Prabowo is using state power to pull Indonesia's tycoons into line

President Prabowo Subianto is changing the deal between the Indonesian state and its biggest companies. In Indonesia at Melbourne, the authors call his method "managed coercion": using the government's legal and financial tools to force big business to fall in line. Where former president Jokowi mostly steered the economy, Prabowo is squeezing it, and the country's tycoons, sometimes called oligarchs, are feeling the pressure.

One tool is a new state company, Danantara Sumberdaya Indonesia (DSI), which is being handed a monopoly, meaning sole control, over exports of coal, palm oil, and ferroalloy. A government rule lets DSI set the prices and decide the profit margins on these major exports, and it is reviewing existing contracts until the end of 2026. A second tool is the "Patriot Bond", a government bond sold to large conglomerates below the normal market rate. Buying one earns little, but it keeps a company on good terms with an executive that now controls access to licenses and projects.

The hardest tool is a forest task force tied to the military. It has issued nearly 40 trillion rupiah in fines and seized 5.8 million hectares of palm oil plantations, then passed much of that land to a state-owned biodiesel producer. Together these moves make private wealth depend on staying close to the president.

For investors watching from abroad, that is the worry. When the state can set your prices, seize your land, and price your loans, ordinary business risk turns into political risk. A firm's fortunes come to rest less on the market and more on its standing with Jakarta.

Why it matters

If you invest in Indonesian companies or work for a big commodity firm, the rules of the game are shifting toward whoever holds power in Jakarta. That can raise the cost and risk of doing business here, and foreign investors may demand a higher reward before putting money in, which can weigh on jobs and the rupiah. Watch how DSI sets export prices and how far the land seizures reach, because those are early signs of how heavy the state's hand will be.