Weekend Listen: Indonesia’s $15 Billion Free Lunch Experiment

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1:27Rebecca Choong Wilkins:Bloomberg Audio Studios. Podcasts. Radio. News.

1:38Rosalind Mathieson:It's 4 a.m. and dozens of kitchen staff are cooking up a storm in a coastal village in southern Indonesia.

1:45Rebecca Choong Wilkins:There's some doing the cooking, chopping up vegetables, some are doing the packing.

1:50Rosalind Mathieson:Rosalind Mattison is Bloomberg's chief Asia correspondent based in Singapore. She and Bloomberg reporter Echolista Yerini visited the remote village kitchen in West Timor in March. There, workers prepare thousands of packed lunches that are delivered to schoolchildren, pregnant women and new mothers almost every day.

2:08Rebecca Choong Wilkins:They're pretty functional, I would say. I mean, it's a reusable metal tray that's separated into compartments. You'll often get a portion of rice, sometimes egg, chicken or tempeh, a small portion of soup, vegetables. Usually there's one piece of fruit. We saw watermelon, dragon fruit.

2:27Rosalind Mathieson:The lunches are part of a vast state-funded program in Indonesia where free meals are delivered to more than 60 million people.

2:35Rebecca Choong Wilkins:It's a massive undertaking. Indonesia is the world's largest collection of islands. And so you're talking about distributing free meals, you know, across thousands of islands, many of them far away from big cities like Jakarta.

2:51Rosalind Mathieson:Providing free, nutritious meals for children under 18 and pregnant women was a big part of Indonesian President Prabowo Subianto's election campaign. He launched the programme in January 2025, and this past year he's been ramping up the programme at a startling pace and cost. It's now about$15 billion of allocation from the budget this year.

3:17Rebecca Choong Wilkins:And when you think about the overall national budget, that's a bit over 6%. And on a par with things like the national healthcare budget.

3:25Rosalind Mathieson:Foreign investors have expressed concern about the program's ballooning price tag, especially at a time when Indonesia's economy is already under immense pressure. I hear from a top Indonesian official about commodity export control plans that have rattled markets. This open of Indonesia and stocks will just get absolutely tossed out the window. Despite investor concerns, Probo has doubled down on the program, saying it'll help create jobs, boost consumption and economic growth. But Rosalind says there's little evidence to show that the programme so far is anywhere near the economic game changer that Proboa promised it would be.

4:04Rebecca Choong Wilkins:Parents that we spoke to weren't really saving any money out of this programme. They said their kids often came home still hungry. Investors are saying, is this really going to be a massive multiplier for the economy? And they have doubts about that.

4:23Rosalind Mathieson:This is The Big Take Asia from Bloomberg News. I'm Rebecca Chung-Wilkins, filling in for Wanha. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show, Indonesia's free lunch programme. What it takes to feed tens of millions of people every day and have safety problems and ballooning costs are worrying investors and could threaten the future of the scheme.

4:59Rosalind Mathieson:Rose, you visited some of the schools and community centres in Indonesia where these free meals were delivered. How did the kids like their pet lunches?

5:10Rebecca Choong Wilkins:I think every child on the planet doesn't like green beans because they were all pushing those around on their plate every time. Sometimes they were swapping bits of the meals with each other that they didn't like or the ones they wanted. But I would also say, particularly in the rural area, there was a sense from these kids that they kind of appreciated the gesture.

5:31Rosalind Mathieson:When Indonesian President Prabowo began laying the groundwork for his free meals initiative, it was aimed at addressing a growing public health crisis. As of 2024, nearly one in five Indonesian children were affected by stunting, a condition linked to long-term malnutrition. Prabowo has made fighting this condition personal.

5:53Rebecca Choong Wilkins:He's very much attached his personal brand to this and he was motivated by the desire, he says, to take better care of the people of Indonesia and to lift them up in a way to give them opportunities through better nutrition. And you can see how important it is to him. He's enlisting the military to help roll out this program. He's a former military general, as we know. He's a bit of a state interventionist at heart, a bit of a socialist when it comes to economic policy. So he sees a very strong role for the state in economic policy in Indonesia. And that has kind of cascaded through all his policies so far.

6:36Rebecca Choong Wilkins:Just last week, Prabowo announced that the government's going to take direct control of exports of some commodities through a new state export body. This is part, of course, of Prabowo's push for the state to play a larger part in the economy. He's argued that more of the profits from natural resources should stay at home and be channeled into social programs and infrastructure. And of course, that includes his very, very big free meals program.

7:06Rosalind Mathieson:Prabowo says the program is supposed to do much more than just improve nutrition. He says that it could transform the economy too.

7:14Rebecca Choong Wilkins:So it is that idea again of leveraging of this program to not just improve child nutrition, which is very important, and their retention rates at school. So more kids turning up to school, but also staying at school. But it is that multiplier effect on the economy that he talks about.

7:32Rosalind Mathieson:Prabowo talked about that multiplier effect at the World Economic Forum earlier this year. Our free meals strengthens our economy. More than 61 ,000 micro, small and medium enterprises and corporates are now a part of this supply chain. We are creating more than 600 ,000 jobs just at the kitchens.

8:05Rebecca Choong Wilkins:So create an ecosystem of jobs locally, wherever these central kitchens are located, also potentially help consumption so that if parents aren't spending so much money feeding their kids, they have perhaps a bit more money to invest elsewhere in the economy. and essentially can it just be a contributor to GDP and to rising prosperity in Indonesia. So he's banking on this program to do an awful lot.

8:33Rosalind Mathieson:For now at least, Indonesians seem to be on board. Opinion polls suggest the program has been fairly popular and the government has moved quickly to scale it up. Now there are more than 25 ,000 kitchens operating nationwide, each serving up to 3 ,000 meals a day. But as Ros found, the reality of delivering food at that scale and across an archipelago of more than 17 ,000 islands can be messy.

8:59Rebecca Choong Wilkins:In the rural area, it's rough going. You know, the roads are often washed away. They're prone to flooding. They're potholed already. So the trucks have to navigate these roads to make each stop. And they've got to try and make each stop on time. And they say every day they're feeling pressured to make sure that they do their deliveries on time. Another logistical challenge that they face, particularly in the rural area, is that there aren't big farmer markets open every day. They have to drive a couple of hours to another bigger town to source produce. So that's another logistical challenge because it's sort of a four-hour round trip to get there and back.

9:38Rosalind Mathieson:Then there's the question of food safety. Across the country, at least 15 ,000 children have fallen ill due to food poisoning linked to the programme.

9:47Rebecca Choong Wilkins:There were particularly early on quite widespread and documented cases of food poisoning. There were some reports even of shards of glass in some meals. There are still those occurring, but they do seem to be tapering off. When we spoke to the head of the National Nutrition Agency, he was telling us very clearly they are penalising kitchens for infringement, so they might stop their payments for a couple of weeks. In extreme cases, they will close those kitchens entirely.

10:18Rosalind Mathieson:Critics of the programme point to food safety issues like these. And they're beginning to ask whether the programme can actually deliver the kind of economic payoff promised by the government. Ros put that question to the head of Selyos, a Jakarta-based think tank.

10:33Rebecca Choong Wilkins:The head of the think tank asked him how he would grade it. He said, well, I give it an F for now. And they've been critical in a bunch of ways about this programme, including, again, that idea of an economic multiplier. And they don't see it. In fact, one thing they said is that anecdotally that they have found evidence of an inflationary impact of this program at a localised level. So parts of Indonesia where there have been people saying, well, we're seeing increases in chicken prices and egg prices because the kitchens are hoovering up all these things.

11:10Rosalind Mathieson:After the break, we look at the cost of running such an ambitious program and why ProBoa's enthusiasm for this kind of social experiment is making investors nervous.

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13:45Rosalind Mathieson:Indonesia's free meals program is expected to feed nearly 83 million people, or around a third of the population, by the end of this year. To do that, the government has set aside$15 billion, five times the amount it spent last year. That's according to the National Nutrition Agency. But Bloomberg's Rosalind Mattison says investors are worried about that growing price tag.

14:08Rebecca Choong Wilkins:It is a large amount of the budget. They have looked to trim a bit of it, and the government is looking at cost-cutting measures as a whole to try and save about$7.1 billion. That's again as they're under pressure from rising energy prices and the impact of the war in the Middle East. And that's putting a lot of questions over the legal budget deficit cap, which has been set at 3 % for a long time. And that's been a cornerstone for investors for many years. And they're looking at that closely and saying, are you going to breach that budget cap? And will the free meals program be a factor in you doing that?

14:47Rosalind Mathieson:For more than two decades, Indonesia has lived with a strict fiscal rule. Since 2003, the government has been legally required to keep its budget deficit below 3 % of GDP, a safeguard put in place after the Asian financial crisis. But in March, a government official suggested temporarily easing that limit to cope with higher oil prices. For markets, Roz says that was a red flag.

15:12Rebecca Choong Wilkins:Both Moody's and Fitch cited it, that 3 % figure as a factor when they lowered their rating outlooks on Indonesia this year. So the rating houses are watching that 3 % figure very closely and saying the spending. A lot of this is coming from these big ticket programs, including free meals. It's coming at a time when investors are also nervous about the broader investability in Indonesia.

15:39Rosalind Mathieson:President Prabowo Subianto last week announced the government would take control or direct control of exports of some of Indonesia's most important commodities.