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Wealthy Indonesians are shifting hundreds of millions of dollars offshore amid mounting concerns over President Prabowo Subianto’s fiscal discipline and the country’s economic stability.
Gold and real estate are two popular havens although a third, less traditional, pocket has emerged: cryptocurrencies – in particular Tether Holdings SA’s stablecoin USDT, which is designed to maintain a 1:1 peg to the US dollar. The assets all offer ways for the country’s rich to skirt scrutiny in moving large sums of money around.
Bloomberg News spoke to more than a dozen wealth managers, private bankers, advisers and high-net-worth individuals for this story, all of whom asked not to be identified discussing confidential information.
One private banker said that several Indonesian clients with a net worth of between US$100 million and US$400 million had converted up to 10 per cent of their assets into crypto. The shift began in October when Prabowo came to power but accelerated substantially after the rupiah plunged in March, the person said.
The outflows from Southeast Asia’s biggest economy may have contributed to the steep decline in Indonesia’s currency. The rupiah on Wednesday fell to its lowest in history against the dollar before rebounding slightly on Thursday as investors priced in the impact of rising trade frictions from US President Donald Trump’s on-again, off-again tariffs.
The nation’s currency and stock markets are also suffering due to concerns that Prabowo’s policy spending spree could eat into the country’s fiscal discipline built under previous administrations.
“I’ve been stepping up my purchase of USDT in recent months,” said Chan, a former top executive aged in his 40s at one of Indonesia’s big conglomerates, who asked not to use his full name for fear of government repercussions.
“It allows me to preserve the value of my assets and send them abroad if needed without physically carrying them across the border. The outlook of Indonesia’s economy and the risk to the country’s political stability really worry me.”
Of chief concern and the reason behind stocks and currency volatility are the actions of Prabowo, who since October has expanded the role of the armed forces, stretched state spending and brought state-backed firms more directly into his orbit. The former general wants Indonesia to grow at about 8 per cent annually, something not even China is close to achieving.
If expansion is to approach anywhere near Prabowo’s objective, it would require massive government spending. Investors worry this could lead to greater fiscal deficits, more debt and tax increases, not to mention more widespread inflationary pressures.
Representatives for the Finance Ministry’s Directorate General of Taxes and Bank Indonesia did not immediately respond to requests for comment.
While the current wave of outflows does not compare with the exodus in 1998 when Indonesia was hit by the Asian economic crisis, the turn towards the exits is escalating, the people have said.
Since February, clients of one advisory firm had shifted about US$50 million of their money to Dubai and Abu Dhabi, another person said. In the December quarter, similar outflows came to just US$10 million.
In several instances, the money was being used to buy residential and commercial property under the names of family members and friends to avoid detection, the person said. Some clients had managed to obtain working visas in Dubai, for instance, which then allowed them to set up a shell company and use that to purchase property, the person said.
Indeed, the Middle East is gradually becoming a popular parking spot for assets from Indonesians wary of stricter scrutiny from banks in Singapore, a long-time favourite location for the wealthy from all neighbouring countries. Financial institutions in the city state have implemented stricter due diligence and transaction monitoring measures after a major money-laundering scandal in the country.
Cryptocurrencies offer a way around some of that. Although crypto itself is a volatile asset, it is also among the most flexible to move about.
USDT is gaining favour in Indonesia as a way of avoiding detection for currency conversion and shifting amounts north of US$100,000 out of the country. While Indonesia does not have traditional capital controls for individuals, frequent or large transfers may be questioned, triggering regulatory scrutiny and potentially requiring justification. Anything above US$100,000 may also be monitored for anti-money laundering or counterterrorism financing compliance.
Trade in the USDT/rupiah pair, which many investors use as a hedge against local currency fluctuations and macroeconomic uncertainty, now accounts for more than a quarter of Tokocrypto’s daily volumes, according to Wan Iqbal, the firm’s chief marketing officer. Tokocrypto, owned by Binance, is one of the largest cryptocurrency exchanges in Indonesia.
Local investors are also buying more gold.
Bullion sales at PT Hartadinata Abadi, Indonesia’s biggest non-state gold retailer, jumped by about 30 per cent in the first three months of the year versus the same period of 2024, the steepest year-on-year quarterly rise since the company went public in 2017, spokesman Thendra Crisnanda said.
Indonesia has seen rounds of substantial fund outflows related to political instability before. The country last ran a tax amnesty programme that offered Indonesians the chance to come clean on hidden funds in 2022, which resulted in billions of dollars of previously undeclared assets.
Stemming the current rush is something Prabowo could do, should he move to provide assurance around fiscal discipline and commit to key investments in areas such as infrastructure, according to Dedi Dinarto, lead Indonesia analyst at Global Counsel LLP.
While the rupiah and stock market sell-off might be an overreaction, “both foreign and local investors share growing concerns about Prabowo’s policies”, Dedi said.
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