Tariffs, Local Content Req, Foreign Journalists, Prabowo/Megawati, and Kopi Kenangan
This issue:
Indonesia Slapped with 32% Tariffs
Prabowo Attempts to Jump-Start Economy
Restrictions on Foreign Journalists and Researchers
Prabowo-Megawati Reproachment?
Kopi Kenangan Expands to India
Indonesia Slapped with 32% Tariffs
On April 2, US President Donald Trump announced a 32% tariff on Indonesian goods as part of his sweeping global tariff policy. Among ASEAN nations, Indonesia faced the sixth-highest tariff, trailing Cambodia (49%), Laos (48%), Vietnam (46%), Myanmar (44%), and Thailand (36%). The tariffs were attributed to Indonesia’s trade surplus with the US, which was around US$16.2 billion in 2024. Another factor driving the high tariff was the growing presence of Chinese companies establishing manufacturing sites in Indonesia and using them as a base to export products to the US.
Following Trump’s announcement, the Indonesian rupiah fell to a new record low of IDR 17,200 against the US dollar. The currency was particularly hammered in the non-deliverable forward (NDF) market, a foreign exchange forward contract commonly used for non-convertible currencies like the Chinese renminbi and the Indonesian rupiah. In response, Indonesia’s central bank implemented targeted interventions to stabilize the currency and prevent it from dropping further. At the time of writing, the IDR was at 16,789 against the greenback.
Despite the tariff pause, Coordinating Minister for the Economy Airlangga Hartarto said Indonesia would not retaliate with reciprocal measures. Instead, Indonesian President Prabowo Subianto announced several economic proposals aimed at eliminating quotas for imported staple goods, lowering import taxes for electronic goods, and ending local content requirements for manufacturing. The government also plans to send a trade delegation to the US to negotiate a resolution. At the same time, efforts will be made to strengthen trade relations with the European Union as an alternative to heavy reliance on the US and China. Seems like rough seas ahead.
Prabowo Attempts to Jump-Start Economy
On Tuesday, President Prabowo signaled a shift in policy by advocating for the relaxation of local content requirements. Alongside this announcement, he introduced several other non-tariff measures, as outlined above. These changes serve two key purposes: they provide Indonesia with leverage in negotiations with the United States while simultaneously revitalizing the domestic economy by dismantling protectionist policies.
If you’ve ever discussed the Indonesian economy with me, you’ll know that local content requirements are one of the first things I blame for the country’s economic woes. For a while now, there have been calls to relax or eliminate these requirements, known as TKDN, as a strategy to attract FDI.
Initially designed to protect domestic manufacturers and promote the development of Indonesian raw materials, these regulations have largely failed to achieve their goals. Instead, they’ve become a significant obstacle to FDI due to the burdensome mandate for locally manufactured goods to include a certain percentage of locally sourced materials. The high cost and/or poor quality of these materials have made it economically unfeasible for many companies to set up factories in Indonesia. For instance, while Vietnam is producing iPhone 16s for Apple, Indonesia can only manufacture AirTags.
Why now? The tariffs seem to have provided Prabowo with the political cover necessary to push for this policy shift. Previously bound by his protectionist rhetoric and nationalist image, he was hesitant to implement changes that might appear to disadvantage local companies. However, with the Indonesian economy steadily declining and US tariffs adding to an already uncertain economic climate, decisive action became inevitable.
While the proposal sounds promising, it remains unclear whether these proposals will be fully realized. Some government ministers have already attempted to walk back parts of Prabowo’s proposals, though this may be more about optics rather than genuine ideological opposition.
Overall, this announcement is a step in the right direction. The anticipated boost in FDI could help tackle pressing issues such as Indonesia’s declining role in the global value chain, declining consumer purchasing power, and its persistently high youth unemployment.
Restrictions on Foreign Journalists and Researchers
On March 10, National Police Chief Gen. Listyo Sigit Prabowo issued Police Regulation No. 3/2025, introducing new non-mandatory permit requirements for foreign journalists and researchers in Indonesia and restricting their access to certain “specific locations” and conflict-prone areas.
Listyo stated that the regulation aimed to safeguard national security by addressing threats like espionage and sabotage while ensuring the safety of foreign journalists. He clarified that journalists can still work without the permit if they comply with existing laws, though skepticism remains.
Indonesian civil society groups have raised concerns with the new regulation, arguing that the new rules pose a significant threat to press freedom. They fear that the regulation may be misused by the police to obstruct journalists and researchers, particularly in contentious regions or covering sensitive topics that the government may prefer to keep under wraps.
Prabowo-Megawati reproachment?
Prabowo and PDI-P chairperson Megawati Sukarnoputri met last Monday in their first meeting since Prabowo’s inauguration on October 20, 2024. The two political heavyweights held a closed-door, 90-minute discussion, sparking speculation about the substance of their meeting. Sufmi Dasco Ahmad, Gerindra’s executive chairman, told the media that the leaders discussed Indonesia’s future development and strategies to address economic and geopolitical headwinds. Meanwhile, some political analysts suggested that the meeting could mark the beginning of a rapprochement between the two leaders, potentially paving the way for Megawati’s party, PDI-P, to join Prabowo’s ruling coalition.
In recent months, PDI-P has faced mounting political pressure due to several corruption investigations involving its members. The most prominent case was the arrest of the party’s secretary-general, Hasto Kristiyanto, earlier this year on bribery charges—allegations that PDI-P has dismissed as politically motivated. PDI-P may have concluded that opposing the government is not worth the risk of its cadres being imprisoned. Instead, the party may have determined that collaboration offers a more strategic path than opposition.
While PDIP’s inclusion in Prabowo’s coalition could offer the party some benefits, it raises concerns for the trajectory of Indonesia’s democracy. Such a move would leave the House of Representatives without an opposition, eliminating dissenting voices and undermining the checks and balances essential for democratic governance. Let’s see how this unfolds.
Kopi Kenangan Expands to India
Indonesian retail coffee giant Kopi Kenangan has taken another step in its global expansion by opening its first store in India this week. In addition to its first store in Delhi, the company has announced plans to open nine additional stores in India by the end of 2025. This regional expansion builds on the company’s successful entries into Singapore, Malaysia, and the Philippines, bringing its total store count to over 1,000 outlets. By expanding abroad, the company aims to diversify its presence and tap into new opportunities in emerging coffee markets.
Kopi Kenangan’s growth is pretty damn impressive. It received a US$1 billion valuation in December 2021, which is pretty remarkable considering it was only founded in 2017. However, the company has been forced to look overseas amidst increasing competition in Indonesia, where both large domestic chains and independent coffee shops are all fighting for market share. Despite growing competition domestically, Indonesia’s retail coffee industry is set to continue growing at 6.3% annually and is expected to reach US$25 billion by 2030. Ngopi yuk!
All opinions are my own.