Indonesia Plans to Centralize Commodity Exports, Including Palm Oil, Through a State Agency

Indonesian President Prabowo Subianto said his government will move to centralize exports of major commodities as part of efforts to increase state revenue and tighten the country’s control over its abundant natural resources.

Speaking before parliament, Prabowo said Indonesia had lost up to US$908 billion in revenue over the past 34 years because its commodities were sold at low prices that did not reflect their true value. He added that key strategic exports, led by palm oil, coal and ferroalloys, would in future be sold exclusively through a centralized state-owned institution.

Indonesia is a major global commodity power and is the world’s largest exporter of thermal coal and crude palm oil.

The president said the government would issue a new regulation on the management of commodity exports. He described the move as a strategic step to strengthen export governance, saying that sales of resources such as palm oil and coal should pass through a state-owned body selected by the government as the sole exporter.

Transition Period and Tighter Measures

Coordinating Economic Minister Airlangga Hartarto said the first commodities to be centralized would be coal, palm oil and ferroalloys. The government will review markets every three months to decide whether additional commodities should be included.

Under a parallel regulation, all Indonesian natural resource exporters will also be required from June 1 to deposit 100% of their export proceeds in state-owned Indonesian banks.

Policy Goals and Market Reaction

Hartarto said the measures aim mainly to address long-standing concerns over under-invoicing and transfer pricing practices used by some exporters to reduce the revenue due to the state.

Financial markets reacted cautiously to the announcement. Jakarta’s main stock index fell by around 2% after the announcement, amid investor and producer concerns that a state-controlled buyer system could weaken competitiveness and narrow profit margins for companies operating in the energy and agriculture sectors.

Source: Reuters

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