Prabowo and Indonesia's Path to Revival

The world is entering a difficult phase. The Russia-Ukraine war is not over, the Middle East remains tense, trade wars between major powers are increasingly open, and climate change is disrupting food production and global supply chains. In this situation, every country is forced to ask: how far can it survive on its own strength?

That question became one of the main threads of President Prabowo Subianto’s state address in August 2026. The President said geopolitical conflict, trade wars, supply chain disruptions and economic pressure require Indonesia to become increasingly able to “stand on our own feet”.

The sentence marks a change in development orientation. Indonesia is not closing itself off from the world economy; what is being built is national capacity so that openness does not turn into dependency. In development studies, this approach is close to the idea of the developmental state: the state does not replace the market, but ensures that the market works to strengthen national production capacity.

Economic self-reliance is often misunderstood as autarky, as if the state must produce everything itself and be hostile to the market. That is not the path Indonesia is taking. The President himself stressed, “We are not anti-market.” What is questioned is when the market is manipulated by the concentration of capital and the people have no bargaining position. For this reason, cooperatives are positioned as instruments for strengthening the people’s economy and controlling supply chains from below.

This approach is not new in development literature. Alice Amsden, in Asia’s Next Giant (1989), showed that the industrialisation of latecomer countries was not born solely from market mechanisms, but from the “principle of reciprocity”: state support must be repaid with performance. Peter Evans in Embedded Autonomy: States and Industrial Transformation (1995) called it embedded autonomy: the state must be autonomous enough not to be captured by narrow interests, but still connected with economic actors to understand the needs of industrial transformation. Dani Rodrik, through Industrial Policy for the Twenty-First Century (2004), added that modern industrial policy is not merely about choosing companies to subsidise, but about building new productive capabilities through a disciplined relationship between the state and the business sector.

From this perspective, Prabowo’s policy direction is more accurately called productive sovereignty: open to investment, trade, capital and world technology, but reducing dependence on sectors that determine the nation’s safety.

Food is the most concrete example. The President said 145 regulations on fertiliser distribution have been removed, fertiliser prices have fallen by 20 percent, and Indonesia has achieved self-sufficiency in eight food commodities, although dependence on beef and garlic remains. Data from the National Food Agency supports that optimism: Government Rice Reserves reached around 5.25 million tonnes on 12 August 2026, far above the 1.52 million tonnes ahead of the peak of El Niño in September 2023, and sourced from domestic production, not imports.

The threat is real. BMKG predicts 56.18 percent of Indonesia’s land area will experience a drier than normal dry season, with a 98 percent chance of moderate El Niño. Under these conditions, food reserves are no longer merely an agricultural matter, but an instrument of national security.

A similar logic applies to energy and downstreaming. The President said the start of B50 to reduce diesel imports and the acceleration of downstreaming for copper, gold, aluminium, industrial salt, DME and waste-to-energy. The government also intends to use state-owned enterprises and Danantara to acquire technology, intellectual property, management and markets.

This is how downstreaming should be read: not merely building smelters, but changing Indonesia’s position from a seller of natural wealth to an owner of production capability.

Sovereignty means little if the economy does not grow. BPS recorded Indonesia’s economy grew 5.29 percent in the second quarter of 2026 and 5.45 percent throughout the first half of 2026. Investment realisation in the first half of 2026 reached around Rp1,010 trillion and absorbed more than 1.4 million direct workers. The poverty rate in March 2026 fell to 8.07 percent, or 22.93 million people, a reduction of 920,000 people from March the previous year. The open unemployment rate in May 2026 was 4.65 percent.

However, the work is not finished: rural poverty is still 10.67 percent, and the Gini ratio in March 2026 stood at 0.368, slightly up compared with September 2025, although lower than March the previous year. The next measure of success is not only how fast the economy grows, but also who moves up in class along with it.

I think the most important sentence in the President’s address was: “Growth and investment are not the final goals. Our goal is the welfare of our people.” He stressed that every rupiah of investment must produce jobs and improvements in quality of life, especially for the lowest groups. That is the difference between economic growth and development.

There is one condition that must not be ignored: running industrial policy, managing natural wealth, building cooperatives and directing state-owned enterprises requires strong institutional capacity. For this reason, bureaucratic and state-owned enterprise reform is the most decisive part of this agenda. The President himself acknowledged that convoluted and corrupt bureaucracy can destroy the nation: “The state must make things easier for the people, not make them harder.”

This is also the lesson of Amsden and Evans: a developmental state is not merely a big state, but a capable state—giving support but demanding performance, intervening but maintaining discipline, close to the business world but not dominated by it. Restructuring of state-owned enterprises, downstreaming, cooperatives, subsidies and public investment must always be accompanied by performance measures.