Flash Visit To Indonesia
Commentary by Wayne Forrest
Under AICC’s roof is AICEF (American Indonesian Cultural and Educational Foundation). Until 2018 it had a stand-alone presence. Since AICC took over as the group’s administrator the group’s scope has been enlarged to include more cultural activities along with its traditional support for Indonesians studying for doctoral degrees in the US. One such effort is the AICEF Prize for Cross-cultural Filmmaking where an Indonesian filmmaker travels to the US to screen their film and an American filmmaker travels to Indonesia. On December 1, I traveled to the Yogyakarta Asian Film Festival (JAFF) to join the American winner, Chithra Jeyaram, who screened her film, “Love, Chaos, Kin”. It was the 20th anniversary of JAFF, and as it was AICEF’s first year partnering with them I decided to go. It was my second trip of 2025, only 8 days, but enough time for a slew of meetings in Jakarta, mostly with AICC members and Indonesian business leaders.
Tropical Cyclone Senyar/Coffee Exports Affected
I arrived in Indonesia only days after devastating floods hit areas of West and North Sumatra and Aceh. The heavy rains combined with poor logging practices led to destructive landslides and mud rivers. Millions of people were displaced. Press coverage was often behind what people were learning from social media but eventually caught up. President Prabowo has resisted declaring a national emergency or seeking international assistance. His pride has drawn criticism. Road links in many areas remain severed with relief possible only via air drops. The question remains if Indonesia has sufficient helicopter resources to meet the challenge; it certainly did not during the 2004 tsunami when the US supplied aircraft carriers to ferry relief to survivors and those needing medical care. The current disaster may not have the same level of souls lost but the numbers of displaced people are similar. The coffee growing region of Gayo in Aceh was severely hit and may only recover 25% of its normal harvest. Many districts have no passable roads currently; it may take 6 months to reconnect all the arterial roads used by trucks. The Guardian newspaper reports that as much as 11% of the already threatened Tapanuli orangutan population has perished.
“Déjà Vu”
In 1991, following the funeral of a pro-independence activist in Dili, East Timor, Indonesian troops fired on a procession to the Santa Cruz cemetery resulted leaving approximately 250 dead and
hundreds injured. The incident became known internationally only because a few foreign journalists managed to smuggle out footage of the event. The day after the report became the headlines of nightly news all over the world Indonesia’s Ambassador to the United Nations, Dr. Makarim Wibisono, asked several AICC members to join him for informal advice on how he should handle the US media which would soon descend on him. By chance Makarim was in the same car on my train from Yogyakarta to Jakarta. It was so amazing but poignant to recall the tense international relations that Indonesia endured during that decade.
Similarly, I reconnected with Sahala Pangaribuan, who I assisted in 1999 when he traveled to NY with the head of Indonesia’s National Police Academy, to seek out training and educational cooperation with the NY Police Academy and John Jay College of Criminal Justice.Sahala kindly assisted with my travel.
What’s on the minds of those I met with.
Where is the Middle Class
For those who joined our November event featuring the Indonesian economist Fauzi Ichsan, you heard that Indonesia’s middle class has been shrinking since 2019, partly due to COVID. Recovery has not kicked in and employers are shedding workers. With consumption being the major engine of Indonesia’s perennial 5% GDP growth, these numbers are concerning. Leading growth indicators such as car and motorcycle sales are down. A recent World Bank report focused on a decline in real wages since 2018, weak FDI flows, and the transfer of focus of spending to social welfare from infrastructure. It noted that job gains were in lower paying sectors. Traditional government subsidies (cash transfers, fuel) help as poverty reducers for those in the “day job” informal economy, but only investment and productivity gains can grow formal sector employment, enlarge the lower and middle classes, and bring Indonesia to its 2045 goal of developed nation status.
Current Account Deficit
Bankers and business leaders also report their concern that although Indonesia is running a trade surplus it has also been experiencing a current account deficit. As one person put it, “along with our high exports of products such as nickel-based stainless steel and electric battery materials we’re exporting profits and dividends to our foreign investors”. Indonesia also buys its shipping and insurance mostly from foreign carriers. The government tries to counter this structural deficit with mandates to keep natural resource profits local, but this is hard to manage and hurts its reputation with future investors.
Lord Keynes Lives
Many I met observe that Indonesia’s government has increasingly turned to government programs to provide economic stimulus, taking a page from the 20th century giant of economics, John Maynard Keynes. The elevation of state-owned enterprises such as Danantara, transfers of government funds to state owned banks, and the creation of new programs such as the Nutritious Meals Program, Danantara, and Village Cooperatives Initiative, all signal the government’s paternalist interest and mistrust of the private sector’s capability to create growth. The irony is that it is often the lack of government competence to create policy/regulatory efficiency, and legal/judicial security, that retards that ability.
Infatuation With Gold
The striking rise in the price of gold in 2025 was not lost on Indonesians, who have been flocking to the metal as a hedge against inflation and for wealth preservation. During the era before many Indonesians had bank accounts, surplus cash went into gold items purchased at a local pawn shop, “Toko Mas” (gold shop), or went under the mattress. Today these shops still exist but the market has modernized, with digital purchasing readily available. The government has also turned its attention to gold, attempting to boost domestic processing and integrate it into the financial sector by launching a bullion bank. Given its large Muslim population such a policy supports Indonesians propensity for syariah banking. Beginning December 23, 2025 it will levy a 7.5% on gold exports which could rise to 15% if the reference price rises above $3200 an ounce. This effort reflects a broader goal to strengthen monetary sovereignty and currency stability.
Support for Russia
A striking statistic: polls indicate a majority of Indonesians support Russia’s invasion of Ukraine. A Pew 2025 poll put the number at 64%. Indonesians—as a whole– believe the narrative that Ukraine (or the West) provoked the war. Indonesia’s mainstream media either does not justify or is neutral about the invasion; it is on social media where the pro-Russian, anti-West narrative, partially fueled by propaganda, lives.
Local OEM Capability/AI
I met with two local companies, TSM Industries and Volex Indonesia that demonstrate the promise of local manufacturing and import substitution. Volex makes wire harnesses, EV equipment, and cabling for data centers. Their new manufacturing facility on Batam is supplying Tesla and other US-based customers, and is looking to supply Indonesia’s growing roster of data centers. TSM is licensed to make phone handsets, Chromebooks, payment terminals, and health scanners.
Increased Role of the Military/Revival of New Order
Indonesians I spoke with are concerned about President’s Prabowo support for increasing the role of the military in civilian affairs, notwithstanding a recent decision of the Constitutional Court that prohibits an active duty officer from simultaneously holding a civilian position. They also point out the government’s formal designation of former President Soeharto, Prabowo’s father as a national hero as well as attempts to draw all of Indonesian political parties into one unified coalition. Furthermore, support is growing for a new election law that revives to New Order system whereby governors and regional district heads are appointed not elected. (See article on page 3)
(These views are the author’s and may not reflect those of AICC or its members.)