The BGA Indonesia team, led by Managing Director Doug Ramage, wrote an update to clients on the reorganization of Indonesia’s executive branch. 

Context 

  • Indonesia’s President-elect Prabowo Subianto will undertake an ambitious reorganization of the executive branch upon his inauguration October 20. A recent amendment to the State Ministries Law, which previously capped ministries at 34, now allows Prabowo — known for his inclusive leadership style — to expand ministerial positions as needed. Political leaders expect a cabinet of 44 ministries — the largest in decades — along with up to two dozen new executive agencies. This overarching agenda, more than any individual policy, is expected to dominate government activities throughout the coming half year.
  • Prabowo’s Cabinet will feature a mix of technocrats and politicians, as seen in all post-Soeharto governments, balancing professionalism with broad power-sharing. A theme among appointees will likely be strong coalition ties and at least some familiarity with their portfolios. This trend was evident in current President Joko “Jokowi” Widodo’s recent transitional cabinet appointments made on Prabowo’s behalf, in which personal loyalty was prioritized over noteworthy technical qualifications. Despite media concerns, politically connected picks are often best positioned to drive change.

Significance 

  • Government expenditure in 2025 will increase 9 percent to roughly $234 billion, with increased spending across the board. However, the deficit remains within the conservative post-Asian financial crisis consensus at 2.5 percent. Observers have expressed unease about Prabowo’s expansionary vision to achieve his 8 percent growth target, but the 2025 budget — influenced by his team — reflects a gradual, measured approach. The question now is whether the increased spending will be cost-effective given the expanded number of agencies.
  • Political influence has firmly shifted toward Prabowo as attention turns to his incoming administration and the changes ahead. Earlier narratives of continuity suggested Jokowi might retain influence, but these now appear outdated. Jokowi’s relevance has also waned due to a recent political misstep: his alleged push for a deeply unpopular revision to the Regional Election Law to benefit his family. Nonetheless, he will end his term with high popularity and remain a source of political legitimacy, particularly in the November regional elections, in which the incoming ruling coalition has a substantial stake.

Implications 

  • Companies will need to navigate the far-reaching impact of government restructuring in the coming half-year. BGA expects that the reconfiguration will affect the regulatory and licensing roles of institutions. Roles within the bureaucracy may be newly established, merged, split or made obsolete, with possible changes among officials holding positions one or two levels below a minister or agency head. This challenges the conventional wisdom that these roles are typically “safe” during a transition. Who does what and who gets the budget will be key questions for officials and businesses alike for some time. Engagement strategies that prioritize these dynamics are most likely to succeed.
  • The plan to introduce a cabinet of experts, balanced with the imperatives of a big-tent coalition, means companies can generally expect appointees familiar with broad sectoral issues who also have specific political and business agendas. With the government reorganization a priority and Prabowo’s quick wins in place, companies may need to wait several months before seeing progress on policies affecting the overall investment climate or specific sectors. This environment does not presage a long-term decline in the investment climate or suggest that senior officials will hesitate to engage with companies early in their tenures.

We will continue to keep you updated on developments in Indonesia as they occur. If you have any comments or questions, please contact BGA Indonesia Managing Director Douglas Ramage at dramage@bowergroupasia.com.

Best regards, 

BGA Indonesia Team 

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Managing Director

Doug is the founding managing director of BowerGroupAsia Indonesia and a leading authority on Indonesia’s political, business and investment landscapes.  With over 30 years of experience working in Indonesia, Doug has established himself as a trusted advisor to major global companies and the government, advancing policies that drive competitiveness, investment and market access, including in the healthcare, information and communication technology, energy, consumer goods, education and finance sectors. His approach to advocacy emphasizes win-win solutions that align with government priorities and contribute to Indonesia’s development.  Doug concurrently serves as vice chair of the Indonesia Committee at the US-ASEAN Business Council. ... Read More