Indonesian Business and Investment in Review (February 2026)

February 2026 proved to be a month of extraordinary complexity for Indonesia’s business and investment landscape, defined above all by the turbulent aftermath of a landmark trade agreement with the United States, a geopolitical shock from the Middle East, and a domestic capital market grappling with mixed signals from global rating agencies.

The centrepiece of the month’s policy developments was the Agreement on Reciprocal Trade (ART) signed by President Prabowo Subianto and US President Donald Trump on 19 February. The deal, which reduced additional tariffs on Indonesian exports from 32 per cent to 19 per cent and ultimately to 15 per cent following the US Supreme Court’s invalidation of Trump’s broader reciprocal tariff authority, dominated national conversation. Coordinating Minister for Economic Affairs Airlangga Hartarto confirmed that 1,819 Indonesian tariff lines – covering palm oil, coffee, cocoa, rubber, textiles, and semiconductors – retain zero-tariff access to the American market. Indonesia’s palm oil association GAPKI expressed optimism that the concession could lift Indonesian palm oil exports to the US to three million tonnes within two to three years, having already more than doubled to over two million tonnes across the previous five years.

Yet the deal attracted fierce scrutiny. Economists at the University of Indonesia’s LPEM and think tank INDEF questioned whether Indonesia had secured a genuinely balanced arrangement, noting that the country is obligated to grant zero-tariff access to 99 per cent of US goods while receiving preferential rates on only around 2 per cent of its total trade. Constitutional law scholar Denny Indrayana called upon the House of Representatives to reject the agreement outright, arguing that Indonesia faces 214 obligations against the United States’ nine. The Centre for Strategic and International Studies further flagged that zero-tariff access on textiles is conditioned on the use of American raw materials – a significant burden given that Indonesian manufacturers source over 65 per cent of their man-made fibres elsewhere. China’s displeasure at the bilateral arrangement prompted Indonesia’s Foreign Ministry spokesperson Yvonne Mewengkang to reassure Beijing that the ART is grounded in Indonesia’s free and active foreign policy doctrine and does not constitute strategic alignment against any third party.

The trade picture was further complicated by Washington’s imposition of countervailing duties of up to 143.3 per cent on Indonesian solar panels, citing alleged government subsidies. Trade Minister Budi Santoso pledged a vigorous defence of the industry ahead of a final ruling expected in July 2026, whilst the Energy and Mineral Resources Ministry suggested that many affected products are likely Chinese transhipment goods rather than domestically manufactured panels. Separately, the government announced a 90-day review of its commitment under the ART to purchase US$15 billion in American energy commodities, following the Supreme Court’s ruling.

A wholly separate controversy erupted over state-owned enterprise PT Agrinas Pangan Nusantara’s plan to import 105,000 vehicles from Indian manufacturers Mahindra and Tata Motors, worth Rp24.66 trillion, for the Koperasi Desa Merah Putih (Red and White Village Cooperative) programme. The Parliamentary Budget Committee chairman Said Abdullah called for cancellation, warning of potential GDP losses of approximately Rp39 trillion, whilst trade unions represented by KSPI warned that tens of thousands of domestic automotive workers faced displacement. Kadin Indonesia chairman Anindya Bakrie – who also heads Bakrie and Brothers – expressed conditional support for the imports whilst urging a long-term focus on domestic production capacity. Following mounting pressure, Parliament’s Deputy Chairman Sufmi Dasco Ahmad requested the government postpone the plan pending review by President Prabowo himself.

Financial markets reflected the month’s tensions. The Jakarta Composite Index (IHSG) closed February at 8,235.485, down 0.44 per cent across the final week, though average daily transaction value surged 25.35 per cent to Rp29.52 trillion. The rupiah weakened towards Rp16,787 per US dollar, with analysts warning it could breach Rp17,000 if Middle East tensions – specifically the Israeli and US military strikes against Iran on 28 February – continued to escalate. Gold proved the chief beneficiary of the uncertainty: Antam gold prices surged to Rp3,085,000 per gram by month’s end, up Rp40,000 in a single session, whilst global spot gold briefly surpassed US$5,277 per troy ounce. Standard and Poor’s warning that Indonesia’s debt interest payments may have breached 15 per cent of government revenue triggered a sharp intraday plunge of 1.47 per cent in the IHSG on 27 February, though the index partially recovered by close.

On the corporate front, Bakrie and Brothers (BNBR) reported a 49.6 per cent jump in net profit to Rp502.74 billion for 2025, supported by strong performances from VKTR Teknologi Mobilitas, Bakrie Indo Infrastructure, and Bakrie Construction. Shareholders approved a rights issue of up to 90 billion new Series E shares targeting Rp4 to 6.5 trillion, intended to finance the acquisition of PT Cimanggis Cibitung Tollways and reduce the company’s debt-to-asset ratio from 84.28 per cent to 67.9 per cent. Chief Executive Anindya Bakrie also signalled exploration of data centre opportunities through subsidiary PT Multi Kontrol Nusantara, noting the strategic significance of land availability and power supply. PT Astra International reported net revenue of Rp323.4 trillion for 2025, down 2 per cent year-on-year, with net profit declining 3 per cent to Rp32.8 trillion amid lower coal prices and a sluggish domestic automotive market, though its financial services division posted 9 per cent profit growth.

State banking remained a pillar of resilience. Bank Rakyat Indonesia achieved the highest national disbursement rate for the Housing Credit Programme, distributing Rp3.42 trillion to 25,909 debtors in just the first two months of 2026. BRI’s BRImo mobile app now counts 45.9 million users, up 18.9 per cent year-on-year, whilst the bank’s CASA ratio improved to approximately 71 per cent. Bank Mandiri prepared Rp44 trillion in cash to support Ramadan and Eid al-Fitr transactions, a 5 per cent year-on-year increase, and praised the Finance Ministry’s extension of Rp200 trillion in surplus budget fund placements to September 2026 – a move the Financial Services Authority (OJK) projected could push credit growth to double digits. Bank Jateng, meanwhile, recorded the highest profit among regional development banks at Rp1.4 trillion for 2025, with total assets crossing Rp100 trillion for the first time.

Indonesia’s critical mineral strategy crystallised further during the month. Deputy Investment Minister Todotua Pasaribu reiterated unequivocally that US access to Indonesian nickel and rare earth elements is conditional upon domestic investment and downstream processing, with raw material exports remaining strictly prohibited. India joined the queue of interested partners, with New Delhi’s Ministry of Steel in discussions for a memorandum of understanding on investment in metal processing and downstream industries. Meanwhile, Indonesia’s Dim Sum Bond issuance on 25 February, managed by Bank of China (Hong Kong), attracted investor demand ratios of 1.84 times for renminbi instruments and 3.51 times for euro instruments, signalling continued international confidence in Indonesian sovereign credit.

On the trade facilitation front, Trade Expo Indonesia 2026, to be held at ICE BSD on 14 to 18 October, has been set an ambitious transaction target of US$17.5 billion – a 6 per cent increase on the prior year. The government signed a memorandum of understanding to place 4,000 Indonesian skilled workers in Germany across hospitality, retail, and healthcare sectors, hailed by Deputy Trade Minister Dyah Roro Esti as a meaningful expansion of professional services exports. Indonesia also pressed the European Union to comply with a World Trade Organization ruling finding EU palm oil regulations discriminatory, after the 12-month grace period expired on 24 February without full EU action.

In infrastructure, state shipbuilder PT PAL Indonesia received orders for more than 20 vessels for 2026 – all from state-owned enterprises under a government directive – whilst PT Sarana Multi Infrastruktur marked its 17th anniversary having channelled Rp274.96 trillion in financing across projects creating 10.9 million jobs. The state investment manager Danantara, celebrating its first anniversary, set an annual dividend target of Rp150 trillion from SOEs and was actively studying the financing of 50 Boeing aircraft for Garuda Indonesia, whilst also targeting completion of an airline holding company merging Garuda, Citilink, and Pelita Air by mid-2026.

Looking ahead, the months immediately following February will test both the resilience of Indonesia’s trade diplomacy and the government’s capacity to manage competing demands. The 90-day review of energy import commitments, the July 2026 final ruling on solar panel tariffs, and progress on CEPA negotiations with the United Kingdom will all bear watching. Domestically, the controversy surrounding Agrinas vehicle imports remains unresolved, and the capital market must navigate Moody’s negative outlook and MSCI scrutiny whilst absorbing an IPO pipeline that KISI Securities estimates includes seven to eight companies with assets of up to Rp3 trillion. If Bank Indonesia’s macroprudential incentive policy successfully transmits to lower lending rates – now approaching 8 per cent according to OJK – and Ramadan season consumer spending provides the customary economic boost, Indonesia retains the foundations for sustained 5 per cent plus growth. The geopolitical clouds gathering over the Middle East, however, represent a wildcard that no amount of domestic policy dexterity can fully neutralise.