AmCham Update Vol. 7 #067

Prabowo Calls for Dialogue with Academics, Indonesia to Shrink SOE Numbers by 75 Percent, Basic Training for Cooperative Managers under Fire after Deaths, Layoff Risks Prompt new Task Force, Compressed Natural Gas Rollout almost Ready

Jun 29, 2026

Prabowo Calls for Dialogue with Critical Academics

Striking a softer tone with critics, President Prabowo Subianto now says he wants to engage more closely with Indonesian academics and promised to review proposals for improvement.

He earlier waved off "intellectuals" for questioning his flagship programs.

"I received a long list of proposals and questions today. I promise to review them one by one," Subianto said in his closing remarks to the Indonesian Science, Technology and Industry Convention (KSTI) in Jakarta on July 28, which was attended by about 2,600 rectors, lecturers, researchers and scientists.

Emphasizing that successful countries acknowledge and address shortcomings, the president said he would follow up on the reform proposals put forward at the event.

"If necessary, we should meet every month. I need to meet smart people," he said. He asked universities to contribute ideas to support the country's long-term development.

The reform proposals from academics include expanding doctoral scholarships, increasing research funding and directing a share of state-owned enterprises' (SOEs) profits to research and innovation.

The president said universities were “places to debate ideas, perspectives, philosophies and innovation,” but he ruled out “other kinds of freedom, becoming places for, let’s say, confrontation.”

Higher Education Minister Brian Yuliarto said the government wants academics to play a bigger role in its strategic programs and the president will convene a task force involving university professors, lecturers and researchers.

"President Prabowo supports [the idea] to create working groups as a follow-up so that research findings can be applied in industry and government and help accelerate what is part of the President’s priorities," Brian said on July 28.

Weeks of student-led protests in Jakarta and other cities called on the government to improve the economy, including steps to curb the rise in prices of fuel and basic necessities, and stop what they described as wasteful spending and scrap expensive flagship initiatives, including the free meals program, which has been allocated Rp 268 trillion ($14.9 billion) this year.

Meaningful dialogue requires protecting academic freedom and allowing criticism of government policies, said Arya Fernandes, a political analyst at the Centre for Strategic and International Studies (CSIS) in Jakarta. “People should be able to challenge policies and the government should be open to views that differ from its own,” Arya told The Jakarta Post on July 28.

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Prabowo calls for SOEs to Shrink from 1,000 to 250 Companies

President Prabowo Subianto again has pledged to reduce the number of state-owned enterprises from more than 1,000 to between 250 and 300 while insisting the massive move is a restructuring that will cut costs and not involve layoffs.

Subianto made the commitment on June 28 during the Indonesian Convention on Science, Technology, and Industry in Jakarta, according to an official statement.

“Out of more than 1,000 SOEs, we have closed over 200 entities. Our ultimate objective is to shrink the number to around 300,” the president said.

State investment fund Danantara, which oversees all SOEs, is in charge of the consolidation.

"Imagine, if we close down over 750 state-owned enterprises. 750 chief executives, 750 directors multiplied by 4 or 5 (people), 750 commissioners multiplied by 10 [people]. What will the overhead be like, and what will their salaries be like," he said.

Subianto then asked SOE Regulatory Agency (BP BUMN) Head Dony Oskaria, who is also the COO of Danantara, to confirm the target. Dony said the goal is even more ambitious – shrink the number to 250.

Subianto said the move is about saving money and increasing efficiency. "These entities have been operating with the people's money, yet instead of generating profits, they only use it to cover overhead costs," Subianto said.

Subianto said restructuring the state sector is necessary for Indonesia to maximize value and benefit the public. He said the process would be complete in two years.

Earlier, Dony also said no employees would lose their jobs as a result of the restructuring. Dony said shrinking the current 1,077 SOEs will save the government Rp20 trillion ($1.1 billion) in annual losses incurred by 52 percent of SOEs.

Dony said the consolidation is expected to generate total annual savings of around Rp50 trillion, far exceeding the cost of salaries.

Critics have long said that the state sector in Indonesia is bloated and often duplicates and competes with the private sector in areas like tourism, pawn shops and construction, pushing out competition and losing money in the process.

It is unclear how the consolidation will address creating a level playing field for the private sector, which has long been the desire of businesses in the country.

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Military Training for Cooperative Managers under Fire Following Deaths

Sending prospective managers of the Red and White Cooperatives and Fishing Villages Program to basic military training turned deadly for five recruits during its first two weeks, prompting the National Commission on Human Rights (Komnas HAM) to call for the training to be suspended.

The 45-day program, launched by the Ministry of Defense on June 14, is aimed at preparing more than 35,000 prospective cooperative managers to take office under one of President Prabowo Subianto’s flagship programs. Participants undergo physical and leadership training alongside management workshops.

The five fatalities were linked to separate medical emergencies, including heat stroke, cardiac arrest, tuberculosis, and respiratory complications, according to Major General Ketut Gede Wetan, head of the Human Resources Development Agency at the Defense Ministry.

Defense officials said all participants had undergone pre-training health screening and received medical treatment after showing signs of illness during the program.

The Civil Society Coalition for Security Sector Reform, which includes dozens of human rights groups, called for an “immediate end” to the training.

“The training is flawed from the outset because it is built on the [assumption] that military discipline equals professionalism in civilian organizations,” the coalition said in a statement on June 27. “The deaths of these five participants further confirm that the assumption is not only mistaken, but also dangerous.”

Komnas HAM said the government should “stop the basic military training program” while also calling for criminal investigations into the five deaths.

House Commission I Member TB Hasanuddin, a retired general, suggested that military-style exercises be reduced in favor of practical training on cooperative management, including finance, inventory control and business operations.

“Cooperative management training must continue because it is essential. However, basic military training – which has actually claimed the lives of participants – should be discontinued and replaced with training methods that are more relevant to their duties,” Hasanuddin told reporters on June 27.

The Defense Ministry says the program will continue while safety protocols are strengthened. Brigadier General Rico Ricardo Sirait, Head of the Defense Information Bureau at the Defense Ministry, said that training intensity has been adjusted and described the program as “state defense and managerial training,” emphasizing that the objective is character-building rather than militarizing civilians.

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Rising Job-Loss Risk Prompts Layoff Task Force

The government has established an Employment Termination Mitigation Task Force to address rising layoff risks in several industries, following warnings from labor unions that as many as 150,000 jobs could be threatened. The task force was established under Presidential Decree 10/2026 after being announced by President Prabowo Subianto during May Day commemorations.

Led by Minister of State Secretariat Prasetyo Hadi, the task force will initially focus on identifying financially distressed companies and developing mitigation measures.

“We are identifying which companies face problems and what those problems are so that mitigation measures can be taken,” Prasetyo said during a press conference on June 26.

The president of the Confederation of All Indonesian Trade Unions (KSPSI), Andi Gani Nena Wea, said proposed reductions to coal production quotas could threaten around 150,000 mining jobs. He said industrial gas shortages and soaring prices have placed another 55,000 manufacturing jobs at risk.

“I believe the government will make a quick and careful decision,” Andi said after meeting government officials on June 26.

Prasetyo said the government is expected to decide within days on industrial gas supplies to help factories maintain operations. He added that plans by automotive component manufacturers JAI and SAI to relocate production to Vietnam had been suspended following government intervention.

Separately, the Ministry of Manpower reported that 23,470 workers were laid off between January and May, while around 4,000 employees at footwear manufacturer Feng Tay Indonesia Enterprises in West Java have been placed on leave pending new orders.

The tobacco industry is also facing uncertainty over proposed Health Ministry regulations, including plain packaging requirements and tighter nicotine and tar limits. Meinar Kusumo, Head of Institutional Industrial Relations at the Ministry of Manpower, urged policymakers to consider the impact on the industry's estimated 5.3 million workers.

“Our recommendation is not to impose stricter regulations before the industry has viable alternatives or mitigation strategies. Tobacco control can continue, but it should also safeguard industrial sustainability and employment,” Meinar said during an industry discussion, according to CNBC Indonesia.

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Government Advances Compressed Natural Gas Rollout

Indonesia is preparing to introduce 3-kilogram compressed natural gas (CNG) cylinders as an alternative to subsidized liquefied petroleum gas (LPG), with final testing expected to conclude in July or August before a phased rollout.

Minister of Energy and Mineral Resources Bahlil Lahadalia said the initiative is aimed at reducing Indonesia’s use of imported LPG, strengthen energy security and lower subsidy costs. The small household CNG cylinders are undergoing their third and final stage of safety testing in China.

“The project has now entered the third stage of testing. God willing, we expect the process to be completed in July or August,” Bahlil said during a visit to Tuban, East Java, on June 25.

Bahlil said Indonesia does not yet have the technology to manufacture compact, high-pressure CNG cylinders that meet international safety standards, which is why production is being done in China. Existing CNG cylinders used by hotels, restaurants and other industries weigh more than 10 kilograms.

The 3-kilogram cylinders are designed to match the size of subsidized LPG cylinders and operate at pressures of 200 to 250 bar, compared with 5 to 10 bar for LPG.

The Energy Ministry plans to introduce the cylinders gradually, beginning in major cities on Java while preparing distribution infrastructure and a national implementation roadmap.

Officials previously said around 100,000 cylinders would be imported during the pilot phase before domestic production is considered economically viable. Initial cylinders and casings will be manufactured and assembled in China, while automatic pressure-reducing valves will be supplied from Germany.

The initiative forms part of a broader strategy to reduce reliance on imported LPG. Indonesia consumes more than 8.5 million metric tons of LPG annually but produces only around 1.91 million metric tons domestically, requiring imports of roughly 7.47 million metric tons a year, according to Statistics Indonesia.

It has long been whispered that a cartel controls the lucrative import of subsidized LPG to Indonesia. That cartel would have to be broken for CNG to succeed.

Bahlil said the government spends around Rp 120 trillion annually importing LPG before selling it domestically at subsidized prices. “Once the testing is complete, we can begin promoting broader adoption in areas where implementation is feasible,” he said.

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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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