The Indonesian National Armed Forces (TNI) Law Revision has sparked intense debate over its impact on Indonesia’s investment climate. The newly revised law allows active military officers to hold positions in 14 civilian ministries and agencies. While government officials argue this move strengthens national security and governance, economists and investors worry about regulatory uncertainty and economic risks.
As Indonesia seeks to attract investment, concerns over transparency, governance, and business competition have emerged. Investors are questioning whether this policy will create stability or introduce new uncertainties that could hinder market confidence.
TNI Law Revision and Investor Concerns
One of the key concerns regarding the TNI Law Revision is its impact on state-owned enterprises (BUMN) and other strategic sectors. While the law does not explicitly include BUMN, its broader implications could influence key industries such as energy, logistics, and telecommunications.
As cited by Investor.id, Achmad Nur Hidayat, an economist and public policy expert from UPN Veteran Jakarta, highlighted two major concerns: “Both foreign and domestic investors may have two main concerns. First, to what extent will military intervention alter the governance of BUMN? Second, will the presence of TNI in civilian institutions create regulatory uncertainty or geopolitical risks?”
The potential risk of military dominance in strategic economic sectors could also impact competition and investment policies. If businesses perceive government regulations as favoring security interests over economic efficiency, market competitiveness could decline.
Market Reactions: A Sharp Decline in the Jakarta Composite Index (IHSG)
Following the ratification of the TNI Law Revision, the Jakarta Composite Index (IHSG) fell by more than 5%, making it the weakest-performing stock index in Asia. This sharp decline signals growing concerns among investors about Indonesia’s economic direction.
Bhima Yudhistira, Executive Director of the Center for Economic and Law Studies (CELIOS), attributed the market reaction to a combination of factors, including skepticism over the revised law. He stated, as reported by Indoposco.id, “IHSG is the weakest in Asia. This is an anomaly, as most Asian stock indices are in the green.”
In addition to the law revision, weak fiscal performance and declining consumer purchasing power ahead of Ramadan further exacerbated market instability. With investor sentiment already fragile, uncertainty surrounding military influence in governance has intensified economic concerns.
Political and Economic Perspectives on the Law
Government officials, however, have defended the law, dismissing concerns over its impact on investment. Luhut Binsar Pandjaitan, Chairman of the National Economic Council (DEN), emphasized that military involvement in governance should not be viewed negatively. “That’s good, there’s no problem (for investment and the economy). It’s good, right? There are also TNI people in government, and I’m from TNI. Isn’t that good?” he said after inaugurating the Batang Industropolis Special Economic Zone (KEK) on Thursday (March 20, 2025), as reported by Detik.com.
President Prabowo Subianto has also stressed the importance of economic efficiency and reducing bureaucratic hurdles to attract investment. He stated, “We are striving to cut bureaucracy and excessive regulations. We want our economy to be efficient. Efficient, efficient, efficient!”
Balancing Economic Stability and Military Presence
Indonesia’s decision to expand military roles into civilian sectors is not without precedent. Countries like Egypt and Myanmar have faced economic stagnation due to military dominance in key industries. Excessive military influence can lead to monopolization, reduced competition, and corruption risks.
Economists warn that without clear boundaries on the military’s role, investors may hesitate to commit capital, fearing increased government intervention. Achmad Nur Hidayat underscored the need for regulatory clarity, stating, “Clear regulations on the limits of TNI’s role in the civilian sector are key to maintaining investor confidence.”
A Divided Outlook
The TNI Law Revision has triggered mixed reactions. While the government believes it will enhance governance and stability, investors and economists remain cautious about its long-term economic impact. The stock market’s sharp response reflects concerns over regulatory uncertainty and military influence in business sectors.
As Indonesia positions itself in the global economy, maintaining investor confidence will be crucial. Whether the law fosters stability or introduces new risks will depend on how transparently and effectively it is implemented. Investors will be closely watching the government’s next steps to determine if this revision ultimately boosts or harms Indonesia’s economic growth.
Source: finance.detik.com, investor.id, indoposco.id
Image: ANTARA FOTO/Aprillio Akbar
