Indonesia August 2025 Riots: What does it mean for Investors?
The August 2025 riots in Indonesia shocked citizens, international observers, and foreign companies planning to invest in the country.
What began as anger over lawmakers’ privileges quickly escalated into nationwide unrest. For foreign investors, the events carried a clear message: political risk in Southeast Asia’s largest economy cannot be underestimated.
What Triggered the Unrest
Demonstrations happened sporadically throughout 2025 due to government policies. In March, parliament passed a controversial law expanding the military’s role in civilian institutions, signaling rising public unease about military overreach.
The August unrest was larger and more violent. The immediate trigger was public outrage over MPs’ housing allowances, which increased to roughly 10 times Jakarta’s minimum wage. Tensions escalated when Grab driver Affan Kurniawan was tragically killed after being struck by a speeding police vehicle. This combination of elite privileges and high-profile death rapidly ignited widespread riots, highlighting how political and social volatility in Indonesia can arise quickly and unpredictably.
Market Reaction
Financial markets responded swiftly:
Equity Markets: The Jakarta Composite Index fell by around 3.6%, with sharp sell-offs concentrated in sectors sensitive to domestic demand and political stability—consumer goods, banking, and infrastructure.
Currency: The rupiah weakened to about IDR 16,500 per US dollar, its lowest level since early August. This depreciation signals higher currency risk for foreign investors, particularly those with unhedged rupiah-denominated assets or import-dependent operations.
Even short-lived unrest can ripple through equity valuations and currency markets, affecting both immediate returns and medium-term investment planning.
Key Risks for Investors
Political Risk: The unrest underscores elevated political risk in Indonesia. Flashpoints over elite privileges and distrust in law enforcement can quickly influence regulatory certainty, policy enforcement, and public support for government initiatives. Companies should anticipate rapid shifts in public sentiment and enforcement practices.
Currency and Market Volatility: The rupiah’s drop and index fall highlight market sensitivity to social and political unrest. Currency depreciation affects returns for unhedged investors and increases costs for companies with import reliance or USD-denominated debt. These shifts signal potential policy disruptions and governance uncertainty.
Government Response
The Indonesian government acted quickly to stabilize the situation. President Prabowo revoked MPs’ controversial housing allowances, froze travel budgets, and pledged investigations into excessive police force. Parliament reversed planned salary hikes and perks.
Economic measures were also introduced: wage subsidies, tax relief, and job creation programs. For foreign investors, this highlights short-term opportunities in sectors tied to stimulus—consumer goods, logistics, digital services—while flagging potential regulatory shifts affecting infrastructure, finance, or labor-intensive industries.
Practical Steps for Investors
- Hedge currency exposure to protect against rupiah volatility
- Reassess equity allocations in sensitive sectors
- Maintain close engagement with local partners and authorities
- Incorporate scenario planning for potential unrest into due diligence
- Monitor policy announcements and social developments continuously
Conclusion
The August 2025 riots highlight how quickly social and political unrest can impact markets. For foreign investors, market fundamentals alone aren’t enough—currency depreciation, equity volatility, and regulatory uncertainty must be factored into investment decisions.
Despite these risks, Indonesia’s large consumer market, growing digital economy, and industrial potential remain attractive. Investors who balance caution with strategic engagement—aligning operations with government priorities and maintaining flexible strategies—can navigate volatility and capitalize on medium- to long-term opportunities.
At Vintage Management, we provide consulting services to people who want to expand their business to other countries and offer insights like those in this article. If you want to expand your business, contact us for a private discussion.
