Pancasila Economy and Indonesia Incorporated Under President Prabowo
JAKARTA, Investortrust.id — President Prabowo Subianto’s administration has been in power for one year, seven months, and 12 days since 20 October 2024, up to 1 June 2026. However, the eighth president’s economic policies have already caused a stir. There is admiration, but also unspoken anxiety and distress. He has firmly committed to implementing Article 33 of the Constitution strictly and consistently. Indonesia’s natural wealth must be enjoyed by all its people; it should no longer be monopolised by a select few.
Radically changing long-standing policies in the name of the constitution has drawn admiration, yet economic actors harbour unspoken unease. They comply with government directives to keep businesses running and maintain employment and economic growth, despite questions they cannot openly ask.
The two unspoken questions are: first, whether business expansion can continue to create jobs and gradually push economic growth to 8% by 2029? Second, whether current government policies provide certainty for domestic and foreign investors? Economic growth and income equality must start with investment. Without investment, there is no production. Without production, no new jobs or exports. Without rising exports, there is no significant foreign exchange accumulation.
Recently, the rupiah has sharply depreciated against the US dollar and other strong global currencies, including the Singapore dollar. On Monday, 1 May 2026, the rupiah stood at Rp 17,840 against the US dollar, far above the 2026 State Budget Assumptions of Rp 16,500 per dollar. From end-December 2025 to 1 June 2026, the rupiah depreciated around 7%, and during President Prabowo’s tenure, it has weakened 15% against the dollar.
Scientific explanations for the rupiah’s depreciation include rising US Treasury bond yields exceeding 4.5%, the US-Israel conflict with Iran, and repatriation of dividends by foreign investors in Indonesian listed companies. However, another explanation is the discomfort of major fund owners and large entrepreneurs. In times of unease, capital seeks safe havens. The US dollar remains a safe haven due to America’s large economy, the world’s most liquid bond market (US Treasury), and relatively strong legal and financial institutions.
Large entrepreneurs holding dollars or other safe-haven assets does not necessarily mean they lack confidence in the national economy’s future. Often, such holdings reflect diversification and risk management strategies influenced by global conditions or domestic policy comfort. This underscores the need for a consistent, credible, and certain investment climate to reassure domestic capital to remain productively invested locally. In reality, capital seeks both profit and certainty.
Economists now question whether President Prabowo is implementing socialist economics. Socialism is an economic system emphasising collective ownership or state control of means of production—such as land, factories, mines, energy, and strategic infrastructure—with the primary goal of social equity and justice.
The president does not appear to be applying pure capitalism, which emphasises private ownership of production means and market mechanisms to determine prices, production, investment, and resource distribution. In the name of the people, he wants the state to play a decisive role, even as a primary actor.
Reviewing his speeches, it is clear the president aims to implement Indonesia’s constitutional economy: Pancasila economics. According to Professor Mubyarto, Pancasila economics is a moral market economy based on social justice, conducted as a collective effort for the people’s prosperity, not just the profit of a few.
In modern economic practice, pure capitalism and socialism are rarely applied. Instead, mixed economies—combining market mechanisms, state roles, and social welfare policies—prevail. Major nations are pragmatic: using markets to drive growth and innovation while relying on the state to maintain stability, equity, and strategic interests. Countries aim to implement economic models aligned with their constitutions.
China offers the most striking example. Politically led by the Communist Party, it practices ‘socialism with Chinese characteristics’ economically. Since Deng Xiaoping’s 1978 economic reforms, China has opened up to markets, foreign investment, private ownership, and business competition. Private firms like Alibaba, Tencent, and BYD have become global players. Yet the state retains strong control over strategic sectors such as banking, energy, telecommunications, land, and national industrialisation. China does not enforce pure communist economics but a market economy with a powerful state.