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Finance
Indonesia’s financial sector has been flourishing over the past half decade. The COVID-19 pandemic period, while being a time of austerity for most sectors, led to revolutionary innovations in Indonesia’s financial services industry, particularly in fintech. From December 2020 to December 2022, total assets of the fintech sector grew by 48.54 percent from 2020 to 2022. This growing trend continued even after the pandemic lockdowns ended, as total assets in fintech grew by 30.8 percent from December 2022 to December 2023.
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Finance
Indonesia’s financial sector has been flourishing over the past half decade. The COVID-19 pandemic period, while being a time of austerity for most sectors, led to revolutionary innovations in Indonesia’s financial services industry, particularly in fintech. From December 2020 to December 2022, total assets of the fintech sector grew by 48.54 percent from 2020 to 2022. This growing trend continued even after the pandemic lockdowns ended, as total assets in fintech grew by 30.8 percent from December 2022 to December 2023.
With fintech paving the way forward, traditional banking followed suit by revolutionizing its services. From 2022 to 2023, the banking industry’s fund distribution increased by 6.28 percent, source of funds increased by 6.33 percent, and total assets in the industry grew by 6.98 percent, reaching a total of US$8.22 trillion. Moreover, even regional banks have been benefitting from this wave of innovation. For the same period from 2022 to 2023, the regional banking sector saw a 7.67 percent in distributed funds, an 8.08 percent increase in source of funds, and a 7.52 percent increase in total assets, reaching a total of US$137.96 billion.
Innovations in Indonesia’s finance sector extend beyond financial services. On September 2023, the Indonesian monetary authority, Bank Indonesia (BI), introduced three pro-market monetary instruments that function as short-term fixed income securities with high coupon rates. The three instruments, SRBI, SUVBI, and SUVBI, were able to collect Rp 409 trillion (US$25.2 billion), US$2.31 billion, and US$387 million, respectively.
Particularly in the case of the SRBI, this instrument represented an innovative way to attract capital flow from abroad during a period of high credit costs and slow investment. Approximately 20.77 percent, or Rp 85.02 trillion (US$ 5.26 billion), of the total outstanding SRBI were owned by non-Indonesian residents, underscoring the SRBI’s success as a monetary instrument.
Even when compared to other countries in the same region, the Indonesian finance sector stands out for its stability against fluctuations. Throughout 2023, the global cost of credit was high due to hawkish Fed policies made to curb US inflation, resulting in a stagnation of capital flow on a global scale. Entering the second quarter of 2024, the composite index of many Southeast Asian countries such as Singapore and Thailand recorded price decreases compared to the same period last year, reaching -3.96 percent and -13.9 percent on the Straits Times Index (STI) and the Bangkok SET index, respectively. Meanwhile, the Jakarta Stock Exchange Composite Index (JKSE) recorded a price increase of 5.18 percent for the same one-year period.
In summary, the Indonesian financial sector stands out for its stability and consistency, maintaining growth through innovation even during periods of austerity or global uncertainty. This consistency is also reflected in its GDP, which grew by 7.4 percent from 2022 to 2023, contributing roughly 4.16 percent to the national GDP in 2023.
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President Prabowo Subianto, who often arrives at the presidential office in a locally produced Maung vehicle, has renewed his promise to create Indonesia's first official national car within the next three years. Whether he can succeed where his predecessors failed remains uncertain, as both Soeharto and Joko "Jokowi" Widodo saw their own national car dreams fade due to political and economic missteps.
In a recent cabinet meeting, Prabowo ordered his ministers to begin using Maung vehicles, manufactured by the state-owned defense company PT Pindad, as their official cars. Over a hundred units have reportedly been ordered with approval from Finance Minister Purbaya Yudhi Sadewa. The president also said he has allocated funds and land for future factories to realize his ambitious industrial vision.
The decision to entrust PT Pindad with the project has raised eyebrows, with critics questioning whether this is another case of channeling lucrative state projects to military-linked entities. As defense minister under Jokowi, Prabowo worked closely with PT Pindad to produce military vehicles and equipment for the Indonesian Military (TNI).
Now, as president, his affinity for the military has become even more apparent. His first year in office has been marked by policies expanding military roles in civilian affairs, from revising the controversial military law to allowing active-duty officers to hold civilian posts and assigning troops to assist in farming and food distribution. PT Pindad's central role in the car project reinforces perceptions of a deepening militarization of his administration.
Yet, a national car project should aim to serve the public interest, not personal or institutional loyalty. PT Pindad has yet to release Maung for public sale, but one unit reportedly costs around Rp 600 million (US$36,000), or twice the average amount a middle-class family spends on a car. For the project to succeed, the vehicle must be both reliable and affordable. Otherwise, it risks becoming just another vanity project for the elite, detached from the realities of ordinary Indonesians who continue to buy cheaper, imported alternatives.
The numbers also paint a sobering picture. According to the Association of Indonesia Automotive Industries (Gaikindo), Indonesia's car ownership ratio stands at just 99 cars per 1,000 people, meaning fewer than 10 percent of Indonesians own a vehicle.
Prabowo's national car dream carries echoes of past failures. During Soeharto's New Order, the Maleo project led by then–research and technology minister B.J. Habibie promised a locally made affordable car, but the plan was derailed in 1996 when Soeharto handed control to his son Tommy Suharto's PT Timor Putra Nasional. Tommy imported and rebranded South Korean cars instead, leading Japan to file a World Trade Organization complaint against Indonesia in 1997 for unfair competition.
Jokowi, too, pledged a national car during his 2014 campaign, championing the Esemka vehicle that had symbolized his days as Solo mayor. But once in power, Esemka failed to enter mass production due to the absence of a clear industrial road map. By 2023, former vice president Jusuf Kalla went as far as calling the initiative "a lie."
Despite those failures, Prabowo appears determined to pursue the same goal, having repeated the promise during a recent cabinet meeting. Industry Minister Agus Gumiwang Kartasasmita has proposed placing the national car project on the list of National Strategic Projects (PSN), elevating it to top priority alongside dozens of infrastructure projects, the free nutritious meal, waste to energy and the three million houses programs.
But this is becoming a familiar Prabowo pattern, announcing grand, populist projects on top of already heavy fiscal commitments. Since taking office, he has launched popular but fiscally draining initiatives such as the massive free nutritious meal program, the three million homes and the creation of 80,000 rural cooperatives.
With a history of political favoritism, blurred military-civilian boundaries and ambitious yet underfunded programs, Prabowo's national car plan risks following the same road as its predecessors, a pipedream until realized.
