Improve Resource Governance, Focus on Recovering Economic Performance

The movement of several economic indicators has tended positive, following the peace agreement between Iran and the United States (US) to end the war. Amid the wave of student demonstrations in recent days, this positive tendency should be viewed as an opportunity to improve the national economy’s performance by first enhancing the effectiveness of domestic resource governance.

The end of the Iran-US war reduces the destructive power of geopolitical conflict on various aspects. Primarily because the agreement includes a clause for the opening of the Strait of Hormuz on 19 June 2026. The market responded positively to the deal. Oil prices fell on a fairly promising scale.

Meanwhile, domestically, the rupiah has also begun to move positively. Although still fluctuating, the rupiah exchange rate is starting to show a strengthening trend against the US dollar, having touched the level of around Rp 17,760 per US dollar. The Jakarta Composite Index (IHSG) on the Indonesia Stock Exchange (BEI) is also showing a similar trend. The IHSG has ended its days of freefall and began fluctuating around the 6,220 level in the third week of June 2026.

The Iran-US peace deal, the fall in global oil prices, and the fluctuation of the rupiah-dollar exchange rate plus the IHSG should be understood as the movement of several indicators in a positive direction. This tendency is the initial capital to start repairing all the damage caused by the uncertainty born from geopolitical tensions. No less important is the necessity to revitalise all resources for the recovery of the country’s economic performance.

Indeed, the improvement in these several indicators does not automatically fix or restore economic performance. Moreover, many countries, including Indonesia, are still shrouded in a number of problems, from political and legal issues to other social problems. The variety of problems currently facing Indonesia, for example, can be read and interpreted from the aspirations voiced by the student community in a series of demonstrations taking place in recent days. Therefore, the process of economic recovery certainly requires process and time, as well as constructive policy support from the state regulator.

Of course, efforts to recover the national economy’s performance must be preceded by increasing the effectiveness of domestic resource governance. To build a positive perception and gain public trust, the effectiveness of managing the State Budget (APBN) should be improved. The problem is, as of May 2026, the current year’s APBN recorded a deficit of Rp 180.4 trillion. The deficit occurred because total government spending reached Rp 1,365.4 trillion, while revenue was only Rp 1,185 trillion.

Spending should be realistic and not forced. In the context of efficiency, spending should always be based on the urgency of need. So, when the APBN is forced to finance the import of 105,000 light truck units worth Rp 24.66 trillion and the import of 21,801 electric motorcycle units worth Rp 1.39 trillion, this mode of budget use is clearly unrealistic. This is an example of a case of completely inefficient resource governance.

It is also unreasonable, making the impression of being forced unavoidable. Because, in fact, the required products do not need to be imported as they are already available in the domestic market. There is even certainty about after-sales service guarantees, because these products are also produced by the domestic automotive industry.

In the context of efficiency, two policies of President Prabowo Subianto deserve appreciation. First, the government’s policy of cutting the budget for the realisation of this year’s Free Nutritious Meal (MBG) programme, from the original plan of Rp 335 trillion to Rp 268 trillion. The second policy is the decision to temporarily reduce the realisation of the number of Red and White Village Cooperatives (KDMP) being formed, from the initial plan of 80,000 cooperatives to 40,000 cooperatives. This reduction, of course, has consequences for lowering the budget allocation for the formation of KDMP. These two policies do not provide an opportunity to reduce the current year’s APBN deficit.

In line with the government’s efforts to realise programmes for economic recovery, the role and contribution of the business world are certainly significant. However, as is widely known, the national business world, particularly the manufacturing industry, is still facing pressure due to a flood of imported products in the domestic market sold at dumping prices. Not only does it need policy support that protects the local market, the business world also truly needs incentives. One of these is incentives from the taxation aspect.

Since early June 2026, the business community has been discussing and complaining about the essence of the enactment of Government Regulation (PP) No. 20 of 2026, which came into effect on 22 April 2026. This PP stipulates that limited liability companies (PT) and limited partnerships (CV) can no longer utilise the final Income Tax (PPh) rate of 0.5 percent applicable to micro, small, and medium enterprises (UMKM).

It must be acknowledged that the taxation aspect has recently become a quite sensitive issue for the general public. The public witnesses and feels that both the central government and regional governments are making new provisions in the field of taxation that burden the cost of living for the community.

In fact, it is already a reality today that public consumption is weakening due to the decline in the purchasing power of millions of families’ incomes against goods and services. Not to mention the fact of the swelling number of unemployed and the ongoing decisions on termination of employment (PHK) due to many companies going bankrupt.

All of this is happening because the country’s economic performance is weakening. Therefore, do not expect too much from the taxation aspect, because the potential to collect taxes from the public is indeed shrinking.

In a situation like the present, the government should not build an impression of behaving progressively in setting and enforcing tax rates. More than that, the government also should not act with sectoral ego.