Sector
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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The revision to the Oil and Gas (Migas) Law is now being pushed through the House of Representatives at unusual speed, with lawmakers targeting completion by mid-October 2026 and hoping to conclude deliberations before the current sitting period ends. The pace is notable because the Migas Law revision was not originally included in this year’s national legislation program (Prolegnas), despite years of delays.
Members of Commission XII, which oversees energy and mineral resources, have described its acceleration as a response to shifting global geopolitics and the need to strengthen Indonesia’s domestic energy supply. Yet the speed of the process also raises a broader question: How much can the bill realistically resolve on such a compressed timeline?
The case for reform, however, has been building for years, particularly as the current administration places greater emphasis on energy security. National oil production has fallen from around 1.2 million barrels per day (bpd) in the early 2000s to approximately 700,000 bpd by 2015 and around 600,000 bpd in recent years. The prolonged decline has steadily increased the country’s reliance on imported crude and fuel, making a recovery in domestic production increasingly vital to energy security.
At the same time, the investment environment has become more challenging. The sharp decline in global oil prices, from around US$99 per barrel in 2014 to $52 in 2015 and then to $44 in 2016, significantly reduced the commercial attractiveness of exploration and development projects. The impact was particularly pronounced for Indonesia, where many fields are increasingly mature and therefore more costly and technically challenging to develop. Subsequent price volatility has added another layer of uncertainty, making it harder for both companies and the government to plan long-term investment and production.
This creates a fundamental policy tension. The government wants higher domestic production to reduce import dependence and strengthen energy security, while contractors make investment decisions based on expected commercial returns. When oil prices are low, the potential returns from exploration and development decline, even as the costs and risks of upstream projects remain substantial.
Indonesia’s regulatory framework therefore has to achieve two objectives at once: provide greater certainty for investors while ensuring that increased domestic production remains aligned with the country’s energy security goals. The draft Migas Law revision seeks to address part of this challenge through a major institutional restructuring. The bill would establish a special oil and gas business entity, dubbed BUK Migas, to assume the current functions of the Upstream Oil and Gas Regulatory Task Force (SKK Migas).
In the version now under discussion, BUK Migas would have authority over work areas nationwide, manage upstream operations and report directly to the President rather than through the Energy and Mineral Resources Ministry. Lawmakers argue this structure could reduce bureaucratic layers and streamline decision-making.
Yet the relationship between BUK Migas and Pertamina remains among the bill’s most contested issues. Some have pointed to Malaysia’s Petronas and Saudi Arabia’s Aramco as models for closer integration between the upstream authority and the national oil company. The argument is that greater coordination between regulatory and operational functions could strengthen the state’s ability to develop resources and boost production.
Energy ministry officials and lawmakers, however, have so far described BUK Migas as a distinct institution accountable directly to the president. Institutional restructuring could provide greater clarity over who has authority, including over production sharing contracts, thereby removing some of the uncertainty that has discouraged long-term investment.
But clearer institutional arrangements do not automatically alter the underlying economics of upstream projects. Contractors will still weigh expected returns against exploration costs, geological risks, field maturity and global oil prices.
