JAKARTA – Indonesian President Prabowo Subianto promised a broad crackdown on illegal mining and oil palm plantations, while accelerating his flagship free-meal programme in closely watched twin speeches on Aug 15,
as he laid out his vision for South-east Asia’s biggest economy.
Unveiling a 3,786.5 trillion rupiah (S$300 billion) government budget for 2026, or 7.3 per cent higher than the latest estimate for 2025 spending, he promised to continue spurring downstream industries in critical minerals such as nickel and copper – key ingredients in renewable projects – to allow Indonesia to benefit from higher export proceeds.
The budget proposal – with a deficit forecast at 2.48 per cent of gross domestic product – is based on an economic growth target of 5.4 per cent, an inflation rate at 2.5 per cent and the rupiah trading at 16,500 per US dollar on average for 2026, along with several other indicators.
Mr Prabowo, 73, in both speeches also outlined other priorities for his five-year term till 2029.
These included strengthening recently established sovereign wealth fund Danantara; providing ample financing support to farmers, fishermen and villagers through setting up 80,000 cooperatives nationwide to ensure they obtain the best prices for their produce; expanding edible crops to improve food self-sufficiency; and establishing 20 “gifted schools” for the top 1 per cent of Indonesia’s students.
His State of the Nation speech in the morning was his first as the country’s leader.
The budget presented later that afternoon in Parliament was the first proposal developed by Mr Prabowo’s administration
after he took office in October 2024.
The 2025 budget was prepared by his predecessor, Mr Joko Widodo.
The speeches came as Indonesia, like other economies, faces headwinds from tariffs being imposed by the United States on imports. The US had in July set a 19 per cent tariff on goods coming from Indonesia, while certain commodities not available in the US, such as processed nickel, could be eligible for a lower levy.
Dr Ninasapti Triaswati, an economist with the University of Indonesia, said focusing on nickel processing may not boost employment as the sector relies on fewer workers. “We have to do more to drive the sectors that absorb a lot of labour, such as agriculture.”
Mr Prabowo, in his speeches, pointedly did not renew his commitment to the new Indonesian capital Nusantara, unlike in speeches soon after taking office where he pledged to complete the East Kalimantan project. Adding to uncertainty over his stance on the new capital, Mr Prabowo is slated to host Indonesia’s 80th independence day celebrations on Aug 17 in Jakarta.
Nusantara is a pet project of Mr Widodo’s. Both Mr Prabowo and Mr Widodo celebrated independence day in Nusantara in August 2024, but ties between the two have since frayed.
The government has saved about 300 trillion rupiah by slashing “expenses which are prone to corruption and manipulation”, including unnecessary overseas junkets, excessive meetings and other non-essential expenditures. “We will not hesitate in unravelling major corruption cases,” the President said in his budget announcement.
In his State of the Nation address earlier in the day, Mr Prabowo said the crackdown on illegal mining and oil palm plantations is part of the government’s move to curb corruption.
On illegal mining, he noted that there are 1,063 illegal mines – those operating without proper mining licences – in the country and appealed to lawmakers and political parties for their support for government action.
He said those behind these illegal mines include very influential individuals, and active as well as former military or police generals.
“There is no reason the government wouldn’t take action for the sake of the people,” Mr Prabowo said, prompting a standing ovation from the House.
He said a survey found that palm plantations on 3.7 million hectares – or nearly twice the size of Johor state in Malaysia – were operating in violation of the law. Indonesia is the world’s biggest producer and exporter of palm oil, with the main palm growing areas in Sumatra and Kalimantan.
He added that five million hectares of oil palm plantations have been under scrutiny for operating in protected forest areas, not reporting their actual size, or not responding to summonses from auditors.
“We will ensure that the Indonesian people will not fall victim to greedy economics,” Mr Prabowo said, with the government having already seized 3.1 million hectares of illegal palm plantations with the help of the military. “We have used the military to accompany the teams that took over the plantations because there often is resistance,” he said.
Responding to critics over the free-meal programme for students and pregnant mothers, he said: “Our goal… is to be free from poverty, free from hunger, free from suffering.”
Some 20 million people are being fed under the scheme, with a final target of 82.9 million.
Indonesia launched the ambitious meal programme in January to combat stunted growth due to malnutrition, a key election promise by Mr Prabowo, but there have been concerns over the sustainability of such a scheme in the long term.
Professor Wibisono Hardjo Pranoto, an economist at Surabaya University, said a budget deficit is acceptable as long as the spending is planned and the money is used for productive purposes.
“Spending more than the revenue number is fine. We need… to do effective allocation of the funds so we can service the debts,” he added.
