The world is entering a difficult phase. The Russia-Ukraine war is\nnot over, the Middle East remains tense, trade wars between major powers\nare increasingly open, and climate change is disrupting food production\nand global supply chains. In this situation, every country is forced to\nask: how far can it survive on its own strength?<\/p>\n
That question became one of the main threads of President Prabowo\nSubianto\u2019s state address in August 2026. The President said geopolitical\nconflict, trade wars, supply chain disruptions and economic pressure\nrequire Indonesia to become increasingly able to \u201cstand on our own\nfeet\u201d.<\/p>\n
The sentence marks a change in development orientation. Indonesia is\nnot closing itself off from the world economy; what is being built is\nnational capacity so that openness does not turn into dependency. In\ndevelopment studies, this approach is close to the idea of the\ndevelopmental state: the state does not replace the market, but ensures\nthat the market works to strengthen national production capacity.<\/p>\n
Economic self-reliance is often misunderstood as autarky, as if the\nstate must produce everything itself and be hostile to the market. That\nis not the path Indonesia is taking. The President himself stressed, \u201cWe\nare not anti-market.\u201d What is questioned is when the market is\nmanipulated by the concentration of capital and the people have no\nbargaining position. For this reason, cooperatives are positioned as\ninstruments for strengthening the people\u2019s economy and controlling\nsupply chains from below.<\/p>\n
This approach is not new in development literature. Alice Amsden, in\nAsia\u2019s Next Giant (1989), showed that the industrialisation of latecomer\ncountries was not born solely from market mechanisms, but from the\n\u201cprinciple of reciprocity\u201d: state support must be repaid with\nperformance. Peter Evans in Embedded Autonomy: States and Industrial\nTransformation (1995) called it embedded autonomy: the state must be\nautonomous enough not to be captured by narrow interests, but still\nconnected with economic actors to understand the needs of industrial\ntransformation. Dani Rodrik, through Industrial Policy for the\nTwenty-First Century (2004), added that modern industrial policy is not\nmerely about choosing companies to subsidise, but about building new\nproductive capabilities through a disciplined relationship between the\nstate and the business sector.<\/p>\n
From this perspective, Prabowo\u2019s policy direction is more accurately\ncalled productive sovereignty: open to investment, trade, capital and\nworld technology, but reducing dependence on sectors that determine the\nnation\u2019s safety.<\/p>\n
Food is the most concrete example. The President said 145 regulations\non fertiliser distribution have been removed, fertiliser prices have\nfallen by 20 percent, and Indonesia has achieved self-sufficiency in\neight food commodities, although dependence on beef and garlic remains.\nData from the National Food Agency supports that optimism: Government\nRice Reserves reached around 5.25 million tonnes on 12 August 2026, far\nabove the 1.52 million tonnes ahead of the peak of El Ni\u00f1o in September\n2023, and sourced from domestic production, not imports.<\/p>\n
The threat is real. BMKG predicts 56.18 percent of Indonesia\u2019s land\narea will experience a drier than normal dry season, with a 98 percent\nchance of moderate El Ni\u00f1o. Under these conditions, food reserves are no\nlonger merely an agricultural matter, but an instrument of national\nsecurity.<\/p>\n
A similar logic applies to energy and downstreaming. The President\nsaid the start of B50 to reduce diesel imports and the acceleration of\ndownstreaming for copper, gold, aluminium, industrial salt, DME and\nwaste-to-energy. The government also intends to use state-owned\nenterprises and Danantara to acquire technology, intellectual property,\nmanagement and markets.<\/p>\n
This is how downstreaming should be read: not merely building\nsmelters, but changing Indonesia\u2019s position from a seller of natural\nwealth to an owner of production capability.<\/p>\n
Sovereignty means little if the economy does not grow. BPS recorded\nIndonesia\u2019s economy grew 5.29 percent in the second quarter of 2026 and\n5.45 percent throughout the first half of 2026. Investment realisation\nin the first half of 2026 reached around Rp1,010 trillion and absorbed\nmore than 1.4 million direct workers. The poverty rate in March 2026\nfell to 8.07 percent, or 22.93 million people, a reduction of 920,000\npeople from March the previous year. The open unemployment rate in May\n2026 was 4.65 percent.<\/p>\n
However, the work is not finished: rural poverty is still 10.67\npercent, and the Gini ratio in March 2026 stood at 0.368, slightly up\ncompared with September 2025, although lower than March the previous\nyear. The next measure of success is not only how fast the economy\ngrows, but also who moves up in class along with it.<\/p>\n
I think the most important sentence in the President\u2019s address was:\n\u201cGrowth and investment are not the final goals. Our goal is the welfare\nof our people.\u201d He stressed that every rupiah of investment must produce\njobs and improvements in quality of life, especially for the lowest\ngroups. That is the difference between economic growth and\ndevelopment.<\/p>\n
There is one condition that must not be ignored: running industrial\npolicy, managing natural wealth, building cooperatives and directing\nstate-owned enterprises requires strong institutional capacity. For this\nreason, bureaucratic and state-owned enterprise reform is the most\ndecisive part of this agenda. The President himself acknowledged that\nconvoluted and corrupt bureaucracy can destroy the nation: \u201cThe state\nmust make things easier for the people, not make them harder.\u201d<\/p>\n
This is also the lesson of Amsden and Evans: a developmental state is\nnot merely a big state, but a capable state\u2014giving support but demanding\nperformance, intervening but maintaining discipline, close to the\nbusiness world but not dominated by it. Restructuring of state-owned\nenterprises, downstreaming, cooperatives, subsidies and public\ninvestment must always be accompanied by performance measures.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/prabowo-and-indonesias-path-to-revival-1787021435", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }