AmCham Update Vol. 7 #105

MSCI Warns Indonesia Could fall to Standalone Status, KPK Arrests Five over alleged Disaster Agency Corruption, BNPB Head Sacked, PLN Names New Leader following Power Outages, IMF ups Indonesia Growth Projection

Oct 16, 2026

IDX Rout as MSCI Warns Indonesia Could fall to Standalone Status

Indonesia’s already tarnished stock market got the worst news yet on Oct 16 as global index provider MSCI said it may remove it from the indexes tracked by funds, a statement that resulted in the steepest one-day drop in Jakarta shares since 1998.

The benchmark Jakarta Composite Index fell 11.57 percent on the news while the rupiah slid 0.6 percent to 18,070 per US dollar, its weakest point since late July. Trading was also halted for 30 minutes. The JCI closed on Oct 16 at 5,185.11, down 678.68 points.

The Indonesia Stock Exchange (IDX) has been teetering since January when MSCI froze Indonesia in its indexes and threatened to downgrade it to "frontier market" status due to opaque ownership status and questionable trading behavior.

On Oct 16, MSCI said recent reforms have not made sufficient progress and that even a downgrade to frontier wouldn't adequately address the issues.

"Significant concerns remain around market dysfunction," MSCI said in a statement before trading opened. "Accordingly, MSCI considers Indonesia's continued classification as an emerging market no longer appropriate."

MSCI proposed a downgrade to "standalone" status, which would %u2060exclude the IDX from global indexes that are tracked by billions of dollars in passive investment funds and trigger decisions to buy or sell.

UBS bank estimated the move could result in about $4 billion of passive outflows from Indonesia, with active investors potentially adding another $15 billion to the total. Already, foreign investors have sold $4.7 billion worth of Indonesian stocks in 2026.

"When MSCI begins questioning whether Indonesia still deserves to be in the Emerging Market group, what is being tested is confidence in our market institutions," said Fakhrul Fulvian, Chief Economist at Trimegah Sekuritas Indonesia.

"Since early 2026, MSCI has highlighted opacity in shareholding structures, limited information to accurately assess free float, and concerns over possible coordinated trading behavior that distorts proper price formation. That is why, in my view, this is no longer simply an issue of free float. This has become a problem of trust," he said.

The government has not officially responded but economic ministers were summoned to a meeting scheduled for the evening of Oct 16.

The IDX said it has enhanced transparency and integrity in recent months. CEO Jeffrey Hendrik said he would request further clarification from MSCI.

"This is a wake-up call for Indonesia. The only way for Indonesia to remedy this situation would be to impose severe sanctions and fines on those involved in concerted share manipulation," said Angus Mackintosh, an ASEAN specialist at Aletheia Capital in Singapore.

The gloomy news adds to the pressure on President Prabowo Subianto’s government. Moody's and Fitch cut their sovereign rating outlooks for Indonesia to negative this year, citing reduced policymaking credibility and numerous analysts have worried about the impact of expensive populist programs on the country’s fiscal standing. .

MSCI said it will consult with market participants for a downgrade to "standalone" status until April 2027 and then proceed with reclassification unless it finds clear evidence of improvement in market governance.

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Indonesian Disaster Agency Hit by Corruption Scandal

The Corruption Eradication Commission (KPK) arrested five suspects for alleged corruption over procurement at the National Disaster Mitigation Agency (BNPB) on Oct 14, an embarrassing scandal that raises questions over Indonesia’s disaster response.

A total of 14 people are under investigation but only five were remanded to custody. Also questioned was BNPB principal secretary Rustian, who was later released as a witness. The status of the remaining individuals is unclear.

BNPB acting spokesperson Berton Panjaitan said the arrests would not disrupt the agency’s current services to disaster-affected communities.

The case concerns the purchase of goods and services at BNPB, some of which was paid for with emergency funds used for aid distribution in disaster-hit areas, the KPK said.

The emergency funds make up the bulk of the agency’s annual budget of Rp 4.62 trillion ($258 million) this year. Only Rp 1.08 trillion is allocated for non-emergency use.

Among those detained was BNPB procurement officer Gabriel Purwaka Sigit and two expert staff – one of whom is Bima Setyawan, the younger brother of BNPB chief Suharyanto. The other two suspects are from the private sector.

The arrests were preceded by a series of raids earlier this week across Jakarta. Investigators seized about Rp 1.4 billion in cash, gold bars and gold certificates. The KPK did not provide the full details of the case.

Indonesia has confronted several emergencies this year, including the eruption of Mount Anak Krakatau in September, continuing forest fires in Sumatra and Kalimantan and a deadly earthquake in East Nusa Tenggara (NTT) in August.

The ongoing wildfire and haze crisis has drawn criticism from neighboring countries.

The alleged corruption deepens worries about BNPB’s capacity to respond to disasters amid strained cash flow and a lack of human resources.

BNPB chief Suharyanto noted in February a steep drop of nearly 75 percent in this year’s regular budget from the previous year. While the budget was later increased to Rp 5.7 trillion, the agency has asked for an additional Rp 5.67 trillion in emergency funds.

Disaster expert Mizan Bustanul Fuady Bisri of Kobe University in Japan said the alleged corruption may worsen an already weak disaster mitigation effort and “jeopardize future budget” for disaster management.

“The consequence [of the corruption] is that communities will remain unprepared to face disasters and opportunities to minimize hazards of natural disasters will be missed,” he said on Oct 14.

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BNPB Head Sacked in Latest Reshuffle

President Prabowo Subianto on Oct 15 sacked the head of the National Disaster Mitigation Agency (BNPB) after news broke of a scandal at the agency. It was the third reshuffle of cabinet members and officials in just over a month.

Kristomei Sianturi, an army general, replaced Suharyanto as chief of the BNPB, one of the key agencies fighting land and forest fires in Kalimantan and Sumatra that have engulfed parts of the region in haze.

The appointment comes as the Corruption Eradication Commission (KPK) announced the arrest of five people in a case involving procurement of goods and services using disaster preparedness funds at BNPB.

One of the suspects, Bima Setyawan, is the younger brother of Suharyanto.

Subianto also appointed new deputy defense, agriculture and immigration ministers.

Yusuf Jauhari is the new deputy minister of defense for logistics, while Richard Tampubolon is deputy minister of defense for strategy, doctrine, and force development.

Alim Setiawan is the new deputy minister for agriculture, and M Maulana Bungaran is the new deputy minister for immigration.

The latest reshuffle follows one on Oct 1 that saw the appointment ofnew foreign and industry ministers, new coordinating ministers and eight other senior leaders of agencies and the police force.

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PLN Names New Leader following Power Outages

Following a series of power outages in recent months, state-owned electricity company PLN has replaced its top executive, appointing Suroso Isnandar to take over from Darmawan Prasodjo following an extraordinary general meeting (EGM) of shareholders on Oct 14.

Danantara Indonesia Chief Operating Officer Dony Oskaria confirmed the appointment, saying that Suroso would temporarily retain his previous position as Director of Project Management and Renewables until a replacement is appointed. Darmawan has held the post since December 2021.

The EGM, held via Zoom at 6:30 pm, was attended by all members of PLN’s board of directors and board of commissioners.

The leadership change followed an earlier meeting the same day between President Prabowo Subianto, Danantara CEO Rosan Roeslani, and Coordinating Minister for Downstreaming and Energy Transition Bahlil Lahadalia to discuss PLN’s transformation.

Following the meeting, Rosan said that Prabowo had instructed Danantara to assess PLN’s business model and prepare recommendations to improve its productivity and responsiveness.

The power outages have included blackouts across six provinces in Sumatra in May and rolling disruptions in Java and Kalimantan in June and July.

The latest interruption was in Batam on Oct 12 and lasted 16 hours. The disruption was blamed on system issues and affected more than 400,000 customers. The incident prompted Danantara to issue an apology.

Officials also said a bat or lightning may have fouled the power system.

When asked whether the leadership change was prompted by the blackouts, PLN Independent Commissioner Andi Arief said on Oct 14 that no specific reason had been given.

H. Teuku Yudhistira, National Coordinator of the Electricity for the Nation Volunteers (Re-LUN), said Suroso’s technical experience gave him direct insight into PLN’s core operations.

“With his educational background and past leadership posts, he understands electrical energy, which constitutes PLN’s core business,” he said.

Suroso has held several key positions at PLN, joining the board of directors in 2023 as Director of Risk Management and in June 2025 was appointed Director of Project Management and Renewables.

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IMF Nudges Up Indonesia’s 2026 Growth Forecast

The International Monetary Fund (IMF) has upgraded its growth forecast for Indonesia in 2026 to 5.1 percent, up slightly by 0.1 percent from its previous estimate, while its projection for 2027 remains unchanged at 5.1 percent.

The IMF’s October World Economic Outlook report shows that Indonesia is outperforming several regional peers, including Malaysia (5.2 percent in 2026 and 4.6 percent in 2027), Thailand (2.1 percent in both years), and the Philippines (3.4 percent in 2026 and 5.0 percent in 2027). Vietnam remains Southeast Asia’s fastest-growing economy, with projected growth of 8.6 percent this year and 7.5 percent next year.

According to investment platform Stockbit, the upward revision was driven by resilient household spending, supported by the government’s decision to maintain fuel subsidies. Stimulus packages have also helped sustain domestic demand.

However, this resilience is tempered by the risk of a twin deficit, comprising fiscal and current account deficits, which could put further pressure on the rupiah.

The IMF projects that Indonesia’s current account deficit will widen to 1.6 percent of GDP, up from the 1.1 percent projected in April 2026. The widening deficit is driven by a surge in oil and gas imports amid persistently high oil prices due to war in the Middle East.

The IMF’s growth forecast is slightly more conservative than the World Bank’s projection of 5.2 percent, while its current account deficit projection is higher than Bank Indonesia’s forecast of 0.5-1.3 percent of GDP.

Vice Coordinating Minister for Economic Affairs Dradjad Hari Wibowo told the press on Oct 8, that the government had identified “sources of economic expansion.” When asked about international projections, he said “only time will tell.”

In its latest report, the IMF also raised its global growth projection by 0.1 percent to 3.1 percent, citing the stronger-than-expected performance of advanced economies despite energy price increases.

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Member Announcement | Kraft Heinz Indonesia

ABC Indonesia Secures Top Halal Award for Fifth Consecutive Year

PT Heinz ABC Indonesia (ABC Indonesia) has earned the Top Halal Award 2026 from IHATEC Marketing Research for the fifth consecutive win since 2022. Three product lines – ABC Sweet Soy Sauce, ABC Sardines and ABC Chili Sauce – received recognition in their respective categories based on consumer perception research.

Felicia Julian, Marketing and R&D Director at PT Heinz ABC Indonesia, attributed the recognition to the company’s Consumer Obsessed values. "ABC Sweet Soy Sauce, ABC Sardines, and ABC Chili Sauce are daily household staples across Indonesia. Therefore, we are committed to delivering products that align with consumer preferences by consistently upholding the highest halal and food safety standards."

In line with this, Mira Buanawati, General Counsel and Head of Corporate Affairs at PT Heinz ABC Indonesia, emphasized that this commitment is rooted in the company’s values. "Maintaining public trust demands consistent governance across all business lines. We ensure halal principles and quality standards are systematically integrated into our supply chain, from raw material selection and manufacturing oversight to full regulatory compliance," Mira said.

The achievement reflects broader market expectations. Data from a Populix survey titled Insight and Customer Perspective of Halal Industry in Indonesia indicate that 93 percent of Indonesian Muslim consumers consider halal certification a primary purchasing factor. To evaluate how effectively brands meet this demand, IHATEC’s Top Halal Index surveys thousands of consumers across two key dimensions: brand awareness and reputation and perceptions of product halalness and safety).

Evrin Lutfika, Director of IHATEC Marketing Research, noted that maintaining leadership for five straight years demonstrates exceptional quality consistency and transparency. Ultimately, the five-year streak reinforces ABC Indonesia’s long-term focus on operational excellence, regulatory compliance and end-to-end halal assurance.

Get to Know Our Members | MECOINDO-ITRON, PT.

Get to Know Our Members | MECOINDO-ITRON, PT.

Itronis a proven global leader in energy, water, smart city, IoT, and intelligent infrastructure services. For utilities, cities, and society, the company builds innovative systems, creates new efficiencies, connects communities, encourages conservation and increases resourcefulness.

By safeguarding invaluable natural resources today and tomorrow, Itron helps improve the quality of life for people around the world. More information is available at www.itron.com.

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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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