Pancasila and Economic Nationalism
As many nations today revisit economic nationalism, Indonesia is not seeking a new concept. Eight decades ago, Bung Hatta reminded that economic nationalism is not about building national capitalism, but rather building a people’s economy.
This message is increasingly relevant amid global trade wars, geopolitical rivalries, economic slowdowns, technological disruptions, and competition for strategic resources. Amidst such uncertainty, Indonesia’s fundamental question is no longer just how to achieve high economic growth, but for whom that growth is created.
Will economic progress merely enrich a select few, or truly serve as a means to achieve social justice for all Indonesians? The answer to this question has long been enshrined in Pancasila.
Pancasila has often been discussed as the state foundation, legal source, or national unifier. Yet the nation’s founders also established it as the bedrock of economic development. Values of divinity, humanity, unity, consultation, and social justice are not merely political principles but economic ones guiding how national wealth is managed and development outcomes distributed.
A Sovereign Path of Self-Reliance
In recent years, the world has witnessed the resurgence of economic nationalism across nations. The United States has pursued strategic industrialisation through substantial subsidies for semiconductor, electric vehicle, and clean energy industries.
China has strengthened its dual circulation strategy to reduce reliance on external markets. India promotes the Make in India initiative to bolster domestic manufacturing. Even European nations are implementing various protections for strategic sectors. This phenomenon demonstrates that despite globalisation, every country strives to safeguard national interests.
In Indonesia’s context, economic nationalism does not mean closing off from the world. Pancasila’s economic nationalism is not anti-foreign, anti-investment, or anti-international trade. Instead, it is a nation’s ability to ensure its openness to the world maximises benefits for the people.
Investments are welcomed if they strengthen national capacity. International trade is encouraged if it enhances domestic competitiveness. Global technologies are harnessed to facilitate knowledge transfer, innovation, and improved human capital.
This is where Pancasila’s uniqueness lies. It offers a middle path between economic liberalism, which risks inequality, and narrow protectionism that hinders progress. Pancasila teaches that while markets are vital, the state must ensure justice and collective welfare.
This perspective finds constitutional grounding in Article 33 of the 1945 Constitution, which states that the economy is organised as a joint effort based on familial principles and conducted for the greatest prosperity of the people.
From Commodity Curse to National Value Addition
Economic nationalism finds its most tangible manifestation in a nation’s ability to create value addition. For decades, Indonesia has been known as an exporter of global strategic commodities, from nickel, coal, copper, palm oil to agricultural products.
Yet history shows that nations exporting only raw materials rarely achieve sustainable prosperity. The greatest economic value lies in processing, innovation, technology, and control of global supply chains.
Therefore, Indonesia’s current hiliirisation agenda is deeply rooted in Pancasila’s economic nationalism spirit. Its aim is not merely to boost state revenue but to ensure Indonesia’s natural wealth creates jobs, technology transfer, industrial development, and broader societal welfare.
However, hiliirisation must not stop at initial processing. Indonesia must advance towards research-, innovation-, and high-tech-based industrialisation to become a key player in global value chains, not just a raw material supplier.
SMEs and People’s Economy as National Pillars
When discussing Indonesia’s economic strength, attention often focuses on large projects, massive investments, or giant corporations. Yet the nation’s economic pulse actually relies on millions of micro, small, and medium enterprises.
Currently, over 64 million SMEs contribute approximately 61% to the national GDP and absorb about 97% of Indonesia’s workforce. These figures reveal that Indonesia’s economic foundation does not rest on a few large corporations but on millions of people’s enterprises sustaining the national economy daily.
Therefore, support for SMEs is not populist policy but a constitutional mandate. Economic development rooted in Pancasila must ensure small entrepreneurs gain wider access to financing, technology, markets, and capacity-building.
Bung Hatta once warned that economic nationalism is not about building national capitalism that merely replaces foreign dominance with domestic elite dominance. True economic nationalism is strengthening the people’s economy. This message remains relevant today as development challenges extend beyond economic growth to the equitable distribution of benefits.