This article examines the role of the Institute for Economic and Social Research (LPEM) at the University of Indonesia as a university-based think tank operating at the boundary between academic research and economic policy-making. Using a conceptual framework on think tanks and epistemic communities, and drawing on two case studies-fuel subsidy reform in 2005 and investment climate reform in the early 2000s-the article traces how LPEM has influenced policy debates and reform trajectories in Indonesia. We show that LPEM's influence has not rested on formal authority or ideological advocacy, but on its capacity to translate empirical analysis into policy-relevant arguments, often through close engagement with state actors. The article argues that LPEM's approach reflects a pragmatic 'political economy of the possible', shaped by institutional constraints and shifting policy environments rather than fixed doctrine. The findings contribute to the literature on think tanks by highlighting how university-based institutions in developing countries can shape policy through credibility, continuity and sustained engagement.
President Prabowo Subianto's administration has several strategies to achieve its goal of 8% growth: increasing the role of state-led capitalism, expansive fiscal measures and unconventional monetary interventions. However, despite the administration's well-meaning intention to boost aggregate demand, we show how the design and implementation of its policies may backfire, creating distortions that will prevent optimal growth. We argue that the administration's narrow focus, coupled with its lack of attention to what many see as the real problems limiting productivity, will inhibit its 8% growth ambition.
This article analyses Indonesia's fishing sector, focusing on its geography, capital distribution, labour dynamics and governing policies. Drawing on previously uncollated statistical data and insights from interviews with key informants, it assesses the impact of the Minapolitan and Blue Economy concepts and the Moratorium, Transshipment and Measured Fishing Catch policies, which have governed the sector since 2009. As the article demonstrates, some of these policies have had little impact while others have had quite serious consequences. The Moratorium and Transshipment policies, for example, led to disruptions in foreign investment, displacement among local fishers and layoffs in associated industries such as seafood processing. As the sector continues to grapple with uncertainty, investors and workers alike struggle to adapt amid successive regulatory changes.
Indonesia's downstreaming program aims to transform its nickel mining and processing sectors and promote a battery electric vehicle (BEV) transition. This article presents evidence from interviews with automotive industry stakeholders to make two core arguments about the BEV transition. First, we argue that the reluctance of Indonesia's established Japanese-led automotive production networks to produce BEVs means that the transition has relied on imported Chinese BEVs and locally assembled BEVs made from overwhelmingly foreign-sourced components. This has created a dilemma for the state: promoting the BEV transition risks driving the delocalisation of Indonesia's automotive industry, while supporting established Japanese manufacturers risks stalling the transition. Second, we argue that the state's capacity to manage this dilemma has been constrained by key government agencies' institutional and political distance from substantial manufacturing interests. These arguments contribute to scholarly analysis of downstreaming and to debates about the state's role in promoting automotive industrialisation.
The first year of Prabowo Subianto's presidency has proven neither benign nor catastrophic for Indonesia's democracy. Prabowo has effectively used the political model he inherited from Joko Widodo to maintain tight control over his cabinet and the legislature, while taking a newly assertive approach in his dealings with the bureaucracy, local government and big business. The ease with which he has subordinated other elites speaks to the institutionalisation of what I call the 'hegemonic presidency' as a key feature of Indonesia's decidedly illiberal, though not yet autocratic, regime. At the same time, the year's events have shown the possible fragility of this new equilibrium, as the macroeconomic trends that underpinned Joko Widodo's political dominance fade, and as Prabowo embraces a policy agenda less targeted at voters' immediate hip-pocket concerns than Widodo's. A wave of mass protests, culminating in significant urban unrest in late August, has revealed how popular frustration with a dysfunctional democracy is merging with economic angst to broaden the sources of anti-government contentious politics. Whereas Widodo's dominance among elites and the electorate went hand in hand, under Prabowo the former is consolidating while the latter appears precarious. The coming years are likely to test how resilient the hegemonic presidency proves to challenging economic conditions.
Indonesia faces domestic economic discontent and a hostile global environment. Less than a year into the Prabowo presidency, protests in August 2025 highlighted public frustration with weak job creation, high living costs and elite privileges. Pandemic scarring lingers, with millions pushed into insecure informal work. Tax revenue is constrained, while austerity, over-regulation and weak monetary transmission suppress demand and investment. These vulnerabilities are compounded by international shocks, including US 'Liberation Day' tariffs and uncertainty around the multilateral order. Addressing these challenges requires fiscal stimulus to alleviate discontent and foster job creation through bold structural reforms to boost productivity, competitiveness and exports. Priorities include deregulation, institutional reform, digitisation and integration into green and regional supply chains. Trade agreements, such as the Regional Comprehensive Economic Partnership and the Indonesia-European Union Comprehensive Economic Partnership Agreement, and aspirations, such as joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the OECD, can help to lock in and anchor reform. Political will to undertake bold domestic action, paired with pragmatic economic diplomacy, is essential to restore stability and secure inclusive growth.
Building a cohesive nation-state amid deep ethnic, linguistic and religious diversity is a central challenge for many governments. This article examines the process of nation-building, drawing lessons from the remarkable experience of Indonesia over the past century. I discuss conceptual perspectives on nation-building and review Indonesia's historical nation-building trajectory. I then synthesise insights from four studies exploring distinct policy interventions in Indonesia-population resettlement, administrative unit proliferation, land reform and mass schooling-to understand their effects on social cohesion and national integration. Together, these cases underscore the promise and pitfalls of nation-building efforts in diverse societies, offering guidance for future research and policy-making to support these endeavours in Indonesia and beyond.
Two legacies of colonialism, climate change and the gender order, have left their imprint on the problems the world faces. Greenhouse gas emissions from burning fossil fuels, deforestation and industrial agriculture have warmed the planet, triggering increases in both immediate 'natural' disasters and the imminent juggernaut of climate change. Fuel for industrial development came from exploitation of the Global South as colonial powers sought cheap natural resources, land and labour. Indonesia's colonial history is a prime example of the vast wealth that was harvested to support northern industry; subsequently, it has been harnessed for postcolonial economic development. Colonial rule also transformed gender relations, resulting in a patriarchal postcolonial New Order state that deployed gender ideology to advance its development agenda, linking the exploitation of women to the exploitation of the environment. This paper explores the ways that colonial legacies have structured the exploitation of gender and the environment and whether and how it is possible to find a postcolonial agenda for a better future. The lessons to be learned from studying disaster recovery in Indonesia and elsewhere are key to addressing climate change. A riskscape model of disaster and climate change that focuses on gender relations provides a means to analyse and manage both with the ultimate goal of finding transformative resilience.
President Prabowo Subianto's first 10 months in office have been marked by shifting domestic and global dynamics. Domestically, his populist, project-driven and fiscally expansionary approach has been unfolding in an inherited fragile institutional environment, putting pressure on Indonesia's longstanding foundational pillars of economic resilience: fiscal discipline, central bank independence, private sector dynamism and a vibrant middle class. Externally, China's growing dominance in global manufacturing-the so-called 'second China shock'-alongside receding US global leadership and a fraying rules-based global order, has heightened uncertainty. Whether Indonesia can stay the course and navigate changing domestic and global dynamics depends on its policy responses and willingness to take deep structural reform by restoring economic policy credibility, recalibrating the state's role in development, rebuilding the middle class with a renewed social contract, maintaining sufficient economic buffers and enhancing the quality of policy decision-making and public communication.
This paper examines the relative prices of tasks following the recent and rapid adoption of new technologies in workplaces. In documenting the relationship between tasks, occupations and wages in Indonesia, we classify tasks into four groups: technological, routine manual, routine cognitive and non-routine interpersonal. Labour supply model estimates reveal that a one-standard-deviation increase in non-routine interpersonal tasks correlates with a 4.1% wage increase, while the same increase in routine manual tasks results in a 2.5% wage decrease. The research presents mixed findings on the employment effects of technology: firms with high technological intensity tend to employ fewer high-skilled workers, suggesting complementarity between current technology and low-skilled labour. Conversely, highly innovative firms are more likely to employ high-skilled workers, indicating a complementarity between innovation and high-skilled labour. Overall, these findings align with task pricing patterns observed in developed countries, contributing to the understanding of the impact of technology on labour markets in developing economies.
