Indonesian Business and Investment in Review (May 2026)

May 2026 proved to be one of the most consequential months for Indonesian business and investment in recent memory, defined by bold structural reform, intensified diplomatic engagement, and a financial market under considerable strain. From the launch of a sweeping commodity export overhaul to a landmark diplomatic breakthrough in Paris, the month laid bare both the ambition and the anxiety coursing through Southeast Asia’s largest economy.

The DSI Overhaul: Indonesia’s Most Consequential Export Reform in a Generation

The most significant policy development of the month – and arguably of the year so far – was the formal launch of PT Danantara Sumberdaya Indonesia (DSI), a new state-owned enterprise tasked with centralising the export management of three of Indonesia’s most strategically important commodities: coal, crude palm oil (CPO), and ferro alloy. The policy, which came into effect on 1 June 2026 after extensive preparation, requires all exporters of these commodities to report transactions through DSI’s single-window platform, integrated into the CEISA 4.0 customs portal.

The rationale behind DSI is longstanding and well-documented. These three commodities accounted for 23.4% of total national exports and contributed a combined US$66.13 billion to Indonesia’s trade surplus over a 71-month consecutive run. Yet Finance Minister Purbaya Yudhi Sadewa and former minister Mahfud MD have both pointed to endemic under-invoicing and transfer pricing practices – with estimates suggesting losses of as much as US$908 billion to the national economy over 34 years – as the primary justification for state intervention. PT MMS, a palm oil exporter, was raided by Bareskrim police in late May in connection with alleged under-invoicing, while the Attorney General’s Office simultaneously opened investigations into transfer pricing practices across major CPO firms.

The government has been at pains to stress that DSI will not function as a profit-seeking entity, and Deputy Agriculture Minister Sudaryono repeatedly confirmed that the scheme would not extend trade chains or generate margins for the state entity itself. Full implementation is not expected until January 2027, with a transitional period running through December 2026 during which exporters continue normal operations while reporting to DSI. Finance Minister Purbaya even advised investors to buy shares in Himbara state banks, arguing that DSI’s centralisation of export proceeds would substantially improve their liquidity.

The reception from industry, however, was decidedly mixed. The Indonesian Palm Oil Farmers’ Association (POPSI) sounded urgent alarm bells, warning that the mere announcement of DSI caused CPO reference prices to fall nearly 5% within hours, dragging down fresh fruit bunch (FFB) prices paid to smallholder farmers to as low as Rp1,800 per kilogram – below the cost of production. POPSI urged the government to position DSI as a regulator and verifier rather than a de facto monopolist, while GAPKI confirmed that prices only began to recover after the government issued clearer guidance on the transition mechanism. Economist Wijayanto Samirin cautioned that operating as a “super trader” for these commodities would require up to Rp330 trillion in annual working capital, raising serious questions about institutional readiness. The timing of the launch, coinciding with a weakening rupiah and fragile market sentiment, drew sharp criticism.

A Rupiah Under Siege and Capital Markets in Freefall

The Indonesian financial markets endured a punishing month. The Jakarta Composite Index (IHSG) ended May down 29.14% year-to-date, making it the worst-performing major stock index globally in 2026. Foreign investors net sold Rp53.97 trillion in equities through the period, with Rp8.51 trillion exiting in the final week of May alone. The MSCI index rebalancing, effective 1 June, removed six Indonesian companies from the Global Standard Index, triggering portfolio adjustments by passive fund managers and amplifying volatility ahead of the effective date.

The rupiah was equally beleaguered. The currency touched a record low of Rp17,906 against the US dollar during intraday trading on 28 May, closing near Rp17,845, while the Singapore dollar surged to a historic high of Rp14,000. Bank Indonesia maintained a stance of continuous intervention – deploying Non-Deliverable Forward transactions and government bond purchases – and introduced a new monthly limit of US$25,000 on cash dollar purchases. Governor-level communications attributed the depreciation to geopolitical tensions in the Middle East, which drove up global oil prices, and to seasonal foreign exchange demand for debt repayments and dividend remittances.

Finance Minister Purbaya characterised the rupiah’s weakness as “unreasonable” relative to Indonesia’s fundamentals, pointing to first-quarter GDP growth of 5.61% – ahead of both Malaysia and China. Yet economists were less sanguine. Fakhrul Fulvian of Trimegah Securities warned that domestic price rigidities were shifting economic stress disproportionately onto the currency, while analyst Ibrahim Assuaibi forecast the rupiah could breach Rp18,000 the following week. The Deposit Insurance Agency (LPS) maintained its guarantee rate at 3.5% for commercial banks, effective June to September, citing stable fundamentals – though the broader backdrop suggested anything but.

Safe-haven assets thrived in the turbulence. Antam gold prices at Pegadaian reached Rp2,911,000 per gram by month-end, a gain of 38.07% year-on-year. Morgan Stanley forecast a recovery in global gold prices to US$5,200 per troy ounce by year-end, while money market and fixed income funds were widely cited as preferred instruments for retail investors navigating the downturn. The DHE SDA regulation, effective 1 June, requiring non-oil and gas exporters to repatriate and hold 100% of foreign exchange proceeds domestically for 12 months, was introduced alongside tax incentives – including potential zero percent income tax – to encourage compliance.

Prabowo’s Paris Windfall: The France-Indonesia Business Council

Against this difficult domestic backdrop, President Prabowo Subianto’s state visit to France produced the most significant diplomatic and commercial achievement of the month. Four new commercial agreements worth US$3.5 billion (approximately Rp62.3 trillion) were formalised, covering energy security, trade, and defence cooperation. The centrepiece was the launch of the France-Indonesia High Level Business Council (FI-HLBC), co-chaired by Danone’s CEO and Kadin Indonesia chairman Anindya Bakrie, and attended by 30 major companies with a combined market capitalisation of US$1.3 trillion.

The council’s headline target – tripling bilateral trade by 2035, from a base of approximately US$2.7 billion in 2025 – is ambitious but credible given the structural complementarities between the two economies. French President Emmanuel Macron welcomed Indonesia’s opening of its market to French beef and dairy imports and expressed strong support for accelerating the Indonesia-EU Comprehensive Economic Partnership Agreement (IEU-CEPA), which would eliminate tariffs on 80% of Indonesian exports to Europe. Macron also indicated interest in Danantara’s potential investment activities in France. Investment Minister Rosan Roeslani described the council as “a new engine for investment,” while the government noted that US$11 billion in existing memoranda of understanding from prior visits now had a dedicated mechanism for implementation. Prabowo subsequently departed for Vienna and Budapest, with Gerindra spokesperson Sugiat Santoso noting that further agreements on EV battery supply chains and defence are expected from those visits.

Sectoral Developments: Trade, Finance, and the Digital Economy

Beyond the headline stories, several significant sectoral developments deserve attention. PT Telkom Indonesia reported a solid start to 2026, with first-quarter consolidated revenue rising 1.5% year-on-year to Rp37.2 trillion, underpinned by EBITDA of Rp18.0 trillion and a net profit of Rp4.3 trillion. The company’s TLKM 30 transformation strategy continued to progress, with 5G investment and data centre consolidation as key pillars. Telkomsel’s board was simultaneously strengthened with the appointment of Muhammad Yusuf Ateh as Commissioner.

PT Astra International signalled renewed focus on shareholder returns, setting aside Rp8 trillion for potential buybacks and targeting low-teens annual total shareholder returns – a material upgrade from historical averages. BUMA International (DOID) reported a 98% year-on-year rise in EBITDA to US$28 million in the first quarter, driven by operational efficiency gains. PT Bukit Asam (PTBA) announced the merger of two operations-and-maintenance subsidiaries, BEST and BEI, under the MIND ID holding, to streamline governance and eliminate redundant functions ahead of a June 2026 effective date.

Pelindo’s container traffic reached 6.42 million TEUs in the first four months of the year, up 7% year-on-year, with international trade segments growing an impressive 11%. BYD’s factory in Subang, West Java, edged closer to full operational status with a capacity of 150,000 vehicles annually, while Saige opened a second Karawang factory targeting one million EV units per year. Indonesia’s fisheries portfolio expanded, with 638 processing units now cleared to export seafood to China, while wild-caught shrimp exports to Saudi Arabia resumed after a temporary ban over contamination concerns was lifted following successful bilateral negotiations.

Looking Ahead

As Indonesia enters the second half of 2026, the central tension is clear: the government is attempting to enact ambitious structural reforms – in commodity governance, foreign exchange repatriation, and industrial downstreaming – at precisely the moment when global headwinds are at their most severe. The success of DSI’s transitional phase will be crucial. If the government can demonstrate that the single-window mechanism improves transparency without disrupting smallholder farmer incomes or disrupting existing export contracts, it may yet build the cross-sector trust the policy requires. Quarterly evaluations of DSI’s impact on state revenue, beginning in June, will provide early signals.

The France-Indonesia business council, meanwhile, raises expectations of sustained capital inflows from European partners, particularly as the IEU-CEPA ratification process accelerates. Bank Indonesia’s capacity to stabilise the rupiah without sacrificing growth will remain under scrutiny, with analysts watching the Federal Reserve’s July decision and any resolution in US-Iran nuclear talks as potential catalysts for emerging market relief. Indonesia’s story in 2026 is ultimately one of structural ambition meeting cyclical adversity – and May was the month that tension became impossible to ignore.