AmCham Update Vol. 7 #066

Luhut Says Indonesia’s Free Lunch Launch was Rushed, New BGN Head May Face Questioning over Free Meals Scandal, DPR Pressures Pertamina on Industrial Gas Prices, Big Changes Promised after Blackouts, Indonesia Takes a Hit in Global Competitiveness Ranking

Jun 26, 2026

Luhut Says Free Lunches were rushed into Place

The government is reviewing the scope of President Prabowo Subianto’s flagship Free Nutritious Meals (MBG) program as officials address governance concerns, operational challenges and fiscal pressures.

Speaking in Jakarta on June 24, National Economic Council (DEN) Chairman Luhut Pandjaitan acknowledged shortcomings in the program’s rollout, saying it had been implemented too quickly but would improve over the next six to twelve months.

“The program was somewhat rushed, that’s why it was problematic,” Luhut told reporters.

The program, which provides meals to schoolchildren, pregnant women and other beneficiaries, had initially been assigned Rp 335 trillion in the 2026 budget, with a goal of reaching 83 million recipients. That allocation was reduced to Rp 268 trillion in May.

At the same time, the National Nutrition Agency (BGN) has begun narrowing the program’s ambitions and refining its budget assumptions in the wake of a spreading scandal that has landed the former head of BGN in detention.

BGN Deputy Head Agustina Arumsari said the budget has been reduced by nearly Rp 40 trillion from the Rp 268 trillion figure, following a government review.

“After the budget sharpening process, Rp 38.25 trillion was removed, plus another Rp 1.37 trillion, leaving Rp 228.38 trillion,” Agustina told reporters on June 18.

The budget review coincides with efforts to focus assistance on vulnerable groups. BGN has identified 76 schools in Java that will be removed from the program because the students are not poverty stricken. Funding is expected to be redirected toward poorer regions.

Separately, Reuters reported on June 25 that officials are considering cutting funding by Rp 40 trillion ($2 billion), suspending the expansion of new kitchens and lowering the number of beneficiaries from the current 62.5 million to 49 million, according to anonymous sources.

Reuters said BGN will temporarily halt the creation of over 13,000 new kitchens for the rapidly expanding program, which started in January 2025 and soon became one of the biggest such programs in the world.

The rollback plan has been discussed with parliament and a final decision is expected to be agreed in the next few weeks, sources said.

The free meals scheme also has raised concerns among investors that it is so expensive it could jeopardize the country’s fiscal stability.

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AGO May Question New BGN Chief over Free Meals Scandal

The Attorney General’s Office (AGO) said it may summon the newly appointed head of the National Nutrition Agency (BGN), Nanik Deyang, as a witness regarding alleged corruption in the government’s Free Nutritious Meals (MBG) program.

Director of Corruption Investigations Syarief Sulaeman Nahdi said on June 24 that investigators have a free hand. “Anyone who has knowledge of and direct experience related to this case may be examined as a witness,” he told reporters at the AGO’s office.

He stressed that being questioned as a witness should not be interpreted as evidence of criminal involvement and he declined to say when or if Nanik, a former journalist, might be summoned. He said the decision would depend on the evidence.

The probe follows the detention of former BGN Head Dadan Hindayana and two former deputies early this month as suspects in a procurement corruption case related to the free lunches. Authorities have named six suspects, including three business executives, in addition to the BGN officials.

The investigation focuses on procurement practices and the creation of thousands of dedicated kitchens to prepare meals for the program. Prosecutors are examining allegations of favoritism and bribery in selecting partners to run the kitchens. Prosecutors are also reviewing the controversial purchase of 21, 000 electric motorcycles valued at Rp 1.03 trillion, 32,000 pairs of shoes, 31,994 tablet computers, and 5,400 75-inch televisions – all supposedly for use by the kitchens.

The idea of questioning Nanik follows an allegation from the detained former BGN Deputy Head Sony Sonjaya, made through his legal counsel, that she had a role in selecting partners to operate several kitchens.

Nanik has denied involvement, saying she joined BGN after the procurement decisions under investigation had been made and that her responsibilities were focused on media affairs rather than procurement.

House Commission IX has called on current and former BGN officials to cooperate with investigators.

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DPR Pressures Pertamina as Industrial Gas Prices Spark Layoff Concerns

Deputy House Speaker Sufmi Dasco Ahmad urged state-owned energy company Pertamina to address rising industrial gas prices after labor unions warned that soaring energy costs could force major ceramic manufacturers in Bekasi to halt operations, putting an estimated 55,000 jobs at risk.

Speaking at the annual congress of the Confederation of Indonesian Trade Unions (KSPI) in Jakarta on June 23, Dasco told Pertamina President Director Simon Aloysius Mantiri about the problem and requested an immediate response to labor concerns.

The intervention followed reports that several ceramic manufacturers, including Milan Keramik and Mulia Keramik, may suspend operations because of elevated gas prices.

KSPI President Andi Gani Nena Wea said industrial gas prices had risen to around $23 per million British thermal units (mmBtu), well above the government's designated gas price of $6 per mmBtu for selected industries.

“This is very alarming. Industries that rely on industrial gas will face serious difficulties,” Andi said on June 23, warning that layoffs could occur within days without government intervention.

Simon said Pertamina would coordinate with state gas distributor Perusahaan Gas Negara (PGN) to explore pricing adjustments linked to liquefied natural gas (LNG) supply costs.

“We will talk to PGN and do our best to improve the situation and support industry with more appropriate pricing,” Simon said during the event. Dasco also called on Pertamina and labor representatives to meet within the next few days to discuss mitigation measures and prevent layoffs.

The issue is expected to be taken up by the government's new Layoff and Workers Welfare Task Force, announced by President Prabowo Subianto during May Day commemorations. Labor leader Said Iqbal, now the Special Presidential Adviser for Labor and Worker Welfare, said the task force would examine measures to prevent layoffs, including support for ceramic manufacturers affected by rising energy costs and broader efforts to safeguard employment in vulnerable industrial sectors.

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Big Changes Promised after Sumatra and Java Blackouts

PLN is again in the hot seat after a series of blackouts in Sumatra and Java has renewed scrutiny of Indonesia's electricity system, prompting promises of infrastructure upgrades and plans to improve grid reliability.

Following two major outages in recent months, including a May 22 blackout that disrupted electricity for more than 13 million customers in Sumatra, President Prabowo Subianto instructed state-owned electricity company PLN to accelerate the Sumatra Electricity Toll Road project.

The project includes construction of 217 transmission towers linking Muara Enim in South Sumatra to Medan in North Sumatra and would strengthen the island's transmission network.

Officials said that a lightning strike on a key transmission line in Jambi caused the blackouts, cutting off power in Sumatra’s southern region. The Institute for Essential Services Reform, which tracks public utilities, flatly rejected the idea that lightning caused the blackout.

“The [electricity toll road] project will improve the reliability of electricity supply along the eastern coast of northern Sumatra. If a transmission disturbance occurs in the southern part of the island, North Sumatra will remain unaffected,” said Rizki Aftarianto, General Manager of PLN’s North Sumatra office, on June 22.

It won’t be a quick fix regardless. PLN is currently seeking permits from the North Sumatra administration, with land acquisition expected to be one of the project's main challenges. North Sumatra Deputy Governor Surya said the provincial government fully supports the initiative, describing it as an important step toward preventing future large-scale outages.

Concerns over electricity reliability have also emerged in Java, where PLN recently implemented rolling blackouts following what PLN described as technical problems at two power plants operated by independent power producers.

Officials have said the company faces a shortfall of 20 million tons of coal in 2026, although PLN denied the blackouts were related to fuel shortages.

Energy Minister Bahlil Lahadalia has ordered a comprehensive operational review of PLN, and also dismissed allegations that the outages were caused by coal shortages, saying government coal allocations through the Domestic Market Obligation (DMO) scheme remain sufficient to meet PLN's needs.

Domestic miners are required to sell 25 percent of their output to the domestic market but DMO prices are far below the current market price.

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Indonesia Tumbles in Global Competitiveness Ranking

Indonesia has dropped 21 places in the latest World Competitiveness Ranking from the peak it reached two years ago. The decline has been blamed on worsening government and business efficiency and infrastructure woes since President Prabowo Subianto took office.

The country is ranked below its Southeast Asian neighbors the Philippines, Thailand, Vietnam and Malaysia. Singapore grabbed the World No. 1 rank, just ahead of Hong Kong and Switzerland.

Switzerland’s Institute for Management Development (IMD) business school, which compiles the rankings, noted that Indonesia had its best performance in 2024 when it secured the 27th spot globally, only to fall to 40th the following year and 48th this year, according to IMD’s 2026 table, which was released on June 18.

The report said that “economies boasting credible institutions are better positioned to tackle today’s volatile and fragmented world,” a shift from the traditional emphasis on cost, scale and output.

Arturo Bris, director of IMD’s World Competitiveness Center, said geopolitical disruption and global fragmentation make institutional strength ever more important.

“Nations with their own tried and tested, credible institutions gain an advantage in this context because, as the international systems cease to serve so many national needs, businesses can carry on as usual,” said Bris.

Indonesia’s economic performance, one of the four main gauges in the ranking, remained in 24th position, which it has held for two years.

'The domestic economy, another component of the ranking, slipped 15 spots to 24th this year and employment likewise tumbled 11 spots to rank 28th.

The country’s business efficiency was well-placed in 2024, ranking 14th out of 70 economies listed. The gauge then tumbled to 26th last year and dropped to 50th this year; five years ago it was 31st.

All components under business efficiency, from productivity and efficiency, labor market, finance, management practices to attitude and values, fell by 9 to 27 spots.

Government efficiency ranked 23rd in 2024 and is now treading water at 38th this year.

Indonesia’s infrastructure ranking has declined for two straight years and now sits at 58th. The only notable improvement was recorded in business legislation and international investment where Indonesia’s ranking went up by 5 to 6 spots.

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Member Announcement | PwC Indonesia

PwC Indonesia Oil and Gas Guide 2026: Navigating Energy Transition and Investment Outlook

PwC Indonesia’s latest Oil and Gas Guide offers a timely perspective for leaders navigating today’s complex energy landscape. As the global energy transition accelerates, oil and gas remain critical to meeting demand, particularly in Asia’s emerging markets, where energy security continues to be a priority.

The report outlines key structural challenges in Indonesia, including declining production from mature fields, limited new discoveries and cautious investment sentiment. At the same time, regulatory refinements and improvements to production-sharing arrangements signal ongoing efforts to enhance competitiveness and unlock long-term value.

Understanding these shifts is essential for decision-makers looking to position their organizations for resilience and growth.

Download the full report here.

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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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