Beyond Berkeley: Indonesia’s New Economic Direction under Finance Minister Purbaya Yudhi Sadewa

CNEWS, Jakarta, September 28, 2025 – Indonesia’s national economic policy is entering a decisive stage. After weathering the fiscal storm of the COVID-19 pandemic, amid global geopolitical uncertainty and rapid technological disruption, Finance Minister Purbaya Yudhi Sadewa has announced a series of bold reforms set to reshape the country’s development trajectory.

Purbaya’s initiatives mark a clear paradigm shift. Whereas during the New Order Indonesia was guided by the orthodoxy of the Berkeley Mafia—with macroeconomic stabilization, deregulation, and dependence on foreign capital—today a new model emerges: a hybrid economy balancing market efficiency, state intervention, and social justice.

“Growth without equity is merely a statistic, not progress,” Purbaya declared at the National Economic Forum earlier this month.

Breaking from the Shadow of Berkeley

The Berkeley Mafia (Widjojo Nitisastro, Emil Salim, Ali Wardhana) played a pivotal role in stabilizing Indonesia’s economy after 1966. They introduced fiscal discipline and market openness that fueled decades of growth.

But the price was high: structural inequality and chronic dependence on foreign investment. Purbaya’s reforms stem from the realization that macroeconomic stability can no longer come at the expense of fiscal sovereignty and social equality.

Between Sumitro and Mubyarto

In the landscape of Indonesian economic thought, Purbaya occupies a unique position. He synthesizes two major traditions:

• Sumitro Djojohadikusumo – emphasizing industrialization, fiscal self-reliance, and innovation-driven long-term development,
• Mubyarto – embodying people-centered economics that sees development as a tool for achieving social justice.

From Sumitro, Purbaya adopts technocratic discipline; from Mubyarto, he absorbs grassroots compassion. The result is an inclusive, sovereignty-oriented development model.

“The prosperity of the people is the highest law of economics,” Purbaya wrote in his fiscal policy notes.

 

Concrete Policy Agenda

Purbaya’s reforms are not just rhetoric; they are being translated into tangible policies:

1. Progressive Tax Reform

   • Raise the tax-to-GDP ratio from 10.4% in 2024 to 13% by 2028,
   • Introduce carbon taxes on energy and heavy industries,
   • Crack down on tax avoidance through digitalized systems.

2. Targeted Subsidies

   • Fuel subsidies monitored via digital ID and vehicle systems,
   • Social assistance shifted to direct cash transfers for accuracy,
   • Social protection spending in the 2025 budget reaches Rp 478 trillion.

3. Green Carbon Policy

   • Carbon taxes paired with renewable energy incentives,
   • Capital investment steered towards energy transition and green economy,
   • Indonesia committed to cutting emissions by 31.89% by 2030 (unconditionally).

4. Fiscal and Industrial Independence

   • 2025 budget deficit reduced to 2.4% of GDP, below the 3% ceiling,
   • Financing expanded through green bonds and retail sukuk,
   • Strengthening MSMEs via affordable credit and digital supply chain integration.

Resonance with Global Thought

Purbaya’s approach aligns with the ideas of Joseph E. Stiglitz, Nobel laureate and vocal critic of neoliberalism and the Washington Consensus. Stiglitz has long argued that unregulated markets breed inequality and systemic failure.

Purbaya adopts a similar stance:

• Markets are needed for efficiency,
• The state must intervene to correct injustice,
• Fiscal policy must ensure that economics serves humanity, not global corporations.

Challenges Ahead: Consistency and Political Economy

Despite ambitious reforms, Purbaya faces two major hurdles:

1. Implementation Consistency – Past reforms often faltered due to weak execution. Ensuring the success of tax digitalization, subsidy targeting, and monitoring will be crucial.

2. Budgetary Politics – State spending remains dominated by routine bureaucracy. For a truly progressive shift, sustained increases in education, healthcare, and research investment are required.

Economic Intelligence Outlook

If pursued consistently, Indonesia could forge a new hybrid economic model:

1. Sumitro’s fiscal discipline – safeguarding competitiveness and macro stability,
2. Mubyarto’s social justice – narrowing inequality and ensuring welfare,
3. Stiglitz’s ethical critique – keeping globalization centered on people, not profits.

This could position Indonesia as a “Third World economic laboratory”: a nation proving that markets and morality can coexist within a sovereign development framework.

Conclusion: A Sovereign Middle Path

Purbaya Yudhi Sadewa is emerging not as a conventional technocrat, but as a moral reformer of economics. He demonstrates that Indonesia need not choose between free-market liberalism and total statism.

With market efficiency, a strong state, and social justice as its pillars, Indonesia now has a chance to build a sovereign economy—one that is not only growing, but also fair, green, and sustainable. ( RED.CN)