Understanding Economic Incentives and Caution

Good morning, Chief.

Here are key business updates, curated by the SUAR Team.

Various Incentives to Boost the Economy Until Year-End

To revive the sluggish economy and chase the 5% growth target, the government has rolled out a series of incentives. These measures are highly anticipated by businesses that need extra momentum to drive economic activity.
The incentives include: Labor-intensive programs in transportation and public works sectors; Government-borne Value Added Tax (VAT DTP) for home purchases up to 100% in the second half of the year; Discounts on airfares, toll road tariffs, and train tickets ahead of the Christmas and New Year period; Recruitment of new workers, prioritizing lower-income groups in the 1st–2nd deciles; Continuation of Wage Subsidy Assistance (BSU).

Bank Indonesia (BI) is also providing monetary stimulus by lowering its benchmark interest rate by 25 basis points to 5.25% at the July 2025 Board of Governors’ Meeting.
Ajib Hamdani, Head of Economic Policy at the Indonesian Employers Association (Apindo), voiced concern over the 2.4% decline in Q1-2025 growth compared to the same period last year. This was surprising given that the first quarter is usually supported by the Lebaran consumption cycle, which boosts money circulation. Without further interventions, he warned, 2025 growth could fall even lower.

In contrast to the government’s optimistic narrative of achieving over 5% growth, a new study by the Center of Reform on Economics (CORE) in its Mid-Year Economic Review 2025 released Friday (July 25, 2025), projected Indonesia’s Q2-2025 growth at only 4.7%–4.8%, slightly down from Q1’s 4.87%. For the full year, the economy is expected to remain within 4.6%–4.8%, well below the government’s ambition of sustaining at least 5%.

Read more here.

Understanding the Poverty Paradox: Falling in Villages, Rising in Cities

Statistics Indonesia (BPS), in data released Friday (July 25, 2025), reported Indonesia’s national poverty rate at 8.47% as of March 2025, down 0.1 percentage point from September 2024. This marks the lowest level in two decades.
Rural poverty fell from 11.34% in September 2024 to 11.03% in March 2025. Urban poverty, however, edged up from 6.66% to 6.73% in the same period.
The decline in rural poverty was driven largely by a higher Farmers’ Exchange Rate (NTP), which reached 123.72 in March 2025, up from 120.30 in September 2024. Higher crop selling prices compared to production and consumption costs boosted farmers’ purchasing power, reducing poverty.
In urban areas, the slight increase in poverty signals concern. Though modest in percentage, the impact is significant for millions living near the poverty line. The rise was attributed to higher food prices and an increase in underemployment—workers with jobs but insufficient hours or income.

—graphic not available

Read more here.

From AI to Biochar: Green Technology to Tackle Climate Crisis

As the climate crisis deepens, new green technologies are emerging—from artificial intelligence (AI) to biochar.
While big data and machine learning consume vast energy and risk raising emissions if not powered by clean energy, biochar presents an alternative.
This technology converts biomass into charcoal that locks carbon in the soil for hundreds of years.

Read more here.

State Banks Fund Merah Putih Cooperatives, Risks Ahead

To support the success of the Village Cooperative Merah Putih (KDMP) program, the government has instructed state-owned banks (Himbara) to participate in funding.
Deputy Minister of Cooperatives and Coordinator of the KDMP Acceleration Task Force, Ferry Juliantono, said initial financing will be provided through a special People’s Business Credit (KUR) scheme, with a ceiling of up to Rp3 billion per cooperative.
The loans carry an interest rate of 6%, with a tenor of six years for working capital and 10 years for investment. The government has also proposed a six-month grace period to allow cooperatives to adapt in their early operational stage.
“The Finance Ministry is finalizing the Minister of Finance Regulation (PMK). We also completed technical guidelines for village pharmacies and clinics. Soon, the Ministry of Energy and Mineral Resources will issue regulations on the distribution of 3-kg LPG cylinders,” Ferry said in a press statement on July 15.

As part of Himbara, Bank Mandiri is playing an active role in supporting cooperatives designated as KDMP launch points across Indonesia. The bank has prepared digital financial services such as Mandiri Agen and QRIS, while also ensuring the readiness of physical service infrastructure.
BRI President Director Hery Gunardi stated that the KDMP launch by President Prabowo marks an important milestone in building an inclusive and sustainable grassroots economy. He emphasized BRI’s commitment to expanding financial access in rural areas, notably through the integration of AgenBRILink services with cooperatives.

Read more here.

Indonesia’s Nickel Pig Iron Output Surpasses China

Since 2020, Indonesia’s Nickel Pig Iron (NPI) production has overtaken China, ending Beijing’s dominance that had lasted since 2005. NPI is a raw iron component containing around 15% nickel ore.
According to data from the Indonesian Nickel Miners Association (APNI) released in July 2025, Indonesia produced just 0.1 million tons of NPI in 2016, compared to China’s 0.4 million tons. By 2020, Indonesia’s output had risen to 0.6 million tons, surpassing China’s 0.5 million tons.
Growth continued, with Indonesia recording 1.3 million tons in 2023, while China’s production stagnated at 0.4 million tons from 2021 to 2023.

—graphic not available

Read more here.

International Hijriah Food Festival 2025: The Indonesian Chamber of Commerce and Industry China Committee (KIKT), in collaboration with Khazanah Al Wahda Kreatif and community partners, is hosting the International Hijriah Food Festival 2025 to mark the Islamic New Year 1446 H.

Having toured several cities since early July, the festival will be held in Solo on July 27–28, 2025, at Pamedan Mangkunegaran Field, Central Java. Visitors can enjoy a wide variety of halal cuisine from the Middle East, South Asia, and other regions, along with entertainment, children’s games, and an inspirational talk show featuring Habib Jafar. The event is free and open to the public.

Financial System Stability Committee (KSSK) Meeting III, 2025: The Financial System Stability Committee (KSSK) will hold its third meeting of 2025 on Monday, July 28, at 16:00 in the Excellence Room, Pacific Century Palace Tower, 30th floor, at the Deposit Insurance Corporation (LPS) headquarters.

The meeting will be attended by senior financial authorities including Finance Minister Sri Mulyani, BI Governor Perry Warjiyo, OJK Chairman Mahendra Siregar, and LPS Chairman Purbaya Yudhi Sadewa. These quarterly meetings review and coordinate financial system stability policies.

Q1 discussions confirmed stability despite U.S. tariff pressures under President Donald Trump. In Q2, the committee agreed to heighten vigilance and strengthen coordination. The Q3 outcome will be announced following the July 28 session.

“A dream is what keeps you alive. Overcome challenges, and one day your dream will come true. Big dreams start from small beginnings.” — Jack Ma, Founder of Alibaba