By Kusnandar & Co., Attorneys at Law – Jakarta, INDONESIA
Indonesia is facing a governance crisis that is reverberating far beyond
its borders, as protests over inequality and corruption expose the gap between
government officials and the public—and threaten to erode foreign investor
confidence.
At the center of the unrest is not only the questionable wealth held by
many lawmakers and senior bureaucrats but also the insensitive behavior of
officials who appear detached from the struggles of ordinary Indonesians.
Revelations of lavish allowances, luxury properties, and unexplained assets
have angered citizens, but equally damaging are the dismissive remarks and lack
of empathy from political elites. While millions grapple with stagnant wages,
rising food prices, and limited access to basic services, images of officials
celebrating their perks have become a flashpoint for outrage.
This combination of unexplained wealth and public insensitivity has fueled
the perception that Indonesia’s political class is out of touch. The protests
of 2025 escalated into violent clashes, resulting in deaths, injuries, and
widespread property damage. For foreign observers, the sight of police stations
and government buildings torched was not only a social warning but also a
signal of political risk.
Markets were quick to react. The rupiah weakened sharply, the Jakarta
Composite Index fell, and investors openly questioned whether Indonesia could
maintain stability. The dismissal of Finance Minister Sri Mulyani Indrawati—one
of the few officials widely respected for her fiscal discipline—further spooked
markets, reinforcing concerns that political considerations are being placed
above economic credibility.
In response, Parliament has promised to accelerate an “unexplained wealth”
bill aimed at confiscating assets that cannot be justified by legitimate
income. While this legislation could be a turning point, skepticism remains
high. Past reform efforts have often been diluted or selectively enforced.
Investors know that if the law is applied unevenly—or worse, weaponized against
political opponents—it will do little to restore faith in governance.
From Kusnandar & Co.’s perspective, questionable wealth and insensitive
leadership create a two-fold risk. First, they erode public trust, making
unrest more likely and governance less predictable. Second, they undermine
regulatory credibility, leaving investors exposed to arbitrary decision-making.
When citizens view leaders as unaccountable and investors view regulators as
unpredictable, the investment climate suffers.
Still, we emphasize that Indonesia remains too important to ignore. With
its large population, natural resources, and strategic location, it continues
to attract global interest. The challenge is not whether to invest, but how to
do so wisely. That means structuring investments to account for legal
uncertainty, ensuring compliance systems are robust, and drafting contracts
that protect against sudden regulatory or political shifts.
“As we often tell our clients, it is not enough to know the black-letter
law in Indonesia—you must also anticipate how laws and regulations are applied
in practice, often against the backdrop of inequality and political
sensitivities,” noted a senior partner at Kusnandar & Co. “Insensitive
statements from officials and unexplained wealth scandals may dominate
headlines, but for investors, the focus must be on ensuring protections are in
place before instability impacts operations.”
For foreign businesses, the current climate highlights the importance of
proactive risk management. That includes monitoring political developments,
understanding how social unrest can translate into regulatory change, and being
prepared for shifts in enforcement priorities.
Ultimately, Indonesia’s ability to attract sustained foreign investment
will depend on whether its leaders acknowledge the urgency of reform. If
insensitive rhetoric continues and wealth disparities remain unchecked, both
citizens and investors will grow more skeptical. But if the government embraces
transparency, enforces asset declarations seriously, and rebuilds credibility,
Indonesia could turn this crisis into an opportunity for renewal.
At Kusnandar & Co., we remain committed to guiding clients through this
complex environment—helping them manage risks, remain compliant, and seize
opportunities even amid uncertainty. Indonesia’s potential is undeniable, but
so too are the challenges. With the right legal strategies, investors can
succeed while contributing to a fairer and more accountable future for the
country.
K&Co - September 11, 2025
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