AmCham Update Vol. 7 #081

MK Rules Free Lunch out of State Budget, Indonesia Investment Authority Earns No. 2 Ranking among Asian SWFs, Mass Mortgage Signing in Central Java, Pharma and Med Device Meeting, Bandung Breaks Ground on Trash-to-Power Plant, Mining Sector Concerns over B50 Impact

Jul 31, 2026

Constitutional Court Orders MBG Out of the Education Budget

In the latest setback for President Prabowo Subianto’s Free Nutritious Meals (MBG) initiative, the Constitutional Court has ruled that the expensive program cannot be funded through the education budget. Ruling on a petition filed by the Taman Belajar Nusantara Foundation, the Court said the government must separate MBG funding from education allocations by the 2028 State Budget (APBN). It urged that adjustments begin in 2027.

“MBG is not a core component of education and therefore cannot be included in the operational budget for education administration,” Chief Justice Suhartoyo said on July 30.

The government had already begun tightening oversight of the program due to corruption cases, leadership turmoil in the National Nutrition Agency (BGN) and food poisoning incidents. Now the budget is under fire.

The petition argued that putting MBG under the 2026 state budget undermined the constitutional requirement to allocate at least 20 percent of state spending to education. The Court found that threshold was only met after MBG was counted as part of the education budget.

The 2026 APBN allocated Rp 769.1 trillion for education, including around Rp 223.6 trillion for MBG, or roughly 30 percent of the total. The Court said education spending should go to core needs like infrastructure and teacher welfare. The Court gave the government until 2028 to make the change.

State Secretary Prasetyo Hadi said the government would coordinate with the House of Representatives (DPR) over the budget implications of the ruling. “Since this concerns the state budget, we need to study it carefully and coordinate with the DPR, as budget decisions are made jointly,” Prasetyo said on July 30.

Ubaid Matraji, the national coordinator of the Indonesian Education Monitoring Network, welcomed the decision. He said the MBG is a nutrition and social protection program rather than an education initiative. He urged the government to separate the funding before 2028.

The program initially received Rp 335 trillion in the 2026 state budget before its allocation was reduced to around Rp 229 trillion under fiscal pressures. Food poisoning incidents have also alarmed the public.

Governance worries grew after former BGN head Dadan Hindayana was arrested in a corruption investigation linked to the program. His successor, Nanik S. Deyang, resigned after six weeks for health reasons and was replaced by Sudaryono on July 22.

Days before the Court ruling, Sudaryono closed 833 MBG kitchens over health violations and non-compliance. He said other kitchens with such violations will also be shut down.

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Indonesia Investment Authority Earns No. 2 Ranking Among Asian Funds

Indonesia’s “other” sovereign wealth fund (SWF), the Indonesia Investment Authority (INA), ranked second among such funds in Asia, based on the Governance, Sustainability and Resilience (GSR) Scoreboard 2026 published by Global SWF.

In the assessment, INA received an overall score of 92 percent, with governance and sustainability scoring 9 out of 10 and resilience scoring 5 out of 5. This placed INA just below Singapore's Temasek Holdings.

While the newer and larger Danantara asset fund grabs more headlines and has an outsized role in the state sector, the INA rating will likely boost efforts to attract more foreign capital. INA believes the result will strengthen investor confidence in Indonesia.

INA Chair Oki Ramadhana said the institution would use the achievement to strengthen its standing among international investors while attracting more investment partners to Indonesia.

"We need to tell the world that INA's GSR score is very strong. This could become one of the factors investors consider when choosing INA as their investment partner in Indonesia," Oki said during a media briefing in Jakarta on July 30.

INA was founded in 2021 as Indonesia’s first sovereign wealth fund. Oki said Global SWF provides an independent assessment of sovereign wealth funds around the world.

He said global investors are no longer just focused on market potential. They are also looking for reliable local partners to secure their investments in Indonesia.

"If we succeed in bringing more investment partners to Indonesia, this is not just INA's story. It is Indonesia's story because those investments will benefit the country," he said.

The GSR Scoreboard is an annual assessment measuring the governance, sustainability and resilience of around 200 sovereign wealth funds and public pension funds worldwide. The assessment is based on publicly available information.

Oki said INA would continue strengthening its governance standards while reinforcing its role as a catalyst for global investment.

INA Chief Risk Officer Adhiputra Tanoyo said the assessment reflects INA's ongoing efforts to strengthen investment management, risk management, legal affairs and compliance.

"As a sovereign wealth fund, INA is assessed not only on its profits or investment returns, but also on a range of other factors, including governance, sustainability and resilience," Adhiputra said.

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Mass Mortgage Signing Held amid Housing Slowdown

During a mass signing ceremony on July 30 in Batang, Central Java, President Prabowo Subianto disbursed 62,000 subsidized mortgages and Rp 880 billion ($48.7 million) under the Housing Credit Program (KPP).

The fanfare comes after loan disbursements slumped in the first half of 2026 as developers complain that rising construction costs, cumbersome licensing procedures and soft purchasing power are weighing on housing supply.

Subianto had pledged during his campaign to build 3 million homes a year, but the progress toward that goal is unclear. On the occasion of a similar event last year, the president said the government would study the experience of other countries like India to find ways to boost housing supply.

Data published by The Jakarta Post from the Public Housing Savings Management Board (BP Tapera) showed disbursements from the housing financing liquidity facility (FLPP) reaching 91,531 low-income households by the end of June, down around 24 percent from the same period last year.

BP Tapera commissioner Heru Pudyo Nugroho said the slow pace is largely due to supply-side constraints as developers face rising prices for construction materials.

Bambang Ekajaya, deputy chairman of Real Estate Indonesia (REI), estimated that construction expenses have risen 15 to 20 percent over the past two years as higher fuel prices push up transportation costs and the weakened rupiah hits the price of imported materials.

Bambang said demand remains strong. "The real demand is always there. What has declined is spending power. Many consumers who were previously eligible to buy homes are no longer able to afford them," he said.

He also highlighted land acquisition as a growing challenge due to policies to protect agricultural land. Bambang said the government’s move to extend subsidized mortgage terms to as long as 40 years to improve affordability will still require borrowers to have stable incomes. "If people lose their jobs or their income becomes uncertain, they will no longer qualify for mortgages," he said.

Public Housing and Settlement Minister Maruarar Sirait conceded that performance has weakened, but he said during the signing event that the government could still meet this year's target of 350,000 subsidized homes. He said there would be another mass signing ceremony by the end of the year to boost mortgage disbursements.

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Pharma and Med Device Committee Discusses Regulatory Issues

AmCham Indonesia held its second Pharmaceutical and Medical Devices Committee meeting of the year on July 30, bringing together members to discuss key regulatory and policy developments shaping Indonesia’s healthcare landscape.

The session was led by Committee Co-Chairs Ika Noviera from GE HealthCare, and Aulia Citta Arieni from Anugerah Pharmindo Lestari (APL).

The Committee shared priority updates on halal requirements for medical devices and the broader healthcare sector, import approvals for pharmaceutical-grade salt and sugar, and over-the-counter (OTC) product distribution. The session also covered regulatory developments on health supplies, health technology assessment and non-halal labelling.

Members exchanged perspectives on further advocacy priorities for the second half of the year, highlighting the importance of continued engagement between the private sector and government.

AmCham extends its appreciation to all participants for their valuable contributions. We remain committed to fostering constructive dialogue and collaboration in support of Indonesia’s evolving healthcare landscape.

Bandung Breaks Ground on $400 Million Waste-to-Energy Facility

Construction began July 29 on a $400 million waste-to-energy plant in Bandung, marking the latest step in the government's plan to use renewable energy to help tame surging amounts of urban waste.

The new facility, Legok Nangka, will have a generating capacity of 40.79 megawatts when it is operational in 2029, according to the energy ministry. The project is projected to create more than 1,500 jobs during construction.

The plant will process waste from six cities and districts that collectively produce over two thousand tons of trash daily. In addition to producing electricity, the facility should also reduce greenhouse gas emissions by about 300,000 tons of carbon dioxide equivalent annually.

"With its significant generating capacity and strong investment support, the project is expected to deliver tangible benefits by reducing waste volumes, supplying clean energy, creating jobs, stimulating regional economic activity, cutting emissions, and improving environmental quality and public health," Deputy Energy Minister Yuliot Tanjung said in a statement.

The government also expects Legok Nangka to serve as a model for similar developments nationwide.

The investment program is being coordinated by Danantara, with domestic and international contractors selected through open tender.

Earlier this month, Danantara selected development partners for eight waste-to-energy projects that will serve 20 cities and districts nationwide

Of the eight winning consortiums, four are Indonesian-led, two are French and two are Chinese.

The initial project broke ground in Bali, on July 8.

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Mining Industry Wary of B50 Mandate

The government’s plan to raise Indonesia’s mandatory biodiesel blend from B40 to B50 is drawing concern from mining companies, which warn that the higher palm oil content could increase operating costs and affect equipment reliability.

Indonesian Coal Mining Association Executive Director Gita Mahyarani said companies were taking preemptive steps in anticipation of full B50 implementation, which formally began on July 1.

"This includes increased monitoring of engine conditions, adjustments to maintenance schedules and coordination with heavy equipment manufacturers regarding fuel specifications and recommendations," said Gita. He said mining equipment varies in terms of equipment age, type, and manufacturer guidelines, and B50 performance data is still incomplete.

Indonesian Mining Experts Association Chairman Sudirman Widhy Hartono said the full impact on mining vehicles and heavy equipment had yet to be assessed, but experience with earlier mandates warranted caution. He estimated that B50 could raise operating costs by 5 to 10 percent due to additional maintenance and engine adjustments.

Traction Energy Asia Executive Director Tommy Ardian Pratama said implementation would require stronger governance, including clearer rules, greater transparency in incentive distribution, improved feedstock traceability and incentives linked to the carbon intensity of feedstocks.

The government has said that the higher blend would raise demand for fatty acid methyl ester (FAME), which is derived from crude palm oil.

“The implementation of B50 will significantly increase FAME demand. Therefore, crude palm oil production must also increase,” Coordinating Ministry for Economic Affairs Senior Policy Analyst Andi Novianto said on July 30.

State-owned fuel distributor Pertamina Patra Niaga said 82 percent of its gas stations are distributing B50, with nationwide availability coming soon.

“By September, we expect B50 to be available across the country. That is likely to be the main challenge going forward,” Deputy President Director Taufik Aditiyawarman said on July 24.

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