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Trading
Indonesia, a developing country rich in natural resources and boasting the 4th largest population in the world, maintains an extensive trade presence. In 2023, the national trade balance reached US$480.7 billion, having grown significantly compared to the pre-pandemic period in 2019, when it stood at US$338.96 billion. Moreover, as of March 2024, the country has officially recorded a trade balance surplus for its 47th consecutive month.
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Indonesia, a developing country rich in natural resources and boasting the 4th largest population in the world, maintains an extensive trade presence. In 2023, the national trade balance reached US$480.7 billion, having grown significantly compared to the pre-pandemic period in 2019, when it stood at US$338.96 billion. Moreover, as of March 2024, the country has officially recorded a trade balance surplus for its 47th consecutive month.
In terms of exports, Indonesia’s top export commodity has historically been mineral-based fuels, especially coal. However, in the global market, Indonesia is a superpower in the exports of vegetable oils, particularly palm oil, having captured roughly 20 percent of the market with a total export value of US$35.2 billion in 2022. Behind that, Indonesia also leads in nickel exports, with a total export value reaching US$5.8 trillion or 14 percent of global exports.
In 2023, China emerged as Indonesia’s top partner for both exports and imports, with a total annual value of US$62.3 billion and US$62.2 billion, respectively. Meanwhile, the nation’s next top export destination is the US, with a total annual value of US$ 23.2 billion, while the next top import country of origin is Japan, with a total annual value of US$ 16.4 billion.
For trades on the level of individual consumers, the main driver of growth has been the rise in e-commerce throughout the past few years. E-commerce gross market value (GMV) grew by 20 percent from US$48 billion in 2021 to US$58 billion in 2022. This growth persisted to 2023, as e-commerce GMV grew by 7 percent to US$62 billion. E-commerce grew rapidly as it provided a means for Indonesian consumers to maintain access to goods and services during the pandemic period of 2020-2022. However, by the time the pandemic ended, e-commerce had grown ubiquitous and became a staple in the day-to-day lives of the average Indonesian.
Meanwhile, the domestic retail sector in Indonesia is driven by the sale of automotives. The retail of automotives alone in the country reached a gross domestic product (GDP) of US$174.35 billion in 2023, contributing to roughly 13.53 percent of Indonesia’s total GDP of US$1.3 trillion for that year at current market prices. Moreover, the country also achieved a per capita GDP of US$ 4,919.
Strong trade growth followed by increasing access to goods has bolstered local consumer confidence in Indonesia despite the period of uncertainty throughout 2023. According to Bank Indonesia’s monthly consumer confidence survey, Indonesians entered 2024 with high confidence, with the confidence index rising from 123.8 in December 2023 to 125.0 in January 2024. Moreover, this increase is even higher compared to same period the previous year, as a consumer confidence index of 123.0 was recorded for January 2023.
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The government’s decision to further reduce natural gas exports to Singapore may strengthen domestic energy supplies, but it risks undermining the country's credibility as a reliable trading partner. The move, justified on energy security grounds, could unsettle investors, strain relations with Singapore and weaken ASEAN's efforts to build an integrated regional energy market.
Following a plenary cabinet meeting in Jakarta on Oct. 1, the government announced that it would reduce Indonesia’s natural gas exports to Singapore over energy security concerns during crises. President Prabowo Subianto pointed out that many countries prioritized their own needs in times of crisis and described the prevailing geopolitical environment as one lacking international order in which only strong countries would survive.
Prabowo has taken a more direct role in defining Indonesia's foreign policy goals and their implementation, which reflects his broader domestic policy orientation toward greater centralization under presidential control. One consequence of this centralized, personality-driven approach is that foreign policy decisions increasingly rest with him.
Given Prabowo's worldview that the nation is being exploited by domestic and global elites, along with his emphasis on survival during crises, it is hardly surprising that some within the government have adopted a more confrontational stance in international relations. After all, the Prabowo administration has a track record of attributing setbacks and dissent to “antek-antek asing” (foreign stooges). Indonesia's recent moves regarding Singapore appear to follow a similar pattern.
The two countries are already embroiled in a diplomatic dispute over the wildfires in Kalimantan, both sides blaming companies linked to the other for the fires. Adding to the tension is Jakarta’s allegation that Singapore was behind MSCI's latest announcement on possibly downgrading the Indonesia Stock Exchange to “standalone” status over market transparency concerns.
Even if energy security concerns are driving the government’s decision to reduce gas exports to the island nation, political factors cannot be ruled out. And the move could have far-reaching consequences beyond Indonesia's immediate relationship with Singapore.
Indonesia previously reduced gas exports to Singapore last year, also citing domestic energy needs as the primary concern. Afterward, Energy and Mineral Resources Minister Bahlil Lahadalia reassured gas exporters that there would be no further reductions to export quotas in 2026, whether for existing contracts or spot agreements. Local gas exporters were therefore caught off guard when Bahlil suddenly announced another cut in quotas to Singapore.
After all, gas processing is a highly capital-intensive business that involves advance planning for production capacity and facilities based on expected commercial returns, which can take decades to materialize. Any unexpected change to sales commitments can significantly affect producers' financial positions.
Beyond existing contracts, the government’s sudden move could also undermine Indonesia's future credibility as a trading partner, particularly in the gas sector. The country’s natural gas industry has benefited substantially from participation in international trade, since access to foreign markets has improved the financial viability of new production facilities.
Existing gas agreements have underpinned the production decisions of local gas contractors, which have allocated output to international markets while reserving supplies to meet their domestic market obligation (DMO). A sudden change in the country’s gas export policy could trigger a cascading effect, as any uncertainty is likely to drive foreign buyers away. Gas producers could then find it increasingly difficult to develop new facilities as access to export markets diminishes.
The timing of the announcement also makes it difficult to restore confidence. Indonesia is currently drafting new oil and gas legislation that includes a proposal to change the DMO requirement from a maximum 25 percent to a minimum 25 percent. If the bill pursues this policy direction, future efforts to restore confidence among foreign buyers could be undermined by a provision that allows the government to increase domestic supply requirements at any time.
More broadly, this development also reflects this administration’s foreign policy direction, which increasingly appears to emphasize relations with major powers at the expense of regional cooperation. While a more active role for Indonesia in international affairs is welcome, the country cannot afford disputes within ASEAN, which it helped establish in 1967.
Energy security, the stated reason to justify reducing gas exports, is also critical to strengthen regional cooperation. ASEAN is developing an interconnected regional power grid aimed at facilitating electricity trade among member states: The initiative requires sustained cooperation and mutual trust among member states, and disputes such as the one with Singapore could undermine its progress.
The government cannot claim to strengthen energy security while undermining the credibility of the national energy industry and antagonizing the very partners with whom it must work to build ASEAN’s energy security. It must therefore complement its more assertive global engagement with stronger regional cooperation, particularly in developing a more secure and integrated energy system for Southeast Asia.
