A wave of global uncertainty, triggered by escalating trade tensions, is pushing Indonesia to reevaluate how it manages its economy. At the heart of President Prabowo Subianto’s strategy is a bold move: sweeping economic deregulation aimed at keeping Indonesia competitive on the international stage. But this pivot raises a critical question—can the nation open up without hurting its domestic industries?
The economic deregulation agenda was introduced shortly after U.S. President Donald Trump announced a 32% reciprocal tariff on goods from American trading partners, including Indonesia. The move sent ripples through global trade circles and placed emerging markets like Indonesia in a delicate position.
For Prabowo’s government, the message is clear: reduce red tape and let business flow more freely. At the Economic Sarasehan forum in early April, Prabowo singled out two major obstacles—local content requirements (TKDN) and customs procedures—as policies that, while intended to support domestic growth, are now stifling it.
To put this plan into motion, the government is forming a Deregulation Task Force. “Deregulation includes everything President directed, from export and import rules to TKDN issues connected to International Competitive Bidding [ICB],” explained Coordinating Minister for Economic Affairs Airlangga Hartarto at a press briefing in Central Jakarta on April 14, 2025.
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Finance Minister Sri Mulyani Indrawati is also aligning with the plan by rolling out several tax adjustments. These include reducing the import income tax (PPh) for products like electronics, mobile phones, and laptops—from 2.5% to 0.5%. “This means reducing another 2% in tariff burdens. Anything that helps ease tariffs, especially while U.S. duties remain in place, we’ll try to do,” she said at the forum on April 8, 2025.
Other measures target broader import duties. Goods from the U.S. under Most Favored Nation (MFN) status will see their tariffs cut from 5%–10% down to 0%–5%. There’s also room for adjustments in crude palm oil (CPO) export duties, which currently range from 0% to 25%. According to Sri Mulyani, this could reduce costs by up to 5%.
Even more urgently, the government is fast-tracking trade remedies. Antidumping, countervailing, and safeguard measures that once took 30 days will now be completed in just 15 days. “We will continue to pursue reforms, especially in taxation, customs, and procedures, to truly reduce the burden,” Sri Mulyani stated.
But not everyone is convinced deregulation is a clear win. For years, Indonesia’s protective tariffs have played a critical role in shielding local industries from global competition. Many of these sectors are still growing and remain vulnerable.
A March 2024 report by the United Nations Conference on Trade and Development (UNCTAD) supports this caution. In the UNCTAD Global Trade Update, the agency stresses that tariffs are essential tools for developing countries. According to the report, import duties can give fledgling industries the breathing room they need to mature before facing off against dominant global players.
In practice, this means the Indonesian government must walk a tightrope—liberalizing its economy just enough to stay globally competitive, while still providing support for local businesses that aren’t yet ready for the big leagues.
The stakes are high. How Indonesia balances free trade and local protectionism could shape the country’s economic resilience for years to come.