Indonesia's Economy at the Crossroads Between Growth and Equity

The Center of Economic and Law Studies (CELIOS) has released a report titled “Economic Inequality Report in Indonesia 2026: Republic of Oligarchy” that spotlights extreme economic inequality in Indonesia. Its findings are straightforward: the wealth of Indonesia’s 50 richest individuals equals that of 55 million citizens (about 20% of the lowest population) or could even surpass the State Revenue and Expenditure Budget (APBN).

In the public sphere, these findings have quickly spread, been quoted, debated, and even politicised. However, behind the clamour lies a more fundamental question that is rarely posed seriously: if wealth has become so concentrated, who truly controls Indonesia’s economy?

This question becomes increasingly relevant when President Prabowo Subianto, in a briefing to university professors in mid-January 2026, stated that the direction of economic growth over the past two decades has instead increased inequality in Indonesia. Furthermore, he emphasised the importance of ensuring that the national development direction does not deviate from its primary goal, which is the welfare of the people.

That statement may sound normative, but in the context of CELIOS’s findings, it takes on new meaning: there is something that needs serious correction in our economic structure.

Over the past two decades, Indonesia has relatively successfully maintained economic stability. Growth around five percent is often cited as evidence that the economic engine is working. In various international forums, Indonesia is even positioned as one of the new economic powers in the region.

However, as many economists remind us, growth always has two sides: how fast it grows, and where it flows. The data highlighted by CELIOS shows that in recent years, the accumulation of wealth among the super-rich has increased sharply or nearly doubled. At the same time, improvements in welfare for the working class have progressed much more slowly.

This is where the problem lies. Indonesia’s economic growth appears increasingly “top-heavy,” flowing strongly to groups that already possess large capital but trickling very slowly to the lower groups. This phenomenon is not entirely new.

However, its growing scale makes it hard to ignore. When the wealth of 50 people can exceed the state’s fiscal capacity, we are no longer talking about ordinary inequality. We are witnessing a deeper structural change in the economy.

Economic inequality is often understood as differences in income or wealth. But in practice, it rarely stops there. Inequality almost always brings further consequences: the concentration of power.

In the CELIOS report, the term “republic of oligarchy” is used to describe this condition. Oligarchy is not merely a situation where a handful of people possess vast wealth. It refers to a condition where that wealth gives them significant influence both in the market and in policy-making processes.

In the Indonesian context, this can be seen from the dominance of certain groups in strategic sectors, particularly those based on natural resources. These sectors have distinctive characteristics: they require large capital, have high entry barriers, and are often linked to state permits or concessions. As a result, the players are limited, and wealth is concentrated.

When this concentration intertwines with access to political power, a vicious cycle forms that is hard to break: wealth generates influence, influence generates favourable policies, and those policies in turn reinforce wealth accumulation. At this point, the question of who controls the economy is no longer simple, as it has become a question about the relationships between the state, the market, and elites.

In theory, the state holds a central position in the economy. The state is not only a regulator but also a balancer. Through fiscal instruments like taxes and state spending, the government can correct inequalities produced by market mechanisms. However, reality is often more complex.

When personal wealth grows far faster than the state’s fiscal capacity, the state’s ability to redistribute becomes limited. The APBN, no matter how large, still has limits. Meanwhile, private wealth accumulation can grow without the same bounds.

This is where the paradox arises: the state has the legitimacy to regulate, but not always the sufficient resources to balance. Meanwhile, the super-rich have vast resources but no equivalent obligation to distribute.

This condition has the potential to give rise to a phenomenon in economic political literature known as state capture, where public policy is significantly influenced by the interests of economic elites. Has Indonesia reached that point? The answer may not be black and white. However, the signs are beginning to appear.

One of the most tangible impacts of wealth concentration is the hindrance of social mobility. In a relatively equal society, individuals have opportunities to rise through education, hard work, and innovation. But in a highly unequal society, those opportunities become increasingly narrow.

Disparities in access to quality education, healthcare services, and economic capital make starting points for each individual vastly different. As a result, inequality does not only occur within one generation but is passed on to the next.

This is often referred to as the inequality trap. Those born at the bottom tend to remain there, while those at the top have greater chances to maintain their position.