faces a major test after leadership reshuffles at the National Nutrition Agency (BGN) and a corruption probe into former officials, raising questions over continuity of the flagship welfare push. Port Congestion: Finance Minister Purbaya Yudhi Sadewa inspected thousands of containers piling up at Tanjung Priok, after complaints from businesses about raw-material disruptions and longer dwelling times, with follow-up steps expected to ease congestion. Creative Economy Angle: Indonesia’s gaming and esports sector is being positioned as a growth engine for the creative economy, with government-industry collaboration aimed at building digital talent and expanding business opportunities. Regional Investment Promotion: Bank Indonesia showcased Bali investment projects, including the Sanur Health SEZ, to foreign ambassadors to boost trade, tourism and investment links and widen MSME market access. Maritime Incident: Samudera Shipping said all crew were safely evacuated after a chartered vessel sank on the Singapore–Pasir Gudang route, with replacement arrangements underway and liabilities expected to be covered by insurance.

Rupiah Watch: The rupiah hit a record low of 18,050 per US dollar, extending a 10-week slide and making Indonesia cheaper for Malaysian shoppers and tourists. Infrastructure & Education Delivery: Indonesia is pushing accelerated Phase II People’s School construction for the 2026/2027 school year, with five sites in the “green zone” reaching 84.83%–86.58% progress. Disaster Recovery Funding: Indonesia’s disaster recovery task force urged ministries to fast-track budget allocation for post-flood and landslide rehabilitation in Aceh, North Sumatra and West Sumatra, targeting completion by 2028. Workforce & Tech Self-Reliance: The government urged vocational universities and polytechnics to align skills with industry demand and boost domestic technology capacity. Strategic Exports: Prabowo signed PP 24/2026 to route exports of strategic commodities—starting with coal, palm oil and ferroalloy—through designated state-owned enterprises. Rail Connectivity Push: Indonesia invited Russian firms to join Trans-Sumatra, Trans-Sulawesi and Trans-Kalimantan rail corridor projects, including technology, rolling stock and safety upgrades. Aviation Disruption Check: Soekarno-Hatta said Terminal 2 smoke was contained quickly and flights were unaffected.

Rupiah & Market Sentiment: Indonesia’s finance minister Purbaya Yudhi Sadewa pushed back on fears of a 1997-98-style crisis, saying fiscal and economic fundamentals remain solid while the Jakarta Composite Index and rupiah weakness are driven largely by negative perceptions; he also called for tighter coordination with Bank Indonesia to support the currency. Port Congestion & Rules: Finance Minister Purbaya urged tighter, fair regulations on how long import cargo can sit at ports, after complaints that storage penalties are cheaper than warehousing—contributing to Tanjung Priok backlogs of thousands of documents and containers. Infrastructure in Papua: The Jayapura–Wamena road project is continuing in 2026, with about 50 km under development via a long-running PPP, framed as a key economic link for Highland Papua. Climate Justice & Waste: The Environment Ministry linked Indonesia’s waste crisis to climate justice, citing methane emissions from poorly managed waste and pushing a climate justice bill to strengthen environmental governance. Creative Economy Push: The Creative Economy Ministry said culture and the arts can expand Indonesia’s creative-economy ecosystem and help practitioners reach global markets through international cultural diplomacy. Energy Security (Regional): Malaysia’s finance minister said it is diversifying energy supply sources to reduce disruption risk, including coal supply expansion beyond Indonesia.

Rupiah & Capital Flows: Bank Indonesia and the finance ministry agreed to raise the attractiveness of yields on Indonesian assets to pull back portfolio inflows after the rupiah hit record lows, as foreign holdings of bonds slid to near two-decade lows. Banking Stability: Indonesia’s Financial Services Authority (OJK) said there’s no sign of a “bank rush,” citing solid capital adequacy (CAR 23.97%) and manageable non-performing loans (2.17%), while warning rupiah weakness could pressure imports and subsidies. Anti-Graft in Finance Tech: KPK launched a graft probe into alleged bribery tied to BRI and Telkom’s banking notification services (SMS/WhatsApp), with suspected state losses near Rp2 trillion, and also continues an EDC procurement case at BRI. Public Finance Watch: Indonesia’s customs and excise revenue reached Rp123.8 trillion (US$6.85bn) by end-May, while the state budget deficit was reported at Rp180.4 trillion as of May. Trade & Tariffs: Indonesia expects its final US export tariff rate under the USTR Section 301 forced-labor probe to reach 18% after a temporary 10% phase, pending US legal steps. Energy Outlook: SKK Migas expects higher oil and gas lifting in 2027, with oil at 602,000–615,000 bpd and gas up to 934,000–977,000 boe/d. Tourism Momentum: The tourism ministry said foreign arrivals rose to 1.25 million in April 2026 (+7.22% y/y), supporting foreign exchange earnings. Digital Finance Security: OJK urged stronger transaction security as cyber threats and AI-enabled fraud rise, noting a surge in digital payments.

Indonesia’s export push to Africa: Indonesia is stepping up trade and investment ties with sub-Saharan Africa to diversify markets, with current trade at about US$18.5bn (3.5% of total) and opportunities flagged in palm oil, processed foods and paper. Rupiah and funding diversification: Finance Minister Purbaya says Indonesia targets issuing yuan-denominated Panda Bonds in June to broaden State Budget financing sources, with Bank Indonesia supportive of renminbi instruments. Food price support via MBG/aid: The agriculture ministry is floating adding chicken eggs to food assistance to absorb farm output when prices fall, linking absorption to the Free Nutritious Meals (MBG) channel. Cigarette policy overhaul: Indonesia is drafting standardized/plain packaging rules for cigarettes and e-cigarettes to curb youth smoking, with a transition period of up to 12 months. Palm oil market jitters: Malaysian palm futures slid on Dalian weakness and concerns around Indonesia’s new centralised export system, which began a transition on June 1. Energy project momentum: Conrad Asia Energy’s Natuna unit booked a jack-up rig for six-well drilling at the Mako gas field, expected to start in Q2 2027. Marine protection warning: NGOs warn offshore oil and gas expansion could threaten marine biodiversity, citing overlaps with protected areas across 11 countries including Indonesia. Biodiversity-to-debt risk: A study says markets may be underpricing biodiversity loss, potentially raising sovereign borrowing costs and interest burdens. Tourism sports calendar: Bali will host the 12th Asian Open Water Swimming Championship on June 13–15, aiming to boost sports tourism beyond the island’s usual draw.

Rupiah & Markets: Indonesia’s JCI slid 2.53% on June 5 as investors stayed cautious; the rupiah edged up to about Rp18,038 per US dollar, but sentiment remains fragile. Free Meals Overhaul: The National Nutrition Agency (BGN) pledged tighter governance after corruption scrutiny, signaling a shift from hitting beneficiary numbers to improving kitchen quality and focusing new capacity on remote areas. US Tariffs—Indonesia’s Bet: Indonesia’s economic affairs minister said the USTR plans to grant 18 Section 301 tariff exclusions, while Indonesia may still face a 10% additional duty—framed as a boost for local manufacturing competitiveness. E-Commerce Rules: Indonesia updated e-commerce regulations to explicitly include ride-hailing and online travel agents under PMSE oversight. Energy Policy: Indonesia will mandate E5 gasoline blending from the second half of 2026 (starting in Java), alongside preparations for a B50 biodiesel rollout. AI for Creators: Meta launched an AI creator assistant on Facebook, rolling out first in the US, Canada, and India, plus expanded AI translation features. OECD Push: Switzerland pledged €3m to support Indonesia’s OECD accession, focusing on SOE governance, responsible business conduct, and anti-bribery alignment.

Rupiah Shock & Market Selloff: Indonesia’s rupiah slid to a historic low near IDR18,000 per US dollar, dragging the Jakarta Composite Index down about 5% to a near six-year low as investors worried about policy uncertainty, fiscal strain from higher oil prices, and the free-meal programme’s governance risks. Central Bank Support: Finance Minister Purbaya said the government has set aside IDR8 trillion to help stabilize the bond market via Bank Indonesia interventions, including repurchases of securities sold by foreign investors. Business Impact: Employers’ group Apindo warned companies are freezing hiring and cutting costs as the weaker currency raises production and financing burdens, especially for sectors reliant on imported inputs. Digital Finance Security: OJK urged banks and fintechs to harden digital transaction security as cybercrime and AI-enabled fraud rise, citing a surge in high-risk malware incidents. Free Meals Programme Reset: Indonesia’s nutrition agency (BGN) will pause new MBG kitchen construction, refocus beneficiaries, and suspend kitchens that miss priority groups, targeting frontier/outer areas and pregnant women, breastfeeding mothers, and under-fives. Energy Transition Milestone: NRE reached 17.89% of Indonesia’s electricity mix in Q1 2026, surpassing the target, though coal still dominates. Meta Creator Tools: Meta rolled out an AI-powered creator assistant inside Facebook to explain performance and suggest next steps, alongside expanding AI Reels translations.

Rupiah Under Pressure: Indonesia’s rupiah slid to a record low, breaching the 18,000-per-US dollar level as oil-price shocks from the Iran conflict tighten dollar liquidity and narrow the trade surplus, with Bank Indonesia intervention and further rate moves now in focus. Central Banking Overhaul: Indonesia’s parliament passed a sweeping bill expanding Bank Indonesia’s growth-support role and giving lawmakers more say over independent financial regulators—raising investor concerns about central-bank independence. Free Meals Corruption Crackdown: President Prabowo fired the head of the US$15bn free school meals programme after corruption allegations tied to the nutrition agency, and ordered investigations into suspected misconduct. US Tariff Threat Looms: The US proposed 10%–12.5% Section 301 tariffs on about 60 economies over alleged forced-labour enforcement failures, explicitly including Indonesia and Malaysia—adding uncertainty for regional exporters and supply chains. El Niño Food Risk: Hot, dry weather linked to an intensifying El Niño is disrupting crop planting across Asia, threatening yields and pushing up grain and rice prices. Industrial & Tech Partnerships: Indonesia is looking to BRICS tech partnerships to move from consuming to producing technology, while Indonesia’s energy transition push highlights the race to build a domestic battery industry. Blue Economy Push in Papua: Papua reaffirmed plans to grow the fisheries value chain via downstream processing and supporting infrastructure to raise coastal community welfare.

US Tariff Shock for Indonesia: The Trump administration’s USTR proposed new Section 301 tariffs of up to 12.5% on imports from 60 economies over alleged forced-labor failures, with Indonesia listed among countries facing the 10% tier—raising fresh cost and supply-chain uncertainty for regional exporters. EU Escalates Sanctions: The EU imposed restrictions on Kyrgyzstan as a sanctions “conduit” for Russia-linked re-exports of sensitive equipment, signaling tougher third-country enforcement. Markets Watch FX and Policy Risk: The ringgit slid on renewed US tariff concerns, while Indonesia’s rupiah also weakened past key levels in regional trading—highlighting how tariff headlines are feeding into currency volatility. Indonesia’s Finance Pipeline: Fitch and S&P assigned a ‘BBB’ rating to Danantara Investment Management’s proposed global bond programme, while Alpha JWC Ventures targets up to $300m for a new fund—both pointing to continued capital-market activity. AI Infrastructure Push: BDx Data Centers secured 1.2GW of power agreements with PLN across Jakarta and West Java, underscoring Indonesia’s data-center buildout momentum. Energy and Climate Backdrop: WMO expects El Niño to return (80% chance by mid-year), while Indonesia and partners keep debating how to balance renewables with grid stability amid rising demand. Human Capital Spending: Prabowo reiterated support for the Free Nutritious Meals (MBG) programme as a long-term investment in nutrition and village economic growth.