Indonesia will centralize exports for key commodities including palm oil and coal through a state-owned enterprise starting June 1, a move that threatens to disrupt global supply chains and has already roiled markets.
"The sale of all our natural resource products, beginning with palm oil, coal, and ferroalloys, will be required to go through designated SOEs as the sole exporters," President Prabowo Subianto said in a speech to parliament on Wednesday.
The announcement sent benchmark Malaysian palm oil futures up nearly 2 percent, while Jakarta's main stock index (.JKSE) fell 0.82 percent, extending a 3.5 percent drop from the previous day. The policy aims to tackle what Prabowo described as $908 billion in lost revenue over 34 years due to under-invoicing and transfer pricing.
The policy, which designates sovereign wealth fund Danantara to oversee the new trading body, has rattled investors wary of increasing resource nationalism and creates significant uncertainty for the world's largest exporter of palm oil, thermal coal, and nickel.
Investor Backlash and Monopoly Fears
Under the new framework, producers must sell their products to the new state entity, PT Danantara Sumber Daya Indonesia (PT DSI), which will then negotiate prices with international buyers. The move has stoked fears of a state-controlled monopoly that could erode transparency and competition.
"Investors are increasingly concerned on policy direction, and this has driven outflows from Indonesia's capital markets," said Jayden Vantarakis, head of ASEAN research at Macquarie Capital in Singapore.
The Indonesian Oil Palm Farmers' Association (POPSI) warned the policy could create a monopsony, or a market with only one buyer, crushing the bargaining power of millions of smallholders. The group drew parallels to a controversial clove-trading monopoly during the New Order era that ultimately devastated farmers.
A Familiar Playbook
The export-control measure is the latest in a series of resource-nationalist policies from Jakarta. In 2020, the country banned raw nickel ore exports, forcing investment into domestic processing facilities and making Indonesia a dominant force in the global nickel market.
While the government insists the new policy will simply ensure fair pricing, Danantara spokesperson Rohan Hafas said PT DSI will not determine prices but only oversee transactions. However, industry groups remain skeptical, fearing it will disrupt established trade relationships and squeeze margins. The uncertainty could benefit rival producers, particularly Malaysia, which could be seen as a more stable source for palm oil.
The move comes as Indonesia's economy faces growing pressure, with a weakening rupiah prompting the central bank to raise interest rates by 50 basis points this week for the first time in two years.
This article is for informational purposes only and does not constitute investment advice.
