On the 16th of October, Indonesia's stock market had its worst day since 1998. The next day, it fell again, marking the deepest sell-off on record. And in total, Indonesia's stock market is now down more than 40% just this year. That's more than the US market fell in the entirety of 2008. But according to Indonesia's government, the economy is doing great. It's growing by 5% and beating almost every forecast. So who's actually telling the truth here? Well, it turns out that this is a bit of a repeating problem. This is Nusantara, Indonesia's brand new $45 billion capital city. It's got a presidential palace, government ministries, and six lane highways. It was built from scratch in the middle of the Borneo rainforest, designed for well over a million people. There's just a bit of an issue. Right now, there's only 10,000 people actually living there. And the reason this flagship city is so empty is pretty much the exact same reason Indonesia's whole economy is now in trouble. On paper, they have pretty much everything that you would need for an economic success story. It's the biggest economy in Southeast Asia with a young population, low debt, and two thirds of all the nickel in the world. But instead, it's turned into a country on the verge of collapse. One where $17 billion can go missing from the state oil company. And where the police raided the homes of the country's top anti-corruption prosecutor, and found 74 kilograms of gold bars. This is the story of how to destroy an economic miracle. Okay, so to understand what's really going on in Indonesia, we need to go back to that empty city in the jungle. Back in 2019, Indonesia's then president, Joko Widodo, announced that he was moving the capital out of Jakarta, a crowded, polluted city that was literally sinking into the ground. And in its place, he promised to build something pretty extraordinary. A brand new, ultra-modern green city, carved out of the Borneo rainforest, complete with flying taxis. It was designed for 1.2 million people by 2029, and the plan for paying for it was just as ambitious. The government would pay for only around a fifth, the rest would come from private and foreign investors, all supposedly lining up to get a piece of Indonesia's future. But that money never really arrived. Softbank, one of the biggest names lined up to back it, pulled out. And other investors held back, worried about unclear land rights and a lack of transparency. In other words, the city depended on one thing above all else, trust. And it never quite managed to win enough of it. And then things got worse. When Indonesia got a new president, he cut the city's budget by more than 85%. Not because the country had run out of money, but because he had other plans for it. Big, expensive promises that cost far more than Indonesia could really afford. So, on one side, you've got investors who aren't sure that they can trust Indonesia. And on the other, you've got a government spending more than its own rules allow. And that combination, as we'll see, is exactly what's tearing Indonesia's economic miracle apart. Now, typically speaking, when a stock market crashes this hard, there's a pretty simple explanation for it. The underlying economy is in trouble. Companies make less money, their shares are worth less, and investors start selling. On one level, it's easy to see why people might think that's happening in Indonesia. This year, the war with Iran sent oil prices through the roof, and Indonesia imports most of its oil. The only problem is, well, that's not really what's happening at all. For starters, on paper, there is no recession. And while oil has hit a lot of countries this year, some were hit far harder. The Philippines, for one, declared a national emergency around oil shortages. And yet, Indonesia's stock market has fallen nearly nine times as much. So, the fact that stock prices are collapsing this hard, while GDP is still supposedly going up, is the first sign that something is going seriously wrong here. But the problem isn't the economy or its oil. It's something specific to Indonesia. And it all comes down to one thing. Trust. To understand that, we need to talk about Indonesia's tycoons. Because despite being a poorer country, Indonesia has a lot of very, very rich families. Last year, the country's 50 richest people were worth a record $306 billion. Roughly three times what they were worth a decade ago. To put that into perspective, it's equivalent to around a fifth of everything Indonesia's entire economy produces in a year. And when these companies put their money on the stock market, money poured in from all over the world. And Jakarta's stock market became one of the biggest in Southeast Asia. Last year alone, Indonesia's benchmark stock index shot up 17%, pushing many of their companies to record highs. But in many of those companies, the families kept almost all of the shares for themselves, sometimes up to 90% or more, leaving only a tiny slice available for everyone else. So when global investors rushed to buy that tiny slice, competition drove prices up to record highs. Now, there was something a little unusual about how those companies were set up. And we'll come back to that. But at the time, nobody really worried about it. Because, well, the economy itself was doing really well. And actually, in part because these families were so rich. Over the past two decades, the economy has just kept on growing. And part of that comes down to a couple of things. For starters, Indonesia really and literally struck gold when it came to natural resources. They have huge amounts of coal and palm oil, as well as two thirds of all the nickel mined on the planet. On top of that, they have 280 million people, most of them pretty young, which makes for a massive home market. And crucially, ever since 1998, it's stuck to its rules, which means investors feel pretty safe putting their money there. And for a long time, all of that made the country. Back in 1998, almost a quarter of Indonesians lived in poverty. But by 2019, it was under a tenth. But all the while, things were starting to crack. And to understand why, we need to look at those rules that we just mentioned that made Indonesia such a safe bet before. Back in 1998, the Asian financial crisis hit Indonesia harder than pretty much anywhere else. The rupiah lost around 80% of its value, and the economy shrank by around 13%. And Sahato, who'd ruled the country for over three decades, was forced out. And so in the years that followed, Indonesia wrote itself a set of rules to make sure that that could never happen again. The government would never borrow more than 3% of the economy in a single year. And the central bank would be independent, free to protect the currency, even when politicians didn't like it. And for two decades, those rules held. This graph here shows Indonesia's budget deficit since 2005. And as you can see, apart from the pandemic, it never crossed that 3% line. Even Joko Widodo, the president who spent a decade building roads, ports, and airports, and that new capital city at a record pace, stuck to them. But then in 2024, this guy here took over. This is Prabowo Subianto. He's a former special forces commander. And as it happens, the former son-in-law of Sahato himself. And he came to power with a pretty big ambition, to get Indonesia's economy growing. Not at 5% a year, but 8%. And to achieve that, he came up with a whole bunch of pretty expensive promises. The biggest of these was free meals for tens of millions of school children and pregnant women. Now, don't get me wrong, there's literally nothing wrong with feeding children. The problem with this policy, however, was just how much it would cost. The meals program alone was allocated around 335 trillion rupiah a year, roughly 19 billion dollars. And to help pay for it, the government had to cut spending elsewhere, including the budget for roads, bridges, and water systems, which fell from 110 trillion to just 30 trillion rupiah. In other words, money that would have built the things a growing economy needs was redirected to a single program. Meanwhile, Prabowo's own cabinet, with more than a hundred ministers, deputy ministers, and advisors and special staff, was left completely untouched. Which, admittedly, is kind of a bad look. But even with those cuts, there was a problem. All of this still cost far more than Indonesia's 3% rule allowed. So, how do you pay for it? Well, for a while, you couldn't. Mainly because of this woman here. Her name is Sri Milyani, Indonesia's finance minister for most of the last two decades. And she was basically the ultimate human security blanket for global investors. A guarantee that Indonesia's rules would hold. As long as she was in charge, breaking that 3% limit was effectively off the table. But in August 2025, protests broke out across the country. And in the chaos, looters broke into her home. Days later, she lost her job. And with the last person who could really say no gone, the government started looking for other ways to pay its bills. And one place it found was the central bank. Which last year agreed to help fund the government programs by buying up its debt. Now, as a general rule of thumb, central banks are usually kept separate from politicians. And for very good reason. A central bank's job is to protect the value of the currency. A bit like a referee keeping a fair game. And a referee only really works if everyone trusts that it isn't on anyone's side. So when in January, Probovo nominated his own referee to the central bank's board, investors started to worry that the referee was becoming the president's piggy bank. But the thing is, covering the government's bills is one thing. Getting the economy growing at 8% is something else entirely. That takes huge amounts of investments. In factories, mines and power plants. And with the budget already stretched, that money had to come from somewhere. And Probovo's answer was something called Danantara. Which is basically a giant government investment fund. A bit like a country's savings account. Except instead of just sitting there, it invests. He took the country's state-owned companies, the big state banks, the electricity company and the oil company, and put them all under one roof. The idea was to pull all of their wealth and use it to invest in the projects Probovo believed would power Indonesia's growth. The plan was for it to manage more than $900 billion, which would make it one of the biggest funds of its kind in the world. Now, in theory, that actually sounds pretty sensible. It's modelled on Singapore's Temasak, which has done exactly this for decades. So what's the catch? Well, for one, it sits outside of the official budget. Which is kind of important, because that 3% rule that we mentioned only counts the official budget. It's a bit like promising your bank you'll keep spending under control, then putting half of your bills on a second credit card that the bank can't see. And for another, this now reports directly to the president. Which means some of the country's biggest companies are now effectively run from the very top, with very little anyone else outside can see. And that's a problem, because Indonesia's state companies, well, they don't exactly have a clean track record. Take a look at this company here. This is Pertamina, Indonesia's giant state oil company. And back in 2025, investigators uncovered what's become one of the biggest corruption cases in Indonesia's history. A scheme involved rigging fuel imports that cost the country an estimated $17 billion. Which, to put into perspective, is not far off what Indonesia spends on free school meals in a whole year. Earlier this year, nine people were jailed over it, including two former bosses of Pertamina's own subsidiaries, and the son of an oil tycoon known as the Godfather of Oil. And the Godfather himself? Well, he's still on the run, with an Interpol red notice out for his arrest. Now, on its own, you could almost read that as good news. Indonesia catches the bad guys, and the system works, right? Well, the man leading that investigation was Indonesia's top anti-corruption prosecutor, Febri Adriancia. He's handled some of the country's biggest corruption cases. But a few months ago, police raided a dozen locations across Jakarta and the surrounding area, including Febri's own luxury home, just outside the city. And inside, they found a safe holding seven suitcases, packed with 74 kilograms of gold bars and cash, worth around $29 million in total. What's more, that house was reportedly missing from his official declaration of assets, which puts his entire net worth at around $1 million. Now, Febri denies that the gold and cash are his, and says that they belong to other people. But think about that for a second. The man in charge of hunting down corruption in Indonesia's oil giant and its biggest welfare program is now on trial himself. Now, it's not like any of this has gone unnoticed. Moody's and Fitch, two of the biggest companies that rate how safe it is to lend to a country, both turned negative on Indonesia for the first time since 1998. And then, on top of all of that, the war with Iran sent oil prices soaring. Now, Indonesia has actually been here before. Back in 2022, when oil last shot past $100 a barrel, the government raised fuel prices, took the hit, and then stuck to its rules. But this time, it did the opposite. Instead, it kept petrol cheap. It cut back the school meals and kept leaning on the central bank. In other words, when the pressure came, the rules bent. Okay, so if all of this is going wrong, then why is Indonesia's economy still growing at 5%? Well, for starters, most of the damage so far has been to trust and the government's finances. And that takes a while to show up in the economy. On top of that, the government is simply just propping it up. Earlier this year, government spending jumped by over 20%, and economists said that without it, growth would have been far lower. And then there's the question of whether the number can be trusted at all. Officially, factories made more stuff, but the electricity used to power them actually fell, which seems kind of weird, right? So the economy is still growing, just probably not as fast as it looks. But if that's the case, the stock market should have followed the same path, a slow decline as the problems built up. But that's not what happened. Last year, Indonesia's stock market actually rose by 70%. And then this year, it collapsed. So why the sudden crash? Well, a big part of the answer is surprisingly simple. For a long time, Indonesia's stock market wasn't really reflecting reality in the first place. This is Projogo Pangestu. And until very recently, he was the richest man in Indonesia. He built his empire by going into business with the family of Sahato, who, let's just say, had a bit of a habit rewarding his friends with timber licenses and lucrative deals. Now, plenty of countries have powerful business families with friends in high places. But what's really unusual is how Projogo got really rich. Because most people get rich by selling more. More products, more services, more customers. Projogo got richer than ever by doing the opposite. He sold less, less of his own company. Back in 2023, he put his geothermal power company on the stock market. But his family held on to almost 90% of it and only sold a tiny slice. And that causes a bit of an issue. Imagine you went to a concert with 100 tickets, where only 10 go on sale. And the organizer keeps the other 90 for himself. If loads of people want to go, those 10 tickets end up selling for crazy prices. Let's say 500 quid each. And now the organizer can turn around and say that the whole concert is technically worth 50,000 pounds, because there are 100 tickets at 500 quid each, even though only 10 were actually ever sold. And that's basically what happened with Burrito. Within two months, its shares were worth more than 10 times what they'd sold for. And a power company was suddenly worth more than almost any other business in Indonesia. Now, keeping most of your own shares isn't actually illegal. So the real question is, who bought that 10%? Because a lot of shares meant for the public had allegedly gone to groups linked to Burrito's own controlling shareholders, who'd hidden who they really were. In other words, the organizer's friends may have been buying up those tickets all along. Once that's the case, you can do something pretty sneaky. Imagine those friends start selling the tickets to each other. First for 500 quid, then 600, then 800 quid. Nobody new is actually buying anything here. But from the outside, it looks like the hottest gig in town. So regular fans now rush in at 1000 pounds a ticket. And that's exactly when the friends sell. In Indonesia, this happens so often that it actually has a name, Goreng Saham, or stock frying. So in other words, the price of the stock wasn't telling you what these companies were worth. It was telling you what a small group of people wanted you to think that they were worth. But Burrito isn't the only case. In fact, this is a pretty widespread problem in the country. At least 130 Indonesian companies have less than a tenth of their shares available to buy. In Thailand, it's just nine. Which meant that for years, prices could keep climbing, completely detached from what was actually going on in the economy. Funds all over the world were effectively being steered into buying Indonesian stocks at prices that might not be real. But that, well, it can only last so long. Because as these stocks got pumped, they ended up on a very important list, run by a company called MSCI. Now, you've probably never heard of MSCI. It's basically just a global index provider. But a huge amount of the world's money, pension funds, saving funds, millions of people's retirement pots, simply follow its list. If you're on the list, then those funds will buy you. And if you're kicked off, then they'll have to sell. And earlier this year, MSCI warned that it could no longer trust Indonesia's prices. And that concert trick that we talked about earlier works both ways. When everyone wants out at once, and hardly any shares are changing hands, there just aren't enough buyers. So prices don't just fall, they collapse. This meant that Projogo lost nearly $9 billion almost overnight. And then, in October, MSCI threatened to take Indonesia off its emerging markets list altogether, and put it in the same group as Argentina and Lebanon. The very next day, well, the stock market had its biggest crash since 1998. That money didn't just leave the stock market, it has been leaving the country in droves. This year, foreign investors have pulled more money out of Indonesian stocks than any time for the last 16 years. And as they've swapped their rupiah back into dollars, they've helped drag Indonesia's currency down to its weakest level ever. For years, investors were willing to overlook this messy market, because they trusted the state around it. But with the rules bending, the referees under suspicion, and the government spending more than it can afford, that trust has pretty much run out. And right now, Indonesia is losing it on two fronts at once. The more investors doubt the market, the more money it leaves the country, and the weaker the rupiah gets. And the weaker the rupiah gets, the more pressure there is on a government that's already stretched, which makes it even more tempting to bend the rules a little further. And MSCI's final decision is still to come. If it does follow through and throw Indonesia off its list, then remember, the concert trick works again. Even more money would be forced to leave, with hardly anyone left to catch them.