Indonesian tycoons are moving a significant portion of their assets overseas since the inauguration of President Prabowo Subianto. Analysts suggest that hundreds of billions of dollars are flowing out due to the sharp decline in the value of the rupiah, excessive fiscal expansion, and political uncertainty.
On the 11th (local time), Bloomberg reported that last year high-net-worth individuals began converting their assets into cryptocurrencies, overseas real estate, and gold, and are accelerating this trend following the sharp decline in the value of the rupiah in March. Previously, in March, the rupiah exchange rate soared to 16,957 rupiah per dollar, marking a historic weakness since the Asian financial crisis in 1998. The Jakarta Composite Stock Price Index (JCI) has fallen more than 10% so far this year.
The main factor contributing to the instability of the Indonesian economy is the Subianto administration, which launched last year. President Subianto, who is the son-in-law of former President Suharto, a past military dictator, is a key figure from the military regime. Since taking office in October, President Subianto has faced criticism for implementing imprudent welfare-centered populism policies, such as free school meals for elementary, middle, and high school students and free health check-ups for all citizens, which undermine fiscal soundness. He has also passed policies that expand the military's political influence, triggering large-scale protests.
As domestic and external instability continues, Indonesian tycoons appear to be turning their attention to new investment opportunities. Bloomberg reported that cryptocurrencies are being presented as alternatives to the rupiah, with the stablecoin Tether (USDT) emerging as a notable option. USDT is a coin pegged to the dollar at a 1-to-1 ratio, providing the advantage of anonymity, allowing large sums to be transferred without detection. Recently, the proportion of USDT transactions on Tokocrypto, Indonesia's largest cryptocurrency exchange, has approached one-quarter of daily trading volume.
Investment in overseas real estate is also on the rise. This involves purchasing residential and commercial properties overseas under the names of family members or acquaintances. An anonymous local private banker noted in an interview with Bloomberg that "Singapore is significantly strengthening anti-money laundering measures, and the Middle East regions, including the United Arab Emirates, are emerging," adding that "they are also attempting offshore tax evasion by establishing paper companies in Dubai and Abu Dhabi."
Gold purchases are also increasing. According to PT Hartadinata Abadi, Indonesia's largest private gold distributor, gold sales in the first quarter of this year rose by 30% compared to the previous year, marking the largest increase since its IPO in 2017.
Experts believe that the Subianto administration needs to send clear signals regarding its stance and policies on fiscal soundness. Deddy Dinarto, a senior analyst at Global Consulting, emphasized that "distrust in the administration is leading to the sharp decline in the value of the rupiah and sell-offs in the stock market," stating, "If confidence in policies is not established, capital outflow will be inevitable."