Volatile Market, RI Investment-Worthy Stamp at Stake

JAKARTA, KOMPAS — Investors consider the level of profit from investing in Indonesia to be shrinking. Without structural-technocratic improvements in government policies, new risks could emerge. The “investment grade” stamp is also at stake.

This is the core message and aspiration that emerged at the Kompas Collaboration Forum (KCF) entitled "What's Wrong with the National Economy?" in Jakarta, Friday (3/21/2025). Present as speakers were President Commissioner of PT Pan Brothers Tbk Benny Soetrisno and a lecturer at the Atma Jaya Catholic University of Indonesia Jakarta, A Prasetyantoko.

The forum discussed the latest developments in the national economy. Starting from the turmoil in the financial market, government policies, to aspects of legal certainty in running a business. Present as an audience who also actively conveyed the thoughts of the leaders of KCF member companies.

Prasetyantoko said that the condition of the domestic financial market, especially the stock market, has recently experienced a fairly deep correction. The Composite Stock Price Index (IHSG) in March 2025 fell to 6,270 or was corrected by 21 percent compared to its highest level of 7,900 in September 2024.

This was triggered by several factors, such as the downgrade of Indonesia's stock rating by Morgan Stanley Capital International (MSCI) and Goldman Sachs. In addition, there was also a downward revision of Indonesia's 2025 economic growth by the Organization for Economic Co-operation and Development (OECD), from 5 percent to 4.9 percent.

The rating agency estimates that the profitability of issuers in Indonesia will decline along with a lower economic growth outlook. In addition, government policies, such as budget efficiency, Danantara, and the Three Million Homes program are seen as having an impact on future fiscal sustainability.

As a result, foreign capital flows in the domestic financial market during March 17-20, 2025 were recorded as net sales of IDR 4.25 trillion. This consisted of net sales of IDR 4.78 trillion in the stock market, net purchases of IDR 1.20 trillion in the Government Securities (SBN) market, and net sales of IDR 0.67 trillion in Bank Indonesia Rupiah Securities (SRBI).

It needs to be guarded against spreading to affect its sovereign rating. If that happens, the possibility of a more complex crisis will be greater.

The outflow of foreign capital has put pressure on the rupiah exchange rate, which tends to move in the range of Rp16,300-Rp16,500 per US dollar. On the other hand, foreign investors still have confidence in the government bond market, considering that Indonesia's sovereign credit rating is still maintained at the investment grade level.

"This, right, has sounded a signal in the equity market. It needs to be guarded against spreading and affecting its sovereign rating. If that happens, the possibility of a more complex crisis will be greater," Prasetyantoko said.

If Indonesia's credit rating drops, he continued, liquidity will tighten further and could potentially trigger a major economic crisis. In other words, dynamic developments in the financial market will precede the real sector.

Based on the latest data, international credit rating agencies, such as Moody's Investors Service and Fitch Rating, in early 2025 again maintained Indonesia's stamp as an investment-worthy country. The institutions assessed that the Indonesian economy remains resilient supported by economic stability.

According to Prasetyantoko, the government needs to maintain fiscal discipline and future economic growth prospects, so that the investment-worthy stamp can be maintained. Various real sector indicators, such as weakening purchasing power and unemployment rates, can also be supported by strong fiscal so that growth is maintained.

In addition, the government should also prioritize a technocratic approach and good governance principles in every policy. Basic economic and political principles must be implemented in a balanced manner, including good public communication, so as not to cause turmoil in the market.

Instead of maintaining the 8 percent growth target as a political promise and implementing short-term priority programs that tend to be populist, the government can focus on one fundamental aspect, namely job creation.

"The 8 percent growth target is just a number, but what is the basis of 8 percent? The philosophy behind 8 percent is to increase our income to become a developed country. So, rather than relying on 8 percent growth, it is better to measure how much we create jobs," said Prasetyantoko.

On the same occasion, Benny said that the 8 percent growth target in 2029 is a good thing. However, the ideal should be re-evaluated by considering the current domestic economic conditions, including tax revenues that have recently declined.

The Ministry of Finance reported that tax revenue in February 2025 was IDR 187.8 trillion or 8.6 percent of the 2025 State Budget (APBN) target was realized. This achievement dropped 30.19 percent compared to last year's tax revenue, which was IDR 269.02 trillion or 13.53 percent of the 2024 APBN target.

"It would be better if every leader's KPI (key performance indicator) is measured by job creation. So far, we have only measured economic growth," he said.

Investment will not come in if, for example, purchasing power is always the same.

Likewise, Vice President Director of PT Toyota Motor Manufacturing Indonesia Bob Azam said that one of the main factors that can lead Indonesia to achieve its 8 percent growth target in 2029 is increasing people's purchasing power.

"Investment will not come in if, for example, purchasing power is the same. From the programs delivered by the government, none of them concern employment issues. In fact, it is important to mention it clearly because it is related to purchasing power and investment," he said.

On the other hand, business actors also expect legal certainty in running a business. Law enforcement that provides certainty in business can encourage job creation so that growth occurs.

President Director of PT Tri Mulia Agung, Johnny Darmawan Danusasmita, said that the function of the government is to create regulations that are in accordance with the needs of the business world. However, lately, regulations or targets set by the government have often changed along with the change of the ruling regime.

In fact, like a company, the targets set by the government for development and the economy should be long-term oriented. Changing the rules of the game in each period of government will actually trigger uncertainty in the business world.

"The way to make investors comfortable entering Indonesia is with legal certainty," said Johnny.

According to him, policy making by the government tends to start from the top down. Therefore, a compromise is needed in the form of socialization and communication to the public, including to business actors.

After receiving aspirations from below, the government should be able to make adjustments to the policies to be taken. If the compromise process is not carried out properly, there will be a negative reaction from market players, as has happened recently.

Chairman of the Indonesian Industrial Estate Association (HKI) Sanny Iskandar added that the real sector, especially manufacturing, is the mainstay of the economy. However, in practice, legal certainty and enforcement are still issues for business actors.

"What we are facing now is the lack or absence of certainty of policy and law enforcement. Related to anything, such as spatial planning, land, employment, and so on," he said.

As is known, the manufacturing industry is closely related to several aspects, such as spatial planning, land, environment, building issues including the provision of utilities, infrastructure, and employment.

Previously, the government has accommodated the interests of the business world by issuing the Employment Law with an omnibus law regulation. However, in practice, there are still administrative processes that tend to be convoluted and full of conflicts of interest.