Last week, Indonesian President Prabowo Subianto visited Jeddah, marking his first official visit to Saudi Arabia since taking office in October 2024. The visit comes against the backdrop of Prabowo’s attempts to increase foreign investments, especially from the Gulf states, as part of a broader strategy to boost economic growth in Indonesia.
During the recent visit, Prabowo met Saudi Crown Prince Mohammed bin Salman and discussed mechanisms to strengthen bilateral ties and bolster cooperation across key sectors. The bilateral trade between both countries has grown steadily in recent years, and Indonesia remains one of the largest trading partners of Saudi Arabia in Southeast Asia. Moreover, the overall trade between the Gulf Cooperation Council (GCC) and ASEAN has also grown in recent years, reaching $123 billion, constituting about 8 percent of the GCC’s total trade. Saudi Arabia’s trade dynamics with ASEAN are dominated by energy and petrochemicals, and Riyadh intends to increase the potential for cooperation and investments in non-oil sectors in which Indonesia features prominently.
Indonesia’s economy has maintained steady growth in recent years under the former President Joko Widodo. Jokowi’s tenure was characterized by an infrastructure push and an ambitious vision of economic transformation aimed at turning Indonesia into a regional manufacturing and investment hub. Prabowo rallied support during his campaign and came to power promising economic growth, reducing unemployment and poverty rates, and increasing public welfare initiatives.
While Prabowo seeks to continue Indonesia’s development trajectory, his policies mark a shift toward expansive social spending and a more populist approach, which has been criticized by the opposition and has raised concerns, especially regarding his ambitious $28 billion Free Nutritious Meal Program. Reports indicate that investors are anxious about the current economic trends as the Jakarta Composite Index dropped by over 10 percent since Prabowo took office, while the rupiah has weakened by 7 percent against the U.S. dollar. However, Prabowo remains confident about his target of achieving 8 percent growth by 2029, for which foreign investments into the country will be critical.
During Prabowo’s recent visit, Indonesia and Saudi Arabia signed deals worth around $27 billion, focusing on clean energy, petrochemicals, and mineral resources. Both countries also established a Supreme Coordination Council — an important step toward identifying new areas of collaboration and advancing efforts to enhance and diversify bilateral cooperation, particularly through joint initiatives in trade, energy, infrastructure, and strategic investments. Saudi Arabia’s ACWA Power signed preliminary agreements with Indonesia’s new sovereign wealth fund, Danantara Indonesia, and state energy firm Pertamina to explore renewable energy projects worth up to $10 billion. Indonesia and the Gulf Cooperation Council (GCC) had earlier officially launched free trade agreement (FTA) negotiations, with the first round scheduled for September 2025. This is a part of the wider trend between ASEAN and GCC countries to strengthen their economic ties. During the 2nd ASEAN-GCC Summit in Kuala Lumpur in May 2025, a joint declaration was adopted to deepen ties across transport, food security, and sustainable development. For Jakarta, this offers an avenue not only to expand market access but also to position itself as the bridge between Southeast Asia and the Gulf.
Converging interests in energy, technology, AI, halal food business, and Islamic finance further anchor this cooperation. For Saudi Arabia, expanding investments in Southeast Asia, particularly in Indonesia, aligns with its Vision 2030 objective of diversifying away from traditional Western markets and expanding its economic and political footprint in Asia. Indonesia, as the largest economy and most populous nation in ASEAN, also holds substantial geopolitical weight, making it an increasingly valuable partner for Riyadh.
Both countries also hold significant influence in the Islamic world — Indonesia as the largest Muslim-majority nation, and Saudi Arabia as the custodian of Islam’s holiest sites. Indonesia sends the highest number of Hajj pilgrims annually, making the logistics, healthcare, and spiritual preparation a massive effort that demands strong bilateral coordination, especially amid recent challenges, such as the abrupt visa suspension and coordination lapses that left many pilgrims stranded.
Moreover, both countries share aligned perspectives on key regional and global issues, and during the recent visit, both leaders emphasized their mutual concern for the Palestinian cause, echoing ASEAN’s recent statement in support of Palestinian self-determination and a two-state solution.
In the current circumstances, Indonesia faces external risks in maintaining economic growth momentum, especially with U.S. President Donald Trump’s transactional approach toward the region and trade matters. The Trump administration threatened steep “reciprocal” tariffs, and Indonesia filed a second proposal to the U.S. to avert the possibility of a hefty tariff. Nevertheless, on July 7, the Trump administration sent a letter stating that tariffs for Indonesia would be raised to 32 percent as of August 1.
As part of its efforts to reduce the trade surplus with the U.S. and ease bilateral tensions, Indonesia is planning to ramp up imports of American crude and LPG, aimed at both narrowing the trade gap and diversifying its energy basket. This shift could gradually lessen Indonesia’s dependence on Middle Eastern imports.
Amid growing concerns over tariffs and their impact on domestic markets, Jakarta must strengthen ties with other major powers that offer long-term investment potential and align with its strategic interests. In this context, Gulf powers have become increasingly relevant as they have, in recent years, increasingly looked at Asian markets for strategic investments, seeking to position themselves within this broader landscape of diversified economic partnerships. Indonesia is deepening its cooperation with Gulf countries beyond traditional energy ties, pivoting toward non-oil sectors that align with both nations’ national development agendas and domestic reform priorities.
Both Saudi Arabia and Indonesia have carefully calibrated their foreign policies to avoid provoking the U.S. while insulating themselves from the unpredictability of the Trump administration, all while maintaining a balanced approach toward other major powers. This delicate balancing act, particularly in the context of evolving ASEAN-GCC-China trilateral dynamics, reflects Jakarta’s broader objective: to safeguard its economic future from great power volatility while asserting itself more confidently in the growing space for middle-power diplomacy. The growing synergy between Jakarta and Riyadh reflects not only economic alignment but also a stronger convergence in navigating the evolving global order, including shared positions on key issues in the Islamic world.
