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A new political-economic order is emerging under President Prabowo Subianto’s reign.
Despite lingering fears of oligarchic backlash against his increasingly centralised economic policies, Prabowo has successfully navigated the transition from the coordinated developmentalism of the Joko ‘Jokowi’ Widodo era to a more directive system of state-led economic governance.
He does this mainly by relying on a dynamic of managed coercion, using novel state instruments to extract compliance from capital by leveraging their structural dependence on the executive.
For decades, scholars of Indonesia have described the country’s political economy as an oligarchic democracy. Following the fall of the New Order, entrenched, but highly fragmented elite networks simply reorganised their power within decentralised democratic institutions. Rather than being dismantled by market liberalisation, surviving oligarchic powers captured the new state apparatus, transforming emerging democratic institutions to protect their wealth and influence.
Under the Joko Widodo presidency, this fragmented system evolved into a more coordinated developmentalism, where a dominant fraction of capital, led by leaders of major coal and energy conglomerates, acted collectively to provide political direction, facilitate elite consensus and drive a national strategy centred on infrastructure and industrial upgrading.
This strategy relied heavily on lucrative public-private partnerships, in which the state absorbed the risk, and domestic conglomerates reaped the rewards.
Comply or risk market ostracism
Jokowi’s coordinated developmentalism is now being transformed under Prabowo’s rule.
The clearest indicator of this transformation is the state’s aggressive move to centralise strategic commodity exports. Vowing to crack down on under-invoicing and transfer pricing practices, the Prabowo administration has announced plans to consolidate the export of key resources, such as coal, palm oil, and ferroalloy products, under the newly created state-owned enterprise (SOE) Danantara Sumberdaya Indonesia (DSI). This is a new subsidiary of the national sovereign wealth fund Danantara.
Government Regulation 24 of 2026 establishes DSI as the sole entity authorised to manage these strategic exports. It also grants DSI sweeping powers to not only regulate export volumes, but also control pricing and establish its own profit margins. While initial market anxieties triggered promises of a scale-back, the regulatory architecture remains intact.
During a transition period ending on 31 December 2026, existing sales contracts across the sector will be strictly evaluated by DSI, after which it will be mandatory for exports of key commodities to go through it. The evaluation phase functions as a powerful tool of state oversight – it will effectively dismantle commercial confidentiality, forcing conglomerates into absolute corporate legibility before the state.
Furthermore, by positioning itself as the primary intermediary between domestic producers and global markets, the state gains unprecedented leverage. As the creation of DSI was announced amid growing fiscal pressure, there is no doubt it reflects the state’s desire to capture a greater share of resource rents and to channel capital directly into the state’s development initiatives.
However, this move also has an underlying message to the conglomerates: comply, or risk exclusion from key export channels. Crucially, unlike capital in highly financialised or digital sectors, Indonesia’s oligarchic empires are anchored in fixed domestic assets.
Their resource-extractive enterprises are bound to the archipelago’s geography, ruling out the viability of capital flight. This effectively subordinates capital to national coordination. As a result, governance over capital accumulation will become more hierarchical and centralised, reducing the relative autonomy many conglomerates enjoyed under earlier arrangements.
Prabowo’s calibrated coercion
The administration’s ambition to closely control capital is not limited to the commodities sector.
The issuance of Patriot bonds, marketed intensively to major conglomerates despite their below-market value yields, exemplifies this. Through this financial instrument, the state mobilises private capital to support its fiscal and development agenda by encouraging firms to invest in unattractive government bonds.
This signals a shift by which capital is increasingly subject to extraction by the state. While this does not amount to outright antagonism between the state and capital, it introduces a dynamic of managed – or calibrated – coercion to their relationship.
For large conglomerates, subscribing to Patriot bonds offers a way to maintain favourable relations with an increasingly centralised executive, especially in a context where firms remain dependent on the state for access to projects, licenses, and regulatory approvals. Firms comply because their alignment with state priorities ensures continued access, protection, and influence within the political economy, even if it may constrain their immediate profitability.
The structure and context of these bonds also introduce a degree of asymmetry in state-capital relations. Reports that firms were informally pressured to contribute indicate that the state possesses latent coercive capacity even when it is not explicitly exercised. In this sense, these financial instruments aid in disciplining capital, subordinating capital to broader state priorities.
The administration’s deployment of Satgas PKH (Forest Enforcement Task Force) vividly illustrates the physical manifestation of this managed coercion. While ostensibly a multi-agency administrative body tasked with policing illegal forestry operations, Satgas PKH is closely tied to the military establishment. Having Defence Minister Sjafrie Sjamsoeddin at its helm and operational involvement from regional military commands means it possesses significant latent coercive capacity.
However, rather than exercising brute force, Satgas PKH channels this authority through regulatory mechanisms, levying nearly Rp 40 trillion in fines against dozens of palm oil and mining companies and seizing 5.8 million hectares of palm oil plantations and mining sites. Aware of the heavy institutional weight behind these enforcement efforts, companies are forced to comply to protect their other interests.
Crucially, this managed coercion serves the executive’s broader centralisation agenda. The state is transferring millions of hectares of reclaimed palm oil concessions to PT Agrinas Palma Nusantara, the SOE responsible for biodiesel production.
By leveraging regulatory enforcement to extract massive fines and reallocate lucrative palm oil plantations under state control, the administration is demonstrating its capacity to forcefully integrate oligarchs into its directed economic order.
Oligarchic adaptability
Prabowo’s regime has demonstrated that the state retains a latent, potent capacity to dictate the terms of economic accumulation.
But this does not imply the erasure of Indonesia’s elite networks, but rather a structural rearticulation of their relationship with the state. While the oligarchs are currently forced to adapt to these centralising arrangements, their compliance should not be mistaken for permanent submission.
As the locus of economic coordination moves decisively back toward the executive, disgruntled factions of capital may weaponise public discontent with the Prabowo administration to back an alternative capable of dismantling his directive architecture in the 2029 elections.
As the executive tethers the billionaire class to its development agenda, a critical question remains: can a directive economy built on top-down compliance deliver sustainable, long-term growth, or will it merely centralise the institutional vulnerabilities of the state?
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