China Chamber of Commerce Protest to Prabowo Serves as Alarm for Indonesia's Investment Climate
JAKARTA. The protest from the China Chamber of Commerce to President Prabowo Subianto regarding investment regulations is seen as a serious signal of foreign investors’ perceptions of Indonesia’s business climate, which could affect the competitiveness of attracting investor expansions domestically.
Paramadina University economist Wijayanto Samirin stated that regulatory uncertainty and inconsistent law enforcement have long been major obstacles for both foreign investors and domestic businesses seeking to expand in Indonesia.
“Business climate uncertainty has always been a challenge for foreign investors and domestic entrepreneurs to conduct business in Indonesia. Inconsistent law enforcement only worsens the situation,” Wijayanto told Kontan on Thursday (14/5).
“If this trend is not ended, the private sector will stop expanding, and the wheels of the economy will experience a very serious slowdown,” he said.
Wijayanto also assessed that this negative sentiment could impact Indonesia’s risk perception in the eyes of global investors, including ahead of the planned Panda Bond issuance in June 2026.
“The Panda Bond will be somewhat affected; Indonesia will be perceived as a country with high country risk. Investors will demand higher returns,” he said.
He highlighted the response from Finance Minister Purbaya Yudhi Sadewa, who stated that the government would also protest illegal business practices by several Chinese companies.
According to Wijayanto, the government needs to be careful in responding to investor protests to avoid worsening market sentiment and triggering a wait-and-see attitude.
“A spontaneous response that seems like retaliation will only harm Indonesia; prepare to be further abandoned by investors,” he said.
He reminded that China is currently one of Indonesia’s largest investors. Therefore, if Chinese investors begin to reduce expansions, the national investment situation could become even more pressured.
“China is one of our mainstays; if they also shy away, we will face an even more difficult situation,” he said.
Meanwhile, economist from the Center of Reform on Economics (Core), Yusuf Rendy Manilet, assessed that the China Chamber of Commerce’s step to directly write to the President shows increasing frustration among investors.
“In business diplomacy practices, this channel is usually used when business actors feel that regular communication channels are no longer sufficiently effective,” Yusuf said.
According to him, the impact on the Panda Bond issuance or the government securities (SBN) market does not occur directly but can still influence Indonesia’s overall risk perception.
“If the perception worsens, pressure can emerge through rupiah weakening, more cautious capital flows, and rising SBN yields due to increased risk premiums,” he explained.
Yusuf assessed that the main issue for investors is not merely strict regulations, but uncertainty in policy direction and implementation that is seen as changing frequently.
“Investors can usually still accept strict rules, as long as the policy direction is clear, does not change too suddenly, and the communication process is transparent,” he said.
He noted that the Export Proceeds in Foreign Exchange from Natural Resources (DHE SDA) policy protested by Chinese investors was actually designed flexibly and has several exceptions.
“If companies that do not borrow money in Indonesia are exempt from DHE SDA, there is such an exception. So China should not have a problem,” said Purbaya when met at the Ministry of Finance on Tuesday (12/5).
According to Purbaya, the government must still safeguard national interests in managing natural resources, including regarding plans to increase royalties and levies in the mineral sector.
“It has not been imposed yet because it’s just a plan. Let it be, but we will prioritise our country’s interests,” he emphasised.
He also mentioned that Indonesia-China investment relations are two-way. The Indonesian government, he said, has also conveyed complaints regarding illegal business practices by several Chinese companies in Indonesia.
“I have already complained to them about many Chinese entrepreneurs here who also engage in illegal business,” he said.
In its letter to President Prabowo, the China Chamber of Commerce expressed several objections to various Indonesian government policies deemed burdensome to the business world.
One of the protested issues is the increase in taxes and levies, including mineral royalties and export duties, which are said to have increased repeatedly, accompanied by more aggressive tax inspections leading to large fines of up to tens of millions of US dollars.
The China Chamber of Commerce also highlighted the planned DHE SDA policy, which requires exporters to place 50% of export proceeds in domestic banks for at least one year. According to them, this policy has the potential to disrupt company liquidity and long-term business operations.
In addition, they protested the slashing of nickel ore quotas in the Work Plan and Budget (RKAB), which is said to reach more than 70%, equivalent to a production reduction of around 30 million tonnes.
The China Chamber of Commerce also complained about the tightening of forestry law enforcement, the halting of several strategic projects, and the tightening of work visas, which are seen as hindering the mobility of technical and managerial personnel from China.
Not only that, changes to the nickel ore benchmark price (HPM) regulations are also said to trigger a surge in production costs of up to 200%.
According to the China Chamber of Commerce, these various policies not only disrupt ongoing projects but also have the potential to affect future investments, exports, and hundreds of thousands of jobs in Indonesia’s nickel industry supply chain.