Gas Cuts, Conspiracy Theories and Hot Air: Indonesia’s Dirty Playbook Against Singapore.

Hi Folks, welcome back to Investment Income for Life. Today’s post is a little different from my usual dividend and portfolio updates. Over the past two weeks, Singapore has found itself on the receiving end of some rather hostile words, and now actions, from across the Straits. As investors living in a small, resource-poor city-state of Singapore, I think it is worth stepping back and asking what this episode tells us about risk, resilience and where Singapore needs to go next.

1. What Happened This Week
This year’s haze has been the worst since 2015. The 24-hour PSI peaked at 230 on 18 October, and for a few days Singapore was ranked among the most polluted cities in the world. Our government decided enough was enough. NEA sent legal notices to 10 companies over fires believed to be on their land, SGX queried seven listed agricultural firms about their operations and possible links to the haze, and Senior Minister K Shanmugam made it clear that companies would not escape responsibility.

The response from Jakarta was not cooperation, but retaliation. On 22 October, Indonesia’s Coordinating Minister for Downstreaming and Energy Transition, Bahlil Lahadalia, warned that he would evaluate energy export agreements and would not hesitate to consider stopping exports to countries that do not respect Indonesia. He did not name Singapore, but nobody needed a map to figure out who he meant. Two days later, on 24 October, Indonesia cut pipeline gas exports to Singapore by about 9%, officially to divert supply for domestic electricity needs in Batam, Bintan and Sumatra. Convenient timing, wouldn’t you say?

The good news is that EMA has said the reduction amounts to less than 2% of Singapore’s total daily gas demand of more than 1,000 BBTUD, and contingency plans are in place. The lights stay on. But the message behind the move is what matters.

2. The MSCI Conspiracy Theory
Around the same time, MSCI said it expects to remove Indonesia from its global indices unless the market makes major improvements in governance. Indonesian stocks tumbled by the most since the 1998 Asian Financial Crisis. MSCI’s concerns are hardly a secret: shareholding opacity, insider trading and weak regulatory enforcement. A final decision is expected by 30 June 2027.

Instead of looking inward, former Indonesian trade minister Muhammad Lutfi took to Instagram and alleged that Temasek and GIC had pressured MSCI to threaten a downgrade, triggering mass panic so that Singapore could buy up Indonesia’s best assets on the cheap. Temasek called the allegations baseless and patently untrue, and GIC pointed out it has invested in Indonesia for more than 30 years.

Here is the part I find most telling. Even the president director of the Indonesia Stock Exchange, Jeffrey Hendrik, publicly defended MSCI’s independence. CNN Indonesia also noted there was nothing in MSCI’s announcement to support Lutfi’s claims. Folks, when your own stock exchange will not back your conspiracy theory, it is probably time to put the phone down. Index providers reclassify markets based on investability and governance, not on the wishes of a neighbouring sovereign fund. Blaming Singapore for MSCI’s verdict is a bit like blaming the thermometer for your fever.

3. Singapore, the Convenient Punching Bag
This is not new. Every few years, some Indonesian politicians reach for the Singapore card. During past haze crises, one minister complained it was “insulting” that Singapore offered only one aircraft to fight the fires, and another blamed the wind. This year, the head of Indonesia’s government communications agency told us that when there is no haze, Indonesia sends us oxygen. You really cannot make this up.

To be fair, SM Shanmugam was careful to say these views do not reflect the wider Indonesian government or public, and President Prabowo has been making efforts on the haze. Ordinary Indonesians suffer from the haze as much as we do, if not more. But in my view, a small but loud group of politicians finds it far easier to point at the little red dot than to explain to their own people why the economy is struggling, why governance problems are spooking global investors, and why the same plantation fires keep burning year after year. A foreign bogeyman is a cheap distraction from domestic hardship and poor governance.

4. History Rhymes: The Water Lesson
Older readers will remember that Singapore has been here before. For decades, we depended heavily on Malaysia for water, and whenever relations soured, certain Malaysian politicians, Dr Mahathir being the most famous, would raise the spectre of turning off the taps or renegotiating the price. It was leverage, plain and simple.

Singapore’s answer was not to shout back. It was to invest. NEWater and desalination turned water from a vulnerability into a national strength, and today the “Four National Taps” mean no single neighbour can hold us hostage. The threats did not stop because Singapore won the argument. They stopped working because Singapore removed the leverage.

5. Energy: Time for a Fifth Tap
Energy is our modern-day water problem. The vast majority of Singapore’s electricity is generated from natural gas, and a meaningful portion of that gas still arrives by pipeline from Indonesia. This week’s 9% cut is small in absolute terms, but it is a clear signal that gas supply can and will be used as a political weapon.

I see two things Singapore must do. First, diversify our LNG sources aggressively across more supplier countries, so that no single exporter can squeeze us. Second, and more importantly, Singapore should seriously embark on building small modular light-water nuclear reactors on home soil. Modern reactor designs are far smaller and safer than the plants of the past, they run around the clock regardless of weather, and they produce no carbon. Just as NEWater freed us from water threats, home-grown nuclear power could free us from energy threats. It will take years of planning, regulation and public engagement, which is exactly why we should start now, not during the next crisis.

6. What This Means for Investors
Let me put on my investor hat for a moment. First, governance risk in Indonesian equities is real and now has a deadline attached. If MSCI follows through in 2027, passive fund outflows could weigh on the market for some time. Investors with direct Indonesian exposure, or funds heavy in Indonesia, should know what they own and why.

Second, keep an eye on the SGX-listed plantation and agribusiness names that were questioned over the haze. Regulatory scrutiny and reputational risk can hit valuations, as we saw when several of these counters slipped after SM Shanmugam’s remarks.

Third, and on a more positive note, episodes like this tend to accelerate investment in Singapore’s energy security, from LNG infrastructure and regional power imports to longer-term clean energy. That is a theme worth following for long-term investors. As always, this is my personal view and not financial advice, so do your own homework.

7. Parting Thoughts
Singapore cannot choose its neighbours, and we should always aim for good relations with Indonesia, a country of great people and enormous potential. But hope is not a strategy. The lesson from water applies equally to energy: the best response to threats is to quietly build our way out of dependence. When our vital resources are secure, the bluster from across the Straits becomes just noise, and we can get back to what we do best, which is building wealth and income for life.

Ok folks, that's all from me today. Have a great week ahead!