Sailing Through the Trade War Storm: How Indonesia Should React
By Teguh Anantawikrama, Vice Chairman of the Indonesian Chamber of Commerce and Chairman of the Indonesian Tourism Investors Club
INVESTORTRUST.ID – The global economy is facing turbulent waters as major powers escalate their trade disputes. The ongoing trade war between economic giants, coupled with inflationary pressures, market downturns, and rising unemployment, is affecting nations worldwide, including Indonesia. While these challenges present significant risks, they also offer opportunities for Indonesia to strengthen its position as a resilient and influential player in the regional and global economy.
To navigate this storm, Indonesia must adopt a strategic approach, leveraging its strengths and reinforcing policies that ensure economic stability and growth.
Indonesia, like many emerging markets, is feeling the pressure of a volatile global economy. The Jakarta Composite Index (IHSG) has been fluctuating, reflecting investor concerns about economic uncertainty.
Inflation remains a pressing issue, with food and energy prices soaring due to supply chain disruptions. Unemployment has also risen as businesses struggle to adapt to changing market conditions.
Under the leadership of President General Prabowo Subianto, Indonesia has taken a strong and decisive approach to economic and geopolitical challenges. His administration’s commitment to regional leadership, national security, and economic self-reliance positions Indonesia as a stabilizing force in Southeast Asia. Prabowo’s emphasis on strengthening Indonesia’s defense, food security, and industrial resilience will be critical in navigating the economic turbulence caused by global trade tensions.
Indonesia’s Strategic Responses to the Trade War
1. Strengthening Domestic Resilience
To mitigate external risks, Indonesia must reinforce its domestic economy by:
• Boosting Local Manufacturing: Encouraging import substitution and increasing self-sufficiency in critical industries such as food, energy, and defense will reduce dependency on volatile global markets.
• Expanding the Digital Economy: Supporting startups, e-commerce, and fintech solutions can create new job opportunities and attract foreign investment despite global economic uncertainty.
• Enhancing Food and Energy Security: Strengthening agricultural productivity and investing in energy independence—including biofuels and renewable energy—will stabilize prices and protect the nation from external supply shocks.
2. Strengthening Regional Leadership
Under President Prabowo’s leadership, Indonesia is asserting itself as a regional power in ASEAN and beyond. In the face of global trade tensions, Indonesia must:
• Enhance ASEAN Economic Unity: Indonesia should lead efforts to boost intra-ASEAN trade, reduce regional dependency on external markets, and increase economic cooperation among Southeast Asian nations.
• Expand BRICS+ Engagement: Indonesia’s recent inclusion in BRICS+ provides a major opportunity to diversify trade partnerships beyond the Western-centric economic order. Strengthening economic ties with China, India, Russia, and the Global South will create new trade routes for Indonesian exports.
• Leverage RCEP (Regional Comprehensive Economic Partnership): As a key player in RCEP, Indonesia must ensure it fully capitalizes on tariff reductions and expanded trade with partners like Japan, South Korea, and Australia.
3. Attracting Investment Amid Uncertainty
Despite global market instability, Indonesia remains an attractive investment destination due to its large consumer base, strategic location, and political stability. To sustain investor confidence, the government should:
• Accelerate Infrastructure Development: Under Prabowo’s vision for a stronger Indonesia, investments in roads, ports, and defense infrastructure will enhance Indonesia’s economic and security resilience.
• Ensure Regulatory Stability: Clear and consistent economic policies will reassure investors and encourage long-term investments in key sectors.
• Promote Green Investments: With the world shifting towards sustainability, Indonesia must position itself as a leader in green energy, electric vehicle production, and sustainable agriculture.
Production facilities at the steel plant owned by PT Gunung Raja Paksi Tbk (GGRP). Photo: GGRP.
4. Protecting Workers and MSMEs
Rising unemployment is a pressing concern that requires immediate action. The government should:
• Expand Workforce Retraining Programs: Upskilling and reskilling initiatives will help workers transition into emerging industries such as digital technology, defense manufacturing, and renewable energy.
• Support MSMEs (Micro, Small, and Medium Enterprises): Providing financial support, tax incentives, and digitalization programs will help small businesses survive and thrive amid economic uncertainty.
• Enhance Social Protection Programs: Strengthening social safety nets, including subsidies and direct cash assistance, will support vulnerable populations during economic downturns.
Indonesia’s Role as a Regional Anchor Under Prabowo’s Leadership
President Prabowo’s strong and pragmatic leadership has positioned Indonesia as a regional power with global influence. In response to the shifting global landscape, Indonesia must maximize its strategic advantages:
• A Strategic Maritime Hub: Indonesia’s control over key global trade routes makes it a vital player in supply chain diversification. Strengthening naval and port infrastructure will enhance Indonesia’s role as a global trade hub.
• A Regional Security Leader: Prabowo’s emphasis on military modernization and regional security cooperation strengthens Indonesia’s ability to maintain stability in Southeast Asia, which is crucial for economic growth and investor confidence.
• A Bridge Between Global Powers: Indonesia’s ability to maintain balanced diplomatic relations between the West, China, and the Islamic world allows it to act as a key mediator in global trade tensions.
• A Rising Digital and Industrial Power: With a growing tech ecosystem and increasing investment in defense, infrastructure, and digital transformation, Indonesia is emerging as a major industrial and technological hub in the region.
While the global trade war and economic challenges pose significant risks, they also present Indonesia with an opportunity to assert itself as a resilient and influential economy. Under President General Prabowo Subianto’s strong leadership, Indonesia can navigate this crisis by:
• Strengthening domestic industries and economic self-sufficiency.
• Deepening regional partnerships and asserting its role in ASEAN and BRICS+.
• Attracting strategic investments and ensuring economic stability.
• Protecting workers, MSMEs, and vulnerable populations from economic shocks.
Economic storms are inevitable, but nations that navigate them with vision, strategy, and resilience will find themselves stronger when calmer waters return. Indonesia, under Prabowo’s leadership, has the strength, resources, and regional influence to not only survive this crisis but to turn it into a moment of transformation and growth.***
