Managing strategic trade for Indonesia's technology value chains
Indonesia is developing a comprehensive framework to manage trade in sensitive technologies as it pursues an expanded role in semiconductors, artificial intelligence, data centers, aerospace, and energy technology industries. The Strategic Trade Management framework addresses growing concerns about controlling goods and technologies that can serve both civilian and military purposes.
The framework aims to provide clarity for companies navigating licensing requirements while offering trading partners assurance that sensitive technologies will not be diverted to unauthorized users. Without effective controls, businesses face uncertainty and potential disruptions to supply chains that depend on components from multiple countries.
Growing technology trade
Indonesia's electronics exports have expanded significantly, with semiconductor devices and electronic integrated circuits reaching approximately US$4.1 billion in 2025, up from US$1.5 billion in 2024. This growth reflects Indonesia's increasing participation in technology trade, though these figures do not specify how much involves items subject to export controls.
Strategic trade controls are designed to prevent dual-use technology from being transferred to unauthorized actors. These controls have become increasingly relevant as complex global supply chains create new vulnerabilities and risks involving the misuse of technologies that have legitimate commercial applications but can also be used for weapons development.
International commitments
Indonesia's STM development aligns with UN Security Council Resolution 1540, adopted on April 28, 2004, which formally established the proliferation and possession of weapons of mass destruction by non-state actors as a threat to international peace and security. The resolution requires states to establish national controls over dual-use goods, which are items that have legitimate and peaceful uses but can also be used to develop weapons of mass destruction.
The framework is also tied to Indonesia's trade relationship with the United States. Under the Agreement on Reciprocal Trade signed on February 19, 2026, Indonesia committed to eliminate tariffs on 99 percent of US products while the US maintained a 19 percent reciprocal tariff on Indonesian exports, with zero tariffs on 1,819 specific Indonesian product lines. Indonesia's implementation of STM forms part of this bilateral agreement, though the agreement has not yet entered into force as it requires 90 days after both governments certify that domestic procedures are complete, and Indonesia has not yet ratified it.
Regional coordination
The United States is encouraging Indonesia to serve as a model for STM development among ASEAN member states. The Philippines, serving as ASEAN's 2026 chair, identified an ASEAN Leaders' Declaration on Strategic Trade Management for Secure Regional Trade as one of its Priority Economic Deliverables, with the Second ASEAN Capacity Building Workshop on STM held in Tokyo in July 2026.
The 2026 Indonesia Strategic Trade Management Summit, held September 15-18, 2026 in Jakarta, brought together more than 300 government, industry, academic, and civil society representatives from across Southeast Asia. Co-hosted by Indonesia's Coordinating Ministry for Economic Affairs, the U.S. Department of State's Office of Export Controls and Border Security, and the U.S. Department of Energy's International Nonproliferation Export Control Program, the summit continued a series that began with gatherings in Singapore (2022), Malaysia (2023), and the Philippines (2024).
The 2026-2027 ASEAN-US Trade and Investment Framework Arrangement Work Plan, endorsed in September 2026, identifies strategic trade management as one of several areas for deeper cooperation between ASEAN and the United States.
For companies operating across borders, more aligned procedures could reduce uncertainty as goods and components move between jurisdictions. However, the benefits depend on compatible rules, effective oversight, and clear procedures in each country.
Implementation challenges
Indonesia's immediate challenge lies in implementing the STM framework effectively. Inadequate controls could increase the risk of misuse and undermine trading partners' confidence. Conversely, cumbersome or unclear procedures could raise compliance costs, delay transactions, and disrupt industries that depend on imported components.
Trade Minister Budi Santoso has indicated STM will be introduced gradually, giving businesses and relevant institutions time to adapt. The government plans to adopt a risk-based approach to enforce strategic trade controls without obstructing legitimate commerce.
This approach requires clear distinctions between high-risk and low-risk transactions. Transactions presenting significant risk indicators need closer scrutiny, while those meeting regulatory requirements and posing low risks should be subject to simpler procedures.
Ali Murtopo Simbolon, Deputy for Trade and Digital Economy Coordination at the Coordinating Ministry for Economic Affairs, said at the September summit in Jakarta that STM was becoming more relevant as technology advanced and was needed to support Indonesia's entry into high-tech industries.
Infrastructure and integration
Indonesia already possesses digital infrastructure that could support STM integration. The Indonesia National Single Window, governed by Presidential Regulation No. 44 of 2018, electronically connects 21 ministries and government agencies, enabling single data and information submission for export and import processes.
STM development and the Indonesia Single Risk Management system should be integrated into broader efforts to strengthen the national trade system. Such integration could link licensing, customs, and risk-screening data. However, a digital platform alone is insufficient. The government needs to ensure that data can be shared across agencies, responsibilities do not overlap, and inspections are not duplicated because of inconsistent requirements.
Clear classification of dual-use goods is fundamental. Businesses need to determine early in a transaction whether a product requires a special license and how to meet end-user requirements. The government should provide accessible consultation services and technical guidance to prevent inconsistent interpretations of the rules.
Strengthening the technical capabilities of frontline personnel is equally essential. Controlling dual-use goods requires understanding product and technology characteristics and the ability to assess the intended purpose of transactions and the parties involved. Without adequate expertise, enforcement could become inconsistent.
Clear classification rules, well-defined institutional responsibilities, predictable processing times, integrated data, and adequately trained enforcement personnel will determine whether STM can achieve both of its objectives: controlling the risk of strategic technology misuse while keeping legitimate trade moving. If designed proportionately, STM could help create a more predictable and trusted trading environment for technology industries, helping Indonesia expand partnerships, attract investment, and strengthen its position in global technology value chains.
