JAKARTA: Chinese investors in Indonesia are increasingly alarmed by what they describe as regulatory unpredictability, aggressive enforcement and rising costs in the South-East Asian country.
These concerns are now spilling into public view through a letter currently circulating among business circles via messaging and social media platforms.
The undated letter, bearing the letterhead of the China Chamber of Commerce in Indonesia (CCCI) and addressed to President Prabowo Subianto, warns that abrupt policy shifts and alleged extortion by officials are undermining confidence in South-East Asia’s largest economy.
Copied to the Chinese embassy in Jakarta, the letter says recent measures affecting Indonesia’s nickel industry – dominated by Chinese investment – risk disrupting major downstream projects.
Chinese investment dominates Indonesia’s downstream nickel sector, transforming the country from a raw ore exporter into a global processing hub. This shift accelerated rapidly after Indonesia implemented its permanent raw nickel ore export ban in January 2020.
A senior Indonesian government official confirmed to The Straits Times via text messaging on May 13 that the grievances expressed in the letter, titled: “Letter Requesting Improvement of the Business Environment”, directly mirror concerns previously conveyed by a senior diplomat with the Chinese embassy in Jakarta. The government official requested anonymity due to the sensitivity of the matter.
The letter, which was viewed by ST, noted that for a long time, the vast number of Chinese-invested companies in Indonesia have consistently conducted business in accordance with the laws and regulations and contributed to economic growth, creating employment.
But in “recent periods”, it said, Chinese-invested enterprises operating in Indonesia have generally encountered prominent issues, including excessively stringent regulation, over-enforcement, and even corruption and extortion.
“These problems have severely disrupted normal business operations, directly undermined long-term investment confidence, and caused widespread concern among Chinese-invested enterprises regarding the current business environment and their future development in Indonesia.”
Also on May 13, an executive at the Jakarta office of a Beijing-based company, which is a member of the CCCI, said that the issues highlighted in the letter accurately reflected realities on the ground. He declined to verify the document’s origin and did not want to be named as he was not authorised to speak to the media.
Separately, a senior Chinese executive in Jakarta had noted at an off-the-record get-together with selected media representatives in April that the government’s policy flip-flopping would significantly impact Chinese investor returns. He also declined to be named, citing the need for anonymity.
Recent revisions result in higher costs for businesses
In the past decade, Chinese-invested enterprises have aggressively entered Indonesia, becoming the largest investor group in the downstream nickel sector. They predominantly operate smelters that process nickel ore into intermediate materials for electric vehicle (EV) batteries.
The letter focused primarily on mineral resources, in particular the nickel sector, stating: “Taxes and fees, including mineral resource royalties, have been raised repeatedly.”
It said recent revisions to Indonesia’s nickel ore pricing formula – including factoring in associated minerals such as cobalt and iron – had sharply increased costs for smelters.
“The abrupt enactment of these policies has led to a 200 per cent surge in comprehensive nickel ore costs. As the largest investors and operators in Indonesia’s nickel industry, Chinese-invested enterprises now face sharply rising production costs, widening operational losses, and imbalances across the industrial chain,” the letter continued.
It also highlighted a drastic reduction in mining quotas, saying: “Since this year, nickel ore mining quotas have been cut sharply, with reductions for large mines exceeding 70 per cent, totalling a drop of 30 million tonnes, disrupting the development of downstream industries.”
Speaking at the Attorney-General’s office in Jakarta on May 13, Mr Prabowo said: “Many investors, including those from abroad, complain that Indonesia often takes a long time to process permits.”
He noted that businesses sometimes had to wait one to two years for approvals, compared with as little as two weeks in some neighbouring countries.
“If they can issue permits in two weeks, why do we need two years?” he said, announcing the formation of a special task force to speed up deregulation and remove unnecessary bureaucratic obstacles.
While Prabowo did not refer specifically to Chinese companies or the viral letter, he acknowledged that both domestic and foreign investors have long complained about Indonesia’s slow licensing process and cumbersome regulations.
He also acknowledged that some officials used regulations as a means to solicit bribes, saying: “Regulations tend to be bureaucrats’ initiative, frankly, to seek opportunities.
“Some will ask for kickbacks, asking for money to expedite permit issuance.”
The remarks were a rare public admission by an Indonesian president that corruption within the bureaucracy remains a persistent concern for businesses and investors.
The grievances expressed in the letter come on the heels of several incidents that have heightened concerns among Chinese investors over regulatory unpredictability and official scrutiny.
In November 2025, Defence Minister Sjafrie Sjamsoeddin publicly questioned international flight operations at a private airport within the Chinese-backed Indonesia Morowali Industrial Park, saying that the industrial zone could not become a “state within a state”.
It later emerged that the Transportation Ministry had granted the airport temporary international status months earlier before quietly revoking the permit.
Earlier that same year, the Ministry of Immigration and Corrections said it had removed 30 officers at the Soekarno-Hatta International Airport following allegations of extortion against Chinese citizens – some were later demoted.
The Ministry of Foreign Affairs also said it was coordinating with various government agencies and ministries to resolve extortion cases involving Chinese citizens at Indonesian airports.
Meanwhile, Finance Minister Purbaya Yudhi Sadewa took a firmer stance when asked about the viral letter after attending an event in Jakarta. “Indonesia has its own economic policies. If foreign companies want to leave, let them leave,” he was reported as saying by the local media on May 13.
He noted, however, that some of the policies mentioned in the letter, including higher mineral royalties, were still under review and that certain exemptions would apply, but did not elaborate further.
Dr Denni Purbasari, chief economist at the Indonesia Business Council, warned that policy uncertainty is the ultimate deterrent for both domestic and foreign investors.
“Businesses may adapt to high costs,” he told ST. “But when regulations change too rapidly and overlap, the future becomes unpredictable, and business risks become difficult to measure.” - The Straits Times/ANN
