Stopping the Cycle of Continuous External Pressure

By Dr. Ichsanuddin Noorsy, B.Sc., LL.B., M.Si.

JAKARTA – Since Indonesia enacted Law No. 1 of 1967 on Foreign Investment, along with a series of other regulations during the 1967–1968 period, the country has become increasingly subject to external influence from multilateral institutions, major powers, and global industrial and financial corporations.

In the author’s view, this dependence was further reinforced by the four amendments to the 1945 Constitution during the Reform era. Structural external pressure intensified through the Letter of Intent (LoI) with the IMF in 1997–1998, followed by the enactment of Law No. 10 of 1998 on Banking, Law No. 24 of 1999 on Foreign Exchange Traffic and the Exchange Rate System, and Law No. 25 of 2007 on Investment.

These laws are viewed as the foundation of a liberal capitalist system that has institutionalized Indonesia’s structural dependence. Numerous other regulations, according to the author, have also strengthened the implementation of neoliberal policies across various sectors of national life.

The weakening of the rupiah, the decline of the Indonesia Stock Exchange Composite Index (IHSG), pressure on the real sector, rising layoffs, and weakening purchasing power are seen as evidence of the success of externally imposed economic mechanisms. At the same time, domestic policymaking has also lost its strategic direction, institutional foundation, and governance capacity. The combination of these internal and external factors has further complicated Indonesia’s economic challenges.

However, isolation is not a realistic option in today’s interconnected world. At the same time, Indonesia should not submit to external dictates that are inconsistent with the mandate of the 1945 Constitution.

According to the author, this structural, fundamental, and functional dependency has reduced Indonesia’s economic sovereignty to little more than a formal status. While the state retains the symbols of sovereignty, its policy space is increasingly constrained by a more powerful global system.

This external influence operates through five principal channels:

1. Systems, designed to shape and direct weaker nations.

2. Regulations, which restrict domestic policy options.

3. Standards, which define what is considered “acceptable” according to external benchmarks—for example, U.S. reciprocal trade policies or MSCI assessments of capital markets.

4. Accountability and reputation, which generate market and moral pressure, including through sovereign credit rating agencies that influence the yields of SRBI and government bonds.

5. Validation, whereby domestic policies are considered legitimate only after receiving recognition from global centers of power.

According to the author, these mechanisms are sustained by Indonesia’s public debt, the dominance of the U.S. dollar in monetary and fiscal affairs, dependence on foreign technology, deindustrialization, and continued reliance on imports of strategic goods and services.

As a consequence, Indonesia faces a vicious cycle of dependency. Fiscal space remains limited, monetary resilience is fragile, the real sector lacks sufficient strength, and external financing continues to be relied upon as the primary solution.

What is the way forward?

Closing the country off in the age of the internet, digitalization, and artificial intelligence is neither practical nor desirable. Instead, Indonesia must strengthen its social capital while restoring governance based on the original mandate of the 1945 Constitution.

The country also needs to build strategic autonomy by strengthening domestic production, expanding fiscal capacity, reinforcing monetary resilience, promoting reindustrialization and higher value-added industries, and developing institutions and national actors that are less vulnerable to external pressure.

These strategic priorities should extend beyond the five-year electoral cycle. Indonesia needs a State Policy Guidelines (GBHN) as a long-term national development framework rather than development plans driven solely by changing political administrations.

Building spiritual, moral, intellectual, and material strength will illuminate a path forward. That light will emerge from an organized, disciplined, and resilient domestic foundation.

The author also sees signs that the dominance of predatory global hegemony is beginning to erode, signaling the emergence of a more multipolar world order.

For that reason, Indonesians should stop embracing ignorance and cease accepting forms of dependency that undermine the nation’s future. Without fundamental change, national division and prolonged crisis may become unavoidable.

Jakarta, July 5, 2026