Indonesia has always lived with the volatility of global finance.
But recent events surrounding President Prabowo Subianto’s decision to remove key financial regulators after a market rout reveal something deeper — Jakarta is beginning to grasp that global index providers and credit rating institutions are not merely neutral referees, they are powerful disciplinary mechanisms in the international political economy.
Asean should pay heed to Prabowo’s actions on his regulators who ignored the importance of responding to market discipline.
The immediate trigger was dramatic. After a sharp stock market plunge in late January, Prabowo reacted angrily and summoned senior officials, ultimately reshuffling financial authorities in response to the crisis.
This was not merely emotional politics. It was the behaviour of a state confronting structural vulnerability.
Soon after, index provider concerns compounded the shock.
Warnings about Indonesia’s market conditions hit investor confidence, and a major global index review was even postponed due to doubts over transparency, public float determination and investability.
In other words, global capital did not punish Indonesia through tanks or sanctions — it punished through classification.
The quiet power of financial gatekeepers
In the 20th century, sovereignty was tested by armies. In the 21st century, it is tested by ratings.
Index providers such as MSCI and FTSE Russell determine whether a country is investable.
Credit rating agencies determine whether it is trustworthy. Bond markets determine whether it is affordable.
Together they form an invisible architecture of hierarchy — one that disciplines states without firing a shot.
The logic operates through cascading market reactions.
A downgrade prompts investors to withdraw funds. Removal from an index forces institutional investors to sell holdings automatically. Being placed on a watchlist generates panic and uncertainty.
Questions about transparency cause liquidity to evaporate. These steps unfold not as political debate but as automatic financial mechanics.
This is why emerging markets fear them more than geopolitical rivals.
The reaction to Indonesia demonstrates the point.
A single warning about market integrity triggered investor withdrawals and market instability severe enough to provoke presidential intervention. The punishment was instantaneous, algorithmic and transnational.
Why Prabowo’s response matters
Critics interpret the dismissal of regulators as populist interventionism.
But it can also be read as strategic learning.
Prabowo appears to recognise several uncomfortable truths about globalisation.
Markets behave as political institutions even while presenting themselves as neutral mechanisms. Financial credibility now determines national power.
Reputation travels faster than economic fundamentals.
Indonesia’s macro-economy did not collapse overnight. What collapsed was confidence.
Once global financial institutions signal uncertainty, enormous pools of indexed capital react automatically.
Passive funds do not debate policy — they follow classification rules. A downgrade therefore becomes a forced liquidation.
Thus, the president’s anger was directed less at the market crash itself and more at the institutional trigger behind it.
Punitive without accountability
Unlike the International Monetary Fund, index providers have no treaty obligations.
Unlike the World Trade Organisation, they have no dispute settlement process.
Unlike governments, they face no electorate.
Yet their decisions can reshape national development trajectories.
This is the paradox of modern globalisation: private benchmarks now exercise quasi-sovereign authority.
Countries can spend decades building infrastructure, education and industry — but one technical classification can erase billions in capitalisation overnight.
This is why emerging economies increasingly view ratings agencies as instruments of structural hierarchy rather than purely analytical bodies.
The discipline is asymmetric.
Developed markets absorb shocks. Developing markets are judged by them.
Southeast Asia should pay attention
Indonesia is not alone. Every Asean economy depends on portfolio flows.
Malaysia, Thailand, Vietnam and the Philippines all sit inside the same financial ecosystem where index inclusion determines liquidity and valuation multiples.
The region’s developmental state model — long reliant on foreign capital — now depends as much on perception management as on economic management.
This produces a new policy priority. Macroeconomic stability is no longer sufficient; narrative stability is essential.
Transparency, regulatory credibility and institutional coordination have become strategic assets equivalent to industrial policy.
The geopolitical meaning
The episode also reflects a larger shift in global order.
During the Cold War, discipline came from superpower alignment. During globalisation, discipline comes from capital alignment.
States that ignore financial signaling face currency pressure. States that defy index logic face investment drought. States that lose credibility face growth stagnation.
Prabowo’s move suggests Indonesia is making the transition from reactive to anticipatory governance — recognising that regulatory weakness is no longer a domestic administrative issue but a national security vulnerability.
The lesson for emerging powers
The real message is not that markets are unfair. The message is that markets are structured.
Financial globalisation rewards institutional predictability above economic potential.
Countries must therefore treat regulatory integrity as strategic infrastructure, not bureaucratic detail.
Indonesia’s shock may ultimately be constructive.
It forces a recognition that development today requires mastering not only production and trade — but classification and credibility.
In the modern world order, prosperity depends on staying investable.
And investability, unlike sovereignty, must be continuously earned.
The views expressed are those of the writer and do not necessarily reflect those of FMT.