AmCham Update Vol. 7 #024

Fitch Downgrades Indonesia Outlook, OJK Says 75 Percent of Issuers will Hit 15 Percent Free Float in Year One, Iran War Prompts Concerns about Joining Board of Peace, Indonesia Braces for Oil Shocks, Danantara & INA Commit to Chandra Asri Chemical Plant Project

Mar 04, 2026

Fitch Downgrades Outlook for Indonesia to ‘Negative’

Fitch Ratings has downgraded the outlook for Indonesia's sovereign credit rating to negative from stable, according to the Fitch website.

“The Outlook revision reflects increasing policy uncertainty and erosion of Indonesia's policy mix consistency and credibility amid growing centralization of policymaking authority. This could weaken the medium-term fiscal outlook, undermine investor sentiment, and put pressure on external buffers,” Fitch said in a statement.

The country’s sovereign credit rating remains at BBB, which “reflects Indonesia's record in maintaining macroeconomic stability, favorable medium-term growth, a modest government debt/GDP ratio and moderate external buffers. These rating strengths are constrained by a weak revenue intake, high debt servicing costs and lagging structural features,” Fitch said.

The outlook downgrade is the latest in a string of bad news from ratings agencies and others. Last month, Moody's cut its outlook for Indonesia to negative, citing reduced predictability in policymaking.

Index provider MSCI in January said transparency and governance issues in the stock market created risks for investors. That assessment triggered a rout in the Indonesian Stock Exchange and a loss of $120 billion.

Battered by the war in Iran and the Fitch downgrade, the Jakarta Composite Index was down -362.70 points, or 4.58 percent, to 7,577.06 in afternoon trading on March 4.

Fitch was in Jakarta last week to meet with government regulators as part of the review process.

Investors have raised concerns about policy uncertainty and eroding fiscal constraint in the country, including a widening fiscal deficit and threats to central bank independence.

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OJK Expects 75 Percent of Issuers to Hit 15 Percent Free Float in First Year

The Financial Services Authority (OJK) said on March 2 that it expects up to 75 percent of the companies listed on the Indonesia Stock Exchange (IDX) to meet a new 15 percent free float requirement within a year.

Hasan Fawzi, OJK interim chief capital market supervisor, said companies may be given varying deadlines to comply of one, two or three years.

The free float change is one of a series of reforms being pushed on the market after index provider MSCI warned in January that the country risks being downgraded to “frontier market” status due to lack of transparency and poor governance in capital markets. MSCI said reforms had to happen by May.

The free float is the percentage of shares available to private investors. The current 7.5 percent rule is very small by international standards and makes shares susceptible to manipulation, MSCI has said.

“We will see that around 70-75 percent of our issuers are likely to have reached the minimum target of 15 percent by the end of the first year," Hasan told reporters. He said 60 percent of listed companies are already at the 15 percent mark.

After three years, OJK would oversee the delisting of companies that fail to meet the requirement, Hasan said, without providing details.

Previously, IDNFinancials.com reported the increase in the free float could trigger share sales of up to Rp 187 trillion.

Based on data from the IDX website, there are currently 956 listed companies on the exchange.

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Indonesia’s Board of Peace Role Questioned Due to Iran War

Indonesia’s role in the Board of Peace (BoP), created and chaired by US President Donald Trump, is being questioned as fighting continues in the war the US and Israel launched against Iran on Feb 28.

TB Hasanuddin, an Indonesian Democratic Party of Struggle (PDIP) politician, said Indonesia’s participation risks conflicting with the country’s “independent and active” foreign policy. Joining a forum perceived as tolerating military aggression could weaken Indonesia’s commitment to sovereignty and international law, Hasanuddin told Kompas on March 3.

The politician added that Hamas’ rejection of the BoP’s proposed International Stabilization Force (ISF) to be sent to Gaza also raises questions about the initiative’s viability.

Former Indonesian Ambassador to the US, Dino Patti Djalal, had warned against joining the Board of Peace even before the US went to war with Iran.

The Indonesian Ulema Council (MUI) also urged the government to withdraw from Trump’s board and condemned the US-Israeli strikes, according to a statement issued on March 1.

Nur Rachmat Yuliantoro, a Professor in the International Relations Department at Gadjah Mada University, called for Indonesia to clarify its position. “This is not just about the need to exercise restraint and continue negotiations. Indonesia must demonstrate a firm stance that always sides with peace,” he told reporters on March 1.

Dave Laksono of the Golkar Party defended the country’s role on the Board. “Indonesia’s presence in international forums is not merely symbolic, but a real means to ensure that the voice of this nation continues to be heard in efforts to stop aggression and uphold international law,” he told reporters at the DPR Complex on March 3.

Meanwhile, Heni Hamidah, Interim Director for Citizen Protection at the Foreign Affairs Ministry, said the government is prioritizing contingency planning as the shutdown of airspace in the Persian Gulf region complicates mobility. She said there are 519,042 Indonesians across Iran, Iraq, Qatar, the United Arab Emirates, and Saudi Arabia, and that Indonesia has raised its embassy alert status in Tehran to the highest level.

“The protection of Indonesian citizens and Indonesian migrant workers in the Middle East remains our top priority,” Heni said during a press briefing on March 3.

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Indonesia Braces for Oil Price Risk as US-Iran Conflict Heats Up

Indonesia is moving to cushion its economy against the US-led war with Iran, as Tehran restricts commercial shipping through the Strait of Hormuz, a key artery for oil and gas bound for Asia. Brent crude rose from about $75 to nearly $82.76 per barrel by March 4.

Minister of Energy and Mineral Resources Bahlil Lahadalia said Indonesia has around 20 days of fuel reserves and that subsidized fuel prices will remain unchanged. He said the government is monitoring potential supply disruptions ahead of the Eid homecoming season.

“Regarding subsidies, as long as there are no new policies from the government, the price will remain the same, including solar [diesel] subsidies. As of our meeting earlier, there is no indication of a price increase,” Bahlil told a press conference on March 3.

Finance Minister Purbaya Yudhi Sadewa said the state budget is prepared to absorb higher oil prices. “I’ve calculated that even if it reaches $92 [per barrel], we can still manage the budget, it won’t be a problem,” Purbaya told reporters at the Presidential Palace on March 3.

Energy Ministry data shows Indonesia sources around 25 percent of its crude oil imports from the Middle East.

Trade Minister Budi Santoso said Indonesia’s consumption-driven economy provides some resilience against external shocks but acknowledged risks from higher oil and raw material prices. He said the government is preparing mitigation steps, including export diversification and stimulus measures.

“Even without a physical closure of key shipping routes, uncertainty alone can drive up oil and gas prices as well as international logistics costs,” Shinta Kamdani, Chair of the Indonesian Employers Association (Apindo), told The Jakarta Post on March 2, warning that inflationary pressure and currency volatility could weigh on domestic firms.

Wijayanto Samirin, an Economist at Paramadina University, said even modest oil price increases could strain fiscal accounts through subsidies. “For every $1 increase in crude, fuel subsidies could swell by Rp 3 trillion to Rp 4 trillion,” he said on March 3, adding that higher fuel costs could lift inflation and weaken purchasing power.

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Danantara, INA Commit $200 Million to Chandra Asri Chemical Plant Project

Indonesia’s state asset fund, Danantara, and sovereign wealth fund, the Indonesia Investment Authority (INA), have agreed to invest $200 million in a chlor-alkali and ethylene dichloride (CA-EDC) plant being developed by petrochemical giant Chandra Asri Group in Cilegon, Banten.

Officials said in statement on March 3 that the funds will support the development of the CA-EDC facility operated by Chandra Asri Alkali (CAA), a subsidiary of Chandra Asri Group, one of Indonesia’s largest integrated petrochemical companies.

Chandra Asri Group is part of the Barito Pacific Group, controlled by Prajogo Pangestu, one of the country’s richest men.

The project, valued at about $800 million, is under the government’s National Strategic Projects program and is targeted to begin commercial operations in 2027.

In its first phase, the plant is expected to produce 400,000 tons of caustic soda and 500,000 tons of ethylene dichloride (EDC) annually. The chemicals are widely used for manufacturing, construction, packaging, and chemical processing.

“This collaboration aims to establish a strong capital foundation to sustainably expand strategic raw material industrial capacity,” INA Acting Chief Executive Officer Eddy Porwanto said in a written statement on March 3.

Danantara Chief Investment Officer Pandu Sjahrir said the project is expected to create employment, and support economic growth.

Erwin Ciputra, President Director and Chief Executive Officer of Chandra Asri Group, said the project could create around 3,000 jobs during construction and about 250 permanent positions once operational. He said the facility would strengthen domestic chemical supply and support exports.

The announcement came shortly after Chandra Asri declared force majeure on several contracts on March 2, citing supply disruptions linked to the US war against Iran. The company said volatility in global oil markets had affected feedstock supply, prompting operational adjustments as authorities move to safeguard energy and industrial supply chains.

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AmCham Cares – CATERPILLAR INDONESIA, PT

Caterpillar Foundation Collaborates with Charities to Strengthen Communities in Indonesia

For more than 70 years, the Caterpillar Foundation has been committed to improving lives around the world. Guided by its mission to invest in the skills people need to join the workforce – and the natural and vital infrastructure they rely upon – the Foundation continues to uplift communities where Caterpillar employees live and work.

In 2025, the Caterpillar Foundation continued its long-term collaboration with Prestasi Junior Indonesia (PJI) through JA RAISE, a future-ready STEM education initiative preparing youth for the evolving world of work. Aligning with the Caterpillar Foundation’s workforce readiness and STEM pillar, JA RAISE focuses on strengthening teachers’ STEM competencies, particularly in artificial intelligence, while equipping students with hands-on experience in AI, machine learning and robotics.

JA RAISE reached more than 1,500 senior high school and vocational students across 25 schools in Riau Islands Province and Bogor Regency in 2025. The year culminated in STEM boot camps held in Batam and Bogor, where student teams showcased innovative solutions ranging from smart attendance systems to assistive technologies for the visually impaired.

In connection with Caterpillar Inc.’s Centennial World Tour, the Caterpillar Foundation, through CAF America, donated $21,000 to Yayasan Balita Sehat (FMCH Indonesia), an organization dedicated to improving the quality of life for families. This special, one-time donation helped FMCH Indonesia deliver comprehensive health and dental check-ups to more than 700 children enrolled in 21 community preschools in Bogor, South Central Timor and Southwest Sumba. FMCH Indonesia was selected to receive the donation based on feedback from local Caterpillar employees.

These initiatives reflect the Caterpillar Foundation’s continued commitment to helping communities to be stronger, more resilient and more sustainable.

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With experience built over decades, Juicebox designs and delivers technology-enabled ecosystems that strengthen brand and customer experiences, enabling organizations to scale, adapt and grow in fast-changing markets.

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Update is AmCham’s regular newsletter on developments related to investment, the economy, regulations and issues related to doing business in Indonesia. It comes out three times a week. It is edited by AmCham Managing Director Donna Priadi and written by the AmCham Staff.

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