AmCham Update Vol. 7 #104

Danantara to Merge 23 Industrial Estates, Haze Creating Tensions with Neighboring Countries, Foreign Banks Eye Growth in Indonesia, Pertamina and Medco Acquire Rights to Eni Oil and Gas Projects, Consumer Confidence Slips in September, Gov’t Steps in to Ease BPJS Cash Crisis

Oct 13, 2026

Danantara to Merge 23 Industrial Estates

Indonesia will consolidate 23 state-owned industrial estates into a single entity under Danantara aimed at efficiency and attracting investment.

Dony Oskaria, chief operating officer of Danantara, said the merger would consolidate 35,000 hectares of land under integrated management with greater scale and operational efficiency.

"We have 23 industrial estate companies, and we are merging them into one," Dony said during his keynote address at the Investor Daily Summit in Jakarta on Oct 8.

The consolidation is part of Danantara's broader overhaul of state-owned enterprises (SOE) under its control. Danantara intends to restructure more than 1,000 SOEs into approximately 200 core businesses by the end of 2026.

Dony said a review will determine whether each company will continue or be merged, divested or liquidated.

The restructuring is intended to eliminate duplication, improve efficiency and allow state-owned companies to focus on core competencies while benefiting from greater economies of scale. Dony said the SOE overhaul is part of Indonesia's broader economic transformation. He said Indonesia needs to develop an industrial base that can generate higher-value economic activity.

"We must become an industry-based nation," he said.

Meanwhile, Indonesia and Egypt have agreed to a joint investment fund between Danantara and an Egyptian government investment body.

President Prabowo Subianto met with Egyptian President Abdel Fattah El-Sisi in Jakarta on Oct 11. In a statement, the two governments said the joint fund would be established between Danantara and the Future of Egypt Authority for Sustainable Development, a newly consolidated body that reports directly to the president.

The joint statement said the joint fund has “promising opportunities” in the production of crude palm oil (CPO), phosphate fertilizers and related raw materials.

On a broader level, by consolidating industrial estates, Danantara aims to strengthen the management of industrial land and create a more competixive environment for investors. Under the consolidation, state-owned industrial parks will waive land rental fees starting next year to attract foreign investors, Dony said.

Dony did not say when the integration would be completed.

Beyond corporate restructuring, Dony said Danantara has separated its responsibility for managing state-owned companies from its investment activities to prevent investment-related losses from impacting underlying SOE assets.

He said the distinction had been incorporated into Danantara from the outset, partly in recognition of the risks associated with investment structures such as those involved in Malaysia's massive 1Malaysia Development Berhad (1MDB) scandal.

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Choking Haze in the Neighborhood Puts Pressure on Gov’t

It’s hard to be a good neighbor when your haze spreads far and wide. The Indonesian government is facing pressure from Malaysia and Singapore over haze from forest and land fires in Kalimantan and Sumatra, as worsening air quality prompts calls for stronger regional coordination.

Foreign Minister Arrmanatha Nasir said on Oct 10 that Indonesia had deployed over 60,000 personnel and 48 helicopters and aircraft for water bombing and weather modification as part of its firefighting efforts. He said the measures had been conveyed to Malaysian Foreign Minister Mohamad Hasan following an earlier call between Prime Minister Anwar Ibrahim and President Prabowo Subianto.

The haze has severely affected neighboring countries, with Malaysia’s environment department recording unhealthy Air Pollutant Index (API) readings across one-fifth of its monitored regions, including Kuala Lumpur. Singapore also recorded unhealthy air levels and prepared potential classroom suspensions and a haze subsidy scheme (HSS).

Singapore and Malaysia have both offered firefighting assistance, although Indonesia has yet to accept the offers. Separately, Anwar instructed his foreign minister to seek an urgent ASEAN environment ministers’ meeting to coordinate regional efforts.

Meanwhile, Arrmanatha has maintained that Indonesia remains compliant with the ASEAN Agreement on Transboundary Haze, which requires reporting on fire activity and firefighting responses.

Beyond regional concerns, the haze crisis has also prompted domestic scrutiny, as civil society groups in West Kalimantan filed a lawsuit against the president and dozens of local and central government administrations, alleging negligence in handling the wildfires.

“We deeply regret that the central government failed to attend the hearing, as that also delayed the handling of the worsening wildfires,” said Glorio Sanen, a lawyer representing the plaintiffs, on Oct 11.

Fahd Pahdepie, deputy for communication strategy at the Government Communications Agency (Bakom), said on Oct 11 that Indonesia is still coordinating with Malaysia and Singapore to ensure smooth assistance, while respecting legal procedures and committing to disclose the names of companies complicit in forest fires.

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Foreign Banks Eye Growth in Indonesia

With the government seeking greater consolidation in the finance sector, a number of foreign lenders have taken moves recently to gain a wider footprint in Indonesia, including through mergers and acquisitions.

Bank OCBC NISP made a deal with Bank HSBC Indonesia in May to take over the assets and liabilities of HSBC’s retail banking operations in Indonesia, leaving HSBC to focus on corporate and institutional banking as part of a global shift in emphasis.

The acquisition will add 336,000 customers and Rp 89.8 trillion ($5 billion) in assets to OCBC.

Bank Danamon Indonesia, in which Japan’s MUFG Bank Ltd. holds a majority stake, will integrate with the local branch of MUFG by the end of 2027. The consolidation could create one of the country’s largest banks, with combined assets exceeding Rp 480 trillion, according to Bank Danamon.

In an interview last month with The Jakarta Post, Bank Danamon president director Nobuya Kawasaki called Indonesia attractive and highly competitive. “I assume more foreign banks could be interested in acquiring banks here, and that could trigger further consolidation,” he said.

The planned integration is in line with the Financial Services Authority’s (OJK) push for consolidation in the banking sector. It has encouraged foreign lenders to expand in the country from currently controlling about a quarter of the industry.

In July, OJK chief executive for banking supervision Dian Ediana Rae said, “high foreign investor risk appetite and Indonesia’s need for foreign direct investment” created ample opportunities for foreign banks to grow. Bank loan growth in Indonesia reached 13.65 percent year-on-year in August, after being stuck in single digits last year.

Mira Arifin, Indonesia country manager at Bank of America, said in a press briefing on Oct 7 that Indonesia was attractive for foreign banks due to its large and still underbanked population.

She noted that most of the acquiring banks come from Singapore and Japan, both of which are wrestling with aging populations at home that constrain growth.

Mira said that maintaining standalone operations and competing with well-entrenched local banks could put foreign banks at a competitive disadvantage. “By acquiring, you have more platform, you have a broader network, you have more clients… you have a younger population to capture. So generationally, you have more opportunity for a company to last longer,” she said.

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Pertamina and Medco Acquire Rights to Eni Oil and Gas Projects

Italian energy company Eni has agreed to two deals with Indonesia's Medco Energi and Pertamina to sell stakes in upstream assets in East Kalimantan, the company announced on Oct 12.

Under the deals, Eni would sell a 10 percent interest in the East Sepinggan, North Ganal and Rapak blocks to Pertamina Hulu Energy. The transactions will increase Pertamina's stake in East Sepinggan to 25 percent.

"These assets include the producing Merakes and East Merakes gas fields, as well as Geng %u2060North–Gehem gas discoveries, which are currently being developed through the North Hub gas project, designated as a National Strategic Project," Eni said.

Pertamina said the acquisition will strengthen energy security.

"Pertamina’s participation in these assets can directly support and advance the Kutei North Hub Project, a National Strategic Project connected to Pertamina’s existing infrastructure," Pertamina spokesperson Hermansyah Nasroen said.

Eni will also sell a 10 percent interest in four oil and gas blocks in the Kutai Basin, East Kalimantan to Medco Energi, including Muara Bakau, Ganal, West Ganal, and East Ganal currently operated by a joint venture formed by Eni and Malaysia's Petronas, Medco said in a separate statement.

The assets Medco acquired include the producing Jangkrik field, the Maha, Gendalo and Gandang gas projects, all part of the South Hub project, and the recently announced Geliga gas discovery, which is estimated to have 5 trillion cubic feet of gas and 300 million barrels of %u2060condensate.

"This transaction complements our existing Indonesian portfolio and expands our presence into an established LNG value chain," said Ronald Gunawan, Medco Energi's CEO.

Andrew Harwood, research director for global energy intelligence group Wood Mackenzie, said the deals will support the outlook for the Bontang LNG plant and strengthen domestic energy security.

"For Pertamina, the assets acquired are weighted %u2060toward near-term development potential, while Medco is adding production and longer-term exploration upside. Both are adding deepwater exposure, having built their portfolios on conventional onshore and shallow water developments," he said in a post on LinkedIn.

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Consumer Confidence Dips in September

Indonesian consumer confidence weakened in September amid deteriorating perceptions of job availability, with Bank Indonesia (BI)’s Consumer Confidence Index (CCI) declining slightly from 118.5 in August to 118.1, reversing August’s gains after a six-month downward trend.

“BI’s consumer survey in September indicates that consumer confidence in economic conditions remains strong,” BI spokesman Ramdan Denny Prakoso said in an official statement on Oct 8.

The Current Economic Conditions Index fell to 107.5 from 109.4. The decline was driven by the Current Job Availability Index, moving into pessimistic territory at 101.1. Optimism over job availability was only found among respondents aged 20-30, while other age groups were pessimistic.

Current income assessments also worsened, especially among households earning Rp 1-2 million ($55-100). Lower end consumers remain pessimistic about buying durable goods such as motorcycles or washing machines. A similar sentiment was found among consumers earning Rp 2.1-to 4 million.

Ramdan said that consumers’ general optimism was maintained in September, as indicated by a rise in the Consumer Expectations Index to 128.7 from 127.6 in August. The Business Activity Expectations Index, meanwhile, edged down slightly to 121.5 from 122.1.

Preliminary data from BI showed that the Retail Sales Index (RSI) is projected to decline to 221.3 from 226.5, due to slower sales in food, beverages and tobacco. Even so, the index represents a 1.4 percent annual increase, following the 1.3 percent year-on-year (YoY) rise the previous month, supported by retailers’ expectations of increasing sales of household goods, cultural, and recreational products.

Despite the decline in consumer confidence, vehicle sales remain robust. Car sales climbed 28.1 percent YoY, a slowdown from the 32.4 percent recorded in August. Motorcycle sales rose 15.37 percent YoY, reaching their highest level since October 2014.

Fitch Solutions’ BMI Research projected that Indonesian consumers would remain cautiously optimistic over the course of 2026 and 2027. Despite a 5.5 percent YoY increase in household spending this year, growth is expected to slow to 4.9 percent YoY in 2027.

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Gov’t Steps in to Ease BPJS Cash Crisis

With BPJS Kesehatan, the administrator of the country's national health insurance, facing a cash crisis, the government plans to inject an additional Rp 20 trillion ($1.1 billion) into the system to ensure continued payments to hospitals and other healthcare providers.

Finance Minister Suahasil Nazara said on Oct 9 that the funding would be disbursed in equal installments in October and November.

The intervention comes as the state-run health insurer faces growing financial pressure from rising healthcare claims.

"This is intended to help BPJS Kesehatan, which is running a deficit, so it can continue serving the public," Suahasil said.

The additional funds are on top of a 2026 state budget allocation of approximately Rp 47 trillion to cover health insurance for low-income Indonesians whose premiums are subsidized by the government.

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Member Announcement | HHP Law Firm

Forum held on Mobilizing Capital and Strategic Certainty for Growth

HHP Law Firm brought together policymakers, business leaders, investors, financial institutions and market participants on Sept 9 for “Mobilizing Capital and Strategic Certainty for Indonesia’s Next Growth Phase.” The forum explored Indonesia’s economic outlook, investment opportunities and the role of public-private collaboration in supporting growth.

“As a law firm established over 35 years ago, HHP Law Firm has had the opportunity to assist both the public and private sectors in numerous strategic transactions and projects that have shaped Indonesia’s economic journey… Through this forum, we hope to facilitate meaningful discussions that allow attendees to gain firsthand insights into the outlook for Indonesia’s economic policy,” said Ponti Partogi, Managing Partner of HHP Law Firm.

The program featured keynote presentations by Heriyanto Irawan of the National Economic Council and Rachmat Kaimuddin of Danantara Development Management Fund. Discussions highlighted policy consistency, strong governance and public-private collaboration as essential to strengthening investor confidence and supporting sustainable growth.

Building on these themes, participants joined breakout sessions facilitated by HHP lawyers on issues affecting businesses and investors.

In her closing remarks, HHP Law Firm co-founder Tuti Hadiputranto emphasized continued collaboration among government, investors, businesses and other stakeholders to support long-term growth and greater strategic certainty for investment.

Across the discussions, a common message emerged: creating a competitive and attractive investment environment requires sustained dialogue, trust and partnership between the public and private sectors. HHP Law Firm was pleased to bring together diverse stakeholders to exchange perspectives on Indonesia's opportunities and the path ahead.

Get to Know Our Members | MCDERMOTT INDONESIA, PT

Get to Know Our Members | MCLARTY ASSOCIATES (An Ankura Company)

McLarty Associates, an Ankura company, is an international strategic advisory firm with offices in Brussels, Beijing, Delhi, and Washington, DC.

McLarty Associates advises companies on political risk analysis, government advocacy, market access, mergers and acquisitions, and corporate communication strategies. It also supports global companies seeking to do business in the United States through its subsidiary, McLarty Inbound.

Its team comprises nearly 100 seasoned professionals, including former diplomats, trade negotiators, intelligence officers, academics, and journalists. A pioneer in the field of private sector diplomacy, McLarty Associates has built a team ready to help its clients in every part of the globe.

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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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