Makassar. Ex-Deputy Foreign Minister Dino Patti Djalal doubts that Singapore is behind the MSCI downgrade following allegations that the city-state had been taking advantage of Jakarta’s market crash.

Former Trade Minister Muhammad Lutfi recently claimed that the Singaporean sovereign fund GIC and the investment vehicle Temasek had pressured MSCI into stripping Jakarta out of its “emerging market” group. The status change had dealt a fatal blow to the benchmark Jakarta Composite Index (JCI), which fell to a six-year low although stocks have now rebounded. Lutfi said Singapore’s investors had used the opportunity to buy Indonesian “strategic assets” for cheap.

Dino, who was once Indonesia’s US envoy, rejected such allegations, while avoiding saying Lutfi's name.

"Claims that Singapore is conspiring against Indonesia's equity market, trying to sabotage our economy, or even attempting to take over Indonesian assets on a fire sale via the MSCI — all of this doesn’t make sense. Nothing could be further from the truth,” Dino said in a social media post on Thursday.

“Singapore is a neighbor that has goodwill, trust and a long-tested track record of cooperation with Indonesia.”

Dino pointed to Singapore’s substantial investments in the country, on top of its assistance during past crises such as the Covid-19 pandemic and natural disasters. Any economic turmoil in Indonesia is expected to take a toll on Singapore.

He underlined President Prabowo Subianto’s foreign policy mantra of “having a thousand friends is too few, one enemy is too many”, saying that “treating the closest neighbor like a foe or with full of suspicion would be highly contradictory”.

Temasek and GIC have denied the allegations of trying to influence MSCI, according to the Singaporean news outlet Straits Times. 

MSCI’s proposal to double downgrade Indonesia’s status to “standalone” market could mean excluding Indonesian stocks from global indexes tracked by funds, triggering a market rout. Indonesian market authorities are seeking further clarification from MSCI amid ongoing reforms to improve shareholding transparency. Prabowo, however, has just accused the New York-based finance firm of trying to intimidate Indonesia.

“Let me tell this to MSCI: Our nation fears no one and will not be intimidated. We have the power and courage. We are willing to make sacrifices. We will never give up,” Prabowo told a cabinet meeting in Jakarta on Wednesday.

Ties with Singapore have faced some obstacles throughout the year, including the #SellSingapore campaign that took Indonesia’s social media by storm. Some Indonesian netizens online had previously tried to trend the hashtag, claiming that the fellow ASEAN state was trying to cash in on Jakarta’s economic failures.

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