Sector
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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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.
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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Several companies have come under scrutiny following global index provider MSCI’s decision to temporarily freeze Indonesia’s February review, citing concerns over market accessibility and transparency. In response to the announcement, the Financial Services Authority (OJK) and the Indonesia Stock Exchange (IDX) have stepped up due diligence and trading surveillance to address potential vulnerabilities. As this closer monitoring unfolds, it has brought renewed attention to sharp and unexplained price movements in several counters, most notably PT Sanurhasta Mitra (MINA), which had previously been flagged for unusual market activity.
Against this backdrop, the situation carries a measure of irony. Several stocks affiliated with businessman Happy Hapsoro, including PT Raharja Energi Cepu (RATU), had been widely expected to enter MSCI indices based on announcements and index compositions published last year. Some market participants have suggested that the rapid rise and prominence of these stocks may have contributed to MSCI’s heightened scrutiny of Indonesia’s free float and ownership transparency. Parties linked to the companies have rejected allegations of manipulation, maintaining that the price movements reflect market demand and underlying fundamentals rather than coordinated activity.
The controversy has since moved beyond market participants and regulators, prompting responses at the highest levels of government. Senior officials at the OJK and the IDX have pledged regulatory refinements and closer engagement with global index providers. Coordinating Economy Minister Airlangga Hartarto has sought to reassure investors that corrective measures are underway.
President Prabowo Subianto has also addressed the issue, emphasizing that Indonesia’s macroeconomic fundamentals remain strong and that the turbulence stems from technical market issues rather than structural economic weaknesses. Despite these assurances, the episode has weighed on sentiment. Foreign outflows and heightened volatility highlight how quickly investor confidence can erode when governance concerns emerge.
Adding to the challenge, FTSE Russell, a major global index provider and competitor to MSCI, announced that it would postpone its own review of Indonesian equities. The delay removes what could have been a near-term opportunity for Indonesia to offset MSCI’s freeze with a more favorable assessment from another benchmark provider. Instead, the postponement reinforces perceptions of sustained international scrutiny and prolongs uncertainty at a time when authorities are seeking to restore credibility and stabilize market expectations.
At the center of MSCI’s concerns is a technical but critical concept known as free float. Free float refers to the proportion of a company’s shares that are genuinely available for public trading. MSCI has questioned whether reported free float figures in Indonesia consistently reflect shares that are truly accessible to investors, particularly international and retail investors, especially in cases where ownership structures are concentrated or linked to affiliated parties. For an index provider, such discrepancies pose a serious issue. If shares classified as public are effectively tightly held or indirectly controlled, the market may appear deeper and more investable on paper than it is in practice.
Free float plays a central role in capital market health because it determines liquidity, or how easily investors can buy or sell shares without triggering sharp price swings. A market with sufficient genuine free float enables institutional investors to enter and exit positions efficiently, supports credible price discovery and reduces volatility caused by thin trading. Conversely, when effective free float is limited, even modest inflows or outflows can generate disproportionate price movements, raising risks for both passive index funds and active managers.
Liquidity is especially important for foreign investors, who must also navigate political and regulatory risks in markets that are not their own. Global asset managers require confidence that they can adjust positions without materially affecting prices, particularly during periods of stress or volatility.
