This Week in Indonesian Business and Investment (20-26 Feb 2026)

The week of 20 to 26 February 2026 will be remembered primarily as the week Indonesia staked its claim on the global trade map, signed a landmark agreement with the United States, and then watched, with some unease, as the legal foundations beneath that deal began to shift. It was also a week that exposed the persistent gap between Indonesia’s ambitions and its administrative machinery – a gap that continues to cost the country dearly in foregone investment.

The Prabowo-Trump Agreement and its Turbulent Aftermath

The centrepiece of the week was the Agreement on Reciprocal Trade (ART) signed by Presidents Prabowo Subianto and Donald Trump in Washington on 19 February. By any measure, Indonesia secured meaningful concessions: a 19 per cent reciprocal tariff on most Indonesian exports to the United States, reduced from an initially threatened 32 per cent, alongside zero-tariff access for 1,819 product lines spanning palm oil, coffee, cocoa, rubber, semiconductors, and textiles. Coordinating Minister Airlangga Hartarto confirmed that 90 per cent of Indonesia’s proposals were accepted, and President Prabowo reportedly became the only head of state at the Board of Peace summit to secure a one-on-one bilateral meeting with Trump. The accompanying US$38.4 billion in trade and investment commitments – encompassing a planned purchase of 50 Boeing aircraft, annual energy imports of US$15 billion redirected from existing Middle Eastern and Southeast Asian suppliers, and a five-year soybean import commitment of 3.5 million tonnes annually – gave the deal considerable commercial weight.

Yet within days, the US Supreme Court delivered a 6-3 ruling declaring that Trump’s tariff powers under the International Emergency Economic Powers Act were unconstitutional. Trump responded by invoking Section 122 of the 1974 Trade Act, announcing a new blanket 10 per cent global tariff – and then raising it to 15 per cent within 24 hours. For Jakarta, the ruling was a double-edged development. On one hand, the new 10-to-15 per cent baseline was lower than the 19 per cent agreed bilaterally, which Prabowo acknowledged as advantageous. On the other, Indonesia’s carefully negotiated zero-tariff provisions for flagship commodities now required fresh consultations with Washington to preserve. Trade Minister Budi Santoso moved quickly to reassure that the zero-tariff access for 1,819 product lines would be maintained, while Prabowo told reporters that Indonesia was “ready for all scenarios.” The government’s composure was admirable; its task in the weeks ahead will be to convert that composure into durable legal certainty.

The ART was not without domestic critics. Academics from Universitas Gadjah Mada pointed out a stark asymmetry: Indonesia was bound by 211 obligations in the agreement text compared to just nine on the American side. Think tank CELIOS filed formal objections, warning of constitutional violations and pledging legal action. The Indonesian Ulema Council raised alarm over provisions it argued could weaken halal certification requirements for certain American manufactured goods, though the government – through Cabinet Secretary Teddy Indra Wijaya and the Halal Product Assurance Agency – repeatedly clarified that food and beverage imports remained fully subject to mandatory halal labelling. The controversy illustrated how trade liberalisation, even when economically rational, must navigate Indonesia’s complex regulatory and religious landscape with considerably more public communication than the government initially provided.

Investment: Ambitions Confronting Bureaucracy

Beyond the diplomatic headlines, the week produced a sobering domestic reckoning. The Investment Coordinating Board (BKPM) acknowledged that Indonesia had lost potential investment worth IDR 1.5 quadrillion – a staggering figure – because companies that entered the Online Single Submission system successfully obtained Business Identification Numbers but then stalled before reaching operational permits. Deputy Investment Minister Todotua Pasaribu drew invidious comparisons with Vietnam, where streamlined licensing has helped attract sustained industrial capital. The government’s response – revisions to Government Regulation No. 28 of 2025 and an accelerated NIB issuance programme – was sensible, though the fact that such reforms are needed in 2026, not 2016, speaks to the depth of the structural challenge. The five-year IDR 13,000 trillion investment target remains credible only if the OSS system delivers on its promise. Meanwhile, the Nusantara Capital (IKN) reached IDR 72 trillion in private investment commitments, a meaningful milestone even as questions persist about the pace of on-the-ground development.

Also this week, Prabowo held a nearly two-hour session in Washington with 12 chief executives managing a combined US$16 trillion in assets, including figures from BlackRock, KKR, Oaktree, and Warburg Pincus. Their message was consistent: they valued legal certainty above all else. Danantara, Indonesia’s sovereign wealth fund, received positive billing as a potential local strategic partner, though observers noted that institutional confidence ultimately depends on project realisation, not policy design.

Banking: Cheaper Credit, Higher Dividends

On the domestic financial front, the week brought encouraging news on interest rates. The Financial Services Authority (OJK) confirmed that lending rates had declined to around 8 per cent, from above 9 per cent previously, attributing part of the improvement to Finance Minister Purbaya Yudhi Sadewa’s decision to extend the placement of IDR 200 trillion in Surplus Budget Funds within state-owned banks by a further six months, pushing the maturity to September 2026. OJK’s Head of Banking Supervision, Dian Ediana Rae, said the extension could push credit growth into double digits, with the authority targeting 10 to 12 per cent this year.

PT Bank Rakyat Indonesia reported a 2025 net profit of IDR 57.13 trillion, a 5.3 per cent decline year-on-year but broadly in line with expectations given elevated provision charges. Chief Executive Hery Gunardi signalled a higher dividend payout ratio and outlined a funding strategy centred on growing the CASA base through digital platforms such as BRImo and QRIS. BRI’s ten subsidiaries, led by Pegadaian with IDR 8.34 trillion in profit, collectively contributed IDR 10.37 trillion to consolidated earnings. Meanwhile, Bank Mandiri prepared IDR 44 trillion in cash to replenish ATMs through the Ramadan and Eid al-Fitr period – a 5 per cent increase year-on-year – and CIMB Niaga reported a solid 2025 with pre-tax profit of IDR 8.8 trillion and an NPL ratio of just 1.81 per cent.

Solar Panels, Aviation Consolidation, and the IHSG

Thursday’s session on the Jakarta Composite Index ended on a sour note, with the IHSG falling 1.05 per cent to 8,235.26 after the US Department of Commerce imposed countervailing duties of 104.38 per cent on Indonesian solar cells and panels, citing government subsidies. The ruling – part of a decade-long US campaign against cheap Asian solar imports largely manufactured by Chinese companies – arrived just days after the ART was signed, illustrating the limits of bilateral goodwill when American trade agencies operate independently of presidential diplomacy. All eleven market sectors closed in the red, with transport stocks falling 4.54 per cent.

Danantara Indonesia used the week to advance its plans for a state airline holding company comprising Garuda Indonesia, Citilink, and Pelita Air Service, targeting completion in the first half of 2026. Danantara’s stakeholder management director Rohan Hafas confirmed the structural rationale: unified booking systems, shared maintenance, and rationalised crew management. The agency also flagged what it described as an unfair flight frequency imbalance between Singapore Airlines and Garuda on short-haul routes, framing aviation reciprocity as a commercial sovereignty issue.

The Pickup Truck Controversy and Ramadan Preparations

A domestic controversy that dominated social media centred on PT Agrinas Pangan Nusantara’s plan to import 105,000 pickup trucks from Indian manufacturers Tata Motors and Mahindra & Mahindra for the Merah Putih Village Cooperative programme, at a combined cost of IDR 24.66 trillion. Kadin, GAIKINDO, workers’ unions, and multiple parliamentary members lined up in opposition, arguing that domestic manufacturers had adequate capacity and that the import would undermine supply chains supporting over 1.5 million workers. Finance Minister Purbaya agreed to a postponement pending President Prabowo’s return from overseas. The episode exposed a recurring tension in Indonesian economic policy: the government’s instinct to prioritise cost efficiency and speed against the constitutional and political imperative to develop domestic industry.

As Ramadan began, the customary surge in cash demand gathered pace. Bank Indonesia prepared IDR 185.6 trillion in fit-for-circulation banknotes, with its SERAMBI exchange programme overwhelmed by demand – queue times on the PINTAR digital booking platform reportedly reaching thousands of hours. Bluebird positioned 25,000 vehicles across 1,300 locations nationwide, and ShopBack launched Ramadan promotional campaigns projecting another 30 per cent uplift in consumer spending on its platform.

Looking Ahead

The weeks ahead will test Indonesia’s capacity to convert diplomatic momentum into concrete outcomes. Three files demand particular attention. First, the Indonesia-US trade framework requires rapid legal consolidation – Jakarta must secure written confirmation from Washington that the zero-tariff arrangements for palm oil, cocoa, coffee, and textiles survive the post-Supreme Court legal turbulence. Second, OSS licensing reform must produce measurable reductions in investment cycle times if the IDR 13,000 trillion five-year target is to remain credible. Third, the Danantara airline consolidation needs to move from announcement to implementation without the governance missteps that have historically undermined Indonesian SOE restructuring. Gold trading near IDR 3,039,000 per gram, lending rates declining, and a strengthening rupiah at IDR 16,750 to the dollar all suggest that underlying macro conditions remain supportive. Whether Indonesia can translate this broadly favourable environment into durable structural progress is the defining question of the Prabowo administration’s economic agenda.