Indonesian President Prabowo Subianto is making significant strides in attracting foreign investment while grappling with the challenges posed by state-owned enterprises (SOEs) debt. During his recent visit to the UK on November 22, 2024, Prabowo secured an impressive US$8.5 billion investment from 19 British companies, reflecting growing confidence in Indonesia's economic prospects, bolstered by political stability and governance improvements [280b10a3].
This investment is particularly focused on key sectors such as energy transition, infrastructure, education, and healthcare, as noted by Finance Minister Sri Mulyani. The discussions during Prabowo's visit included meetings with prominent figures, including King Charles III, UK Deputy Prime Minister Angela Rayner, and Prime Minister Keir Starmer, aimed at strengthening ties between Indonesia and the UK [280b10a3].
Despite these positive developments, Prabowo faces the daunting task of addressing a staggering US$186 billion debt challenge linked to SOEs. His predecessor's extensive infrastructure spending has left the country with record debt levels, with only US$70 billion estimated to remain in government coffers after servicing this debt [9e8c111c].
To support his green economy initiatives, Prabowo plans to generate US$65 billion by 2028 through the sale of carbon credits from environmental projects, such as rainforest preservation. A new carbon emissions regulator will be established to oversee this market and ensure project credibility [c4327aa6]. This initiative is part of a broader strategy to leverage Indonesia's natural resources for economic growth while addressing climate change.
Major SOEs like PT Waskita Karya and PT Wijaya Karya are grappling with over US$9 billion in liabilities, leading to declining investor confidence and affecting bond spreads [9e8c111c]. The government aims for an ambitious 8% economic growth, relying heavily on SOEs for infrastructure projects, but restructuring plans are currently under discussion to restore confidence in these entities [9e8c111c].
As Prabowo Subianto embarks on his presidency, the dual challenges of managing SOE debt and fostering a sustainable green economy will require careful balancing to ensure Indonesia's economic stability and growth, even as he successfully secures substantial foreign investments [280b10a3].