Reassessing Indonesia's development resilience: From policy acceleration towards...
The State Address of the President of the Republic of Indonesia on 14 August 2026 demonstrated a development direction that increasingly positions the state as an active actor in managing strategic resources, strengthening food and energy self-sufficiency, promoting downstream processing, reforming State-Owned Enterprises (SOEs), and expanding interventions in education, health, and social protection.
The President set out four main governance guidelines: carrying out the constitutional mandate, safeguarding national interests, accelerating the resolution of people’s difficulties, and ensuring that today’s policies take into account the interests of future generations.
This framework reflects a development paradigm that does not rely solely on market mechanisms. The government is taking a stronger position in determining investment direction, managing public assets, distributing subsidies, developing industry, and providing basic services.
This approach can be understood in the context of rising global uncertainty: geopolitical rivalry, supply chain fragmentation, climate change, technological transformation, and commodity price volatility have made the concept of economic resilience a key agenda for many countries once again.
However, the scale of intervention and the breadth of the development agenda demand more critical evaluation. Success cannot be measured simply by how many programmes are launched, how much investment is realised, how many cooperatives are formed, how many SOEs are restructured, or how many public facilities are built.
The more fundamental question is whether all these achievements improve productivity, strengthen institutions, create social mobility, reduce inequality, and are able to withstand fiscal pressures, climate change, global shocks, or changes in leadership.
Indonesia entered the second half of 2026 with a number of indicators that provide room for optimism.
Investment realisation in the first half of 2026 reached Rp1,010.6 trillion, growing 7.2 per cent compared with the same period the previous year. This investment absorbed 1,448,862 workers and reached 49.5 per cent of the 2026 national investment target of Rp2,041.3 trillion. Notably, investment outside Java reached Rp507.8 trillion, or 50.2 per cent of total investment, slightly higher than investment in Java at Rp502.8 trillion.
A more balanced geographical distribution of investment is an important development. However, a more even spread of investment locations is not automatically synonymous with a more even distribution of development benefits. Concentration of investment in resource-rich regions can produce large investment figures without generating local economic transformation if linkages with local labour, MSMEs, supplier industries, research, and local technology development remain relatively weak.
Around Rp300.1 trillion, or 29.7 per cent, of first-half 2026 investment came from the downstream processing sector, with minerals such as bauxite, nickel, copper, iron and steel, and silica sand remaining important contributors. This fact shows that natural resources and commodity- or resource-based industrialisation continue to play a major role in Indonesia’s investment structure, without disregarding the mandate of Article 33 of the Constitution. The government positions investment not as an end goal, but as an instrument for job creation and improving quality of life.
This principle needs to be translated into more concrete indicators. The government could develop an investment quality index that incorporates labour productivity, wage levels, job formality, local content, technology transfer, MSME involvement, research and development intensity, and the contribution of investment to regional revenue and development, as well as fairness and sustainability.
In agriculture, the government has achieved self-sufficiency in eight commodities: rice, maize, consumption sugar, chicken meat, chicken eggs, shallots, large chillies, and bird’s eye chillies. The government has linked increased production with a policy of reducing fertiliser prices by around 20 per cent and improving availability.
This achievement is important because food is not merely an economic commodity. Food stability is linked to inflation, poverty, farmer welfare, nutritional quality, social stability, and national resilience. Therefore, food policy needs to shift from a production-oriented policy towards a resilience-oriented policy.
Increasing production remains important, but it must be accompanied by irrigation modernisation, mechanisation, climate-adaptive seeds, precision agriculture technology, post-harvest storage, cold chains, agricultural insurance, financing, technology-based extension services, and strengthening of price information systems.
It is time for the government, in the area of food security, to include farmer welfare as a measure. Increased production does not always result in increased income if prices fall at harvest time or market structures leave farmers with weak bargaining positions. Therefore, production policy must be integrated with processing, warehousing, distribution, financing, and market access so that farmers obtain a larger share of added value.
It is in this context that the red-and-white village and sub-district cooperatives have strategic relevance. To be more constructive, the government should measure transactions per member, turnover growth, asset productivity, cash flow, non-performing loan levels, business surplus, transaction digitalisation, and the proportion of income derived from independent business activities.