AmCham Update Vol. 7 #065

Indonesia Dodges MSCI Downgrade for Now, Special Treatment for Danantara Bond Buyers Raises Worries, Manpower Ministry to Revise Outsourcing Rules, Indonesia Plans Dubai-Inspired Finance Hub, Economic Stimulus Renewed for Q3

Jun 24, 2026

Indonesia Dodges Downgrade by MSCI, Scrutiny Remains

Global Index provider MSCI has extended its review of Indonesia's Emerging Market status until November to assess ongoing market reforms. The move is a way of prolonging close scrutiny of market governance and avoids an immediate downgrade to frontier market status.

MSCI acknowledged recent reforms by the Financial Services Authority (OJK), Indonesia Stock Exchange (IDX), and Central Securities Depository (KSEI) to improve transparency and increase free-float requirements, but said concerns remain over opaque ownership structures and coordinated trading activity.

"While these announcements represent a step in the right direction, what matters for international institutional investors is the consistent implementation and sustained effect of these measures across the market," MSCI said on June 23.

When MSCI first raised concerns over the “investability” of the Indonesian stock market in January and warned of a possible downgrade from emerging market to frontier market status, it triggered a market rout and the flight of foreign capital from Indonesia. The IDX has lost about 30 percent of its value in 2026.

Hasan Fawzi, Chief Executive of Capital Markets, Financial Derivatives, and Carbon Exchange Supervision at OJK, said the regulator respected MSCI's continued assessment and views it as part of a normal review process, while remaining committed to strengthening transparency, governance and market enforcement.ng transparency, governance and market enforcement.

“For us, the MSCI announcement is momentum to further strengthen and accelerate our capital market reform agenda, which we have announced since last year" said Hasan at a press conference on June 24.

Hasan added that authorities had stepped up capital market oversight, and sanctioned numerous parties for violations and imposed fines totaling Rp 138.9 billion, as of May 31.

Prasetya Gunadi, an analyst at Samuel Sekuritas Indonesia. said the risk of a near-term downgrade remained low, supported by Indonesia's market size and liquidity, and added that a potential lifting of MSCI's freeze on Indonesian stock inclusion could attract passive fund inflows and improve market sentiment.

Meanwhile, SGMC Capital Fund Manager Mohit Mirpuri said the decision was more favorable than many investors had feared, although downgrade risks had been deferred rather than eliminated. "The next few months will be about execution, credibility and evidence rather than further policy announcements," Mohit said on June 24.

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Concerns Raised over Special Protections for Danantara Bond Buyers

A recent law to give broad protections to buyers of special bonds issued by Danantara is raising concerns among experts about money laundering after new details were revealed over the weekend.

The Financial Sector Development and Strengthening Law was passed on June 4 with the stated aim of increasing the role of Bank Indonesia in helping meet President Prabowo Subianto's ambitious growth goals.

But under Article 50A of the law, disclosed on June 20, purchasers of Danantara's Patriot and Merah Putih bonds will be protected from any potential criminal or tax-related prosecution, as well as civil lawsuits. The law also stipulates that transaction data related to purchases of Danantara bonds cannot be used as a basis for taxation or as legal evidence in court.

"Perpetrators of corruption and transnational money laundering who commit financial crimes could use these instruments to launder their illicit proceeds," warned Nailul Huda, a director at the Center of Economic and Law Studies (CELIOS), in a statement on June 24.

Spokespersons with the finance ministry, the president's office and Danantara did not respond to requests from Reuters for comment.

Another clause views investors in Danantara bonds as having participated in Indonesia’s tax amnesty and voluntary disclosure programs, effectively granting them additional tax-related benefits.

Fikri C. Permana, head of research at KB Valbury Sekuritas, said the measures may help strengthen demand for Danantara securities but create an uneven playing field compared with other fixed-income instruments, including sovereign bonds.

“The government support is positive for the market, but there is a clear distinction compared with other debt instruments,” Fikri said in an interview with Investor Daily on June 24.

“Instead of relying on regulatory incentives, governance should be improved to build investor confidence,” Fikri said, noting that Danantara has yet to publish a financial statement.

Danantara sold Patriot Bonds worth Rp 50 trillion to Indonesian tycoons last year at below-market returns. They were marketed as a way for wealthy businesspeople to contribute to the country.

Concerns about Danantara's capacity to manage Subianto’s spending plans are growing as the fund takes on a wide role and is subject to political control.

A Danantara unit raised $1.5 billion in its debut US dollar bond sale earlier this month, which Danantara hailed as a sign of renewed investor confidence.

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Manpower Ministry to Revise Outsourcing Rules

Deputy Minister of Manpower Afriansyah Noor has said the government will revise Minister of Manpower Regulation 7/2026 on Outsourcing to reduce the number of job categories eligible for outsourced employment from six to four.

The move, a concession to longstanding labor demands, follows consultations with labor unions, employers, and Special Presidential Advisor for Labor and Worker Welfare Said Iqbal.

Said, long one of the most vocal labor leaders in the country, recently joined sides with President Prabowo Subianto. Analysts suggest that his new status as an advisor to the president is meant to ease worker unrest.

Speaking on June 21, Afriansyah said the revision would remove permissions to use outsourced labor for operational support services and supporting work in the mining, oil and gas, and electricity sectors.

“The outsourcing provisions for the electricity and mining sectors will be revised,” Afriansyah said. If adopted, outsourcing would be limited to cleaning services, catering, security, and transportation services, including drivers.

Under the regulation, issued in April, outsourcing is currently permitted for six categories of supporting services: cleaning, food and beverage services, security, transportation and worker transport services, operational support services, and supporting work in the mining, oil and gas, and electricity sectors.

Labor unions have long argued that outsourcing should be limited to traditional support services. “These four supporting jobs are catering, security, cleaning services, and drivers,” Said explained on June 21. He also called for stronger worker protections, including clearer employment status, better regulation of working hours and overtime pay, and stricter compliance with minimum wage requirements.

Manpower Minister Yassierli previously said the government remained open to revising the regulation following recommendations from the National Tripartite Working Group, comprising representatives from the government, labor unions, and employers.

“We in the government recognize that if there’s a desire to reconsider the matter, we are prepared to do so,” Yassierli said on June 18.

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Indonesia Plans Dubai-Inspired Financial Center

In its latest scheme to emulate successful foreign development models, Indonesia is drafting a law to create the Indonesia International Financial Center (PFII), a planned financial hub modeled on Dubai that will operate as a special economic zone (SEZ), Coordinating Economic Affairs Minister Airlangga Hartarto said on June 22.

“We are still finalizing the incentives, but we will design them in a way that puts our financial center on par with Dubai,” Airlangga said, adding that the government is also considering establishing financial centers beyond Bali.

When state investment fund Danantara was launched in 2025, it was described as being based on Singapore’s successful Temasek mode. The country has also said it will emulate successful health tourism models from Singapore and elsewhere.

This project, initiated by Luhut Pandjaitan, the Chairman of the National Economic Council, is expected to be in Bali and modeled after the Dubai International Financial Centre (DIFC).

Speaking before the House of Representatives’ Legislative Body (Baleg) on June 23, Deputy Law Minister Edward Omar Sharif Hiariej said the center would be built on principles of efficiency, transparency, and integrity.

The government expects the center to enhance Indonesia’s competitiveness, attract investment and support financing for strategic sectors. The PFII Bill has also been proposed for inclusion in the National Legislation Program (Prolegnas).

House Commission XI chairman Mukhamad Misbakhun said on June 4 that a new institution would manage the financial center under special arrangements governing taxation, governance, and dispute resolution. The is designed to accommodate a wide range of financial activities, including wealth management services, family offices, banks, insurers, pension funds, and venture capital firms.

Under Law 4/2026 on the Development and Strengthening of the Financial Sector, PFII sites may have financial and administrative autonomy, special legal arrangements and dedicated tax incentives.

Bhima Yudhistira, Executive Director of the Center of Economic and Law Studies (Celios), said the project’s success would depend on the establishment of a credible and independent authority with a strong track record and high integrity, similar to the Dubai model, in an interview with TheJakarta Globe.

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Economic Stimulus Renewed for Q3

Despite recent hesitant steps toward peace between the US and Iran, Indonesia will continue to pump money into further incentives for the local economy due to continued geopolitical uncertainty.

Citing “geoeconomical challenges,” Coordinating Economy Minister Airlangga Hartarto said in a press conference on June 24: “We need to keep protecting the domestic economy and we have to do so by taking proactive steps to prevent and anticipate the external risks that might spring up.”

The measures will cost about Rp 26.34 trillion (US$1.47 billion), most of which will go to food assistance in the form of rice handouts for 33.24 million people during the third quarter at a cost of Rp 17.54 trillion.

The government also plans to provide subsidies for tempeh and tofu producers due to rising soy prices.

The continuing internship and vocational training program will cost Rp 6.26 trillion, Rp 4.14 trillion of which is for hiring 100,000 interns. The program began last October with the intention of creating jobs and therefore sustaining household spending through stipends pegged to the minimum wage.

The vocational training program is set at Rp 2.12 trillion to reach 220,000 vocational high school graduates and 50,000 laid off workers.

Other measures come in the form of transportation and tax incentives, similar to what has been in place for the past few months.

The government will again waive the value added tax on domestic airfares during the mid-year holiday season, targeting 2.3 million travelers. The same measure would be in place for Christmas and New Year, targeting 3.7 million passengers. The transportation stimulus measure includes discounted train and boat fares during holidays.

Other tax incentives will remain in place for liquefied petroleum gas and plastic-related Imports. This has been in effect since April to offset skyrocketing prices of raw materials for plastic manufacturing.

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AmCham Cares – Cargill Indonesia

Cargill Supports Community Well-Being through Nutrition, Health, and Economic Empowerment Programs

In May, Cargill highlighted its ongoing efforts to strengthen community well-being in East Java through integrated programs focused on nutrition, healthcare, clean water access and economic empowerment.

According to the latest Resilient Food Systems Index (RFSI) by Economist Impact, Indonesia ranks 29th out of 60 countries, reflecting strong performance in food affordability and access to nutrition, while challenges remain in food availability and system resilience.

“At Cargill, we believe access to nutrition is fundamental to supporting community well-being and building resilient food systems,” said Yusuf Ronzy, Cargill Director for Plant Management, Food Southeast Asia, Australia and New Zealand. “In Indonesia, we translate these insights into community-based programs that improve access to nutrition-related education and services, particularly in communities surrounding our operations.”

In Gresik, Cargill supports the “Laskar Cegah Stunting” initiative, working with local health authorities, schools, community organizations and village stakeholders on stunting prevention efforts in six villages. The program includes nutrition education, maternal and child health awareness, growth monitoring, supplementary feeding activities and behavior change campaigns.

In Pasuruan, Cargill supports community health clinics and nutrition monitoring programs for children, pregnant women, adolescents, and the elderly, benefiting hundreds of residents. Through World Food Day and World Egg Day activities, the company also distributed protein-rich foods, including eggs, tempeh, and soy milk sourced from local MSMEs.

Complementing these initiatives, Cargill has supported the construction of seven deep wells in Pasuruan, providing clean water access to more than 10,000 residents. The company also offers entrepreneurship training, financial literacy support, product development assistance, and market access opportunities for women-led MSMEs to help strengthen inclusive local economic growth and sustainable livelihoods.

Get to Know Our Member | SIDDHARTA WIDJAJA & REKAN

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KPMG Indonesia is one of the largest practices in the country and has more than 1,300 professionals. It provides Audit, Tax, and Advisory services to multinational corporations, joint ventures, and domestic companies operating across a wide range of business sectors.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Donna Priadi and written by the AmCham Staff.

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