CNA Explains: Indonesia's commodity-export controls signal firmer state role in business

Added: 2026-05-28

[00:00:01]Indonesia's president making moves in the last week to tighten controls on key exports to plug what he says are shortfalls in state revenue.

[00:00:10]The shift giving Jakarta a stronger hand over strategic resources, but analysts warn this could add risk to an economy already underwater from skeptical foreign investors.

[00:00:21]CNN's Olivia Mazuki explains.

[00:00:25]Indonesia's economic strength has long come from what it ships out. Raw and processed commodities.

[00:00:32]But the nation's biggest source of wealth has recently become the nation's biggest uncertainty under President Prabowo's so-called one gate centralized export system.

[00:00:41]This aims to address practices such as under invoicing, transfer pricing, and export earnings kept offshore. This is the main objective is a cloud control.

[00:00:52]Indonesia has decided the state should control how its biggest exports leave the country.

[00:01:00]Not corporation anymore.

[00:01:02]So, coal, palm oil, and eventually nickel would all go through a single state sanctioned entity.

[00:01:12]Now, that's the major break from how business has worked for decades, right? So, this is one of the biggest move towards economic nationalism that we have seen for years.

[00:01:25]Under the arrangement, a unit of sovereign wealth fund Danantara, PT Danantara Sumber Daya Indonesia, will manage the sales of key commodities, coal, palm oil, ferroalloys, which made up around 23% of total exports last year. It is designed to improve traceability and raise government revenue, basically stemming tax avoidance.

[00:01:47]Operationally, it is an enormous undertaking. Now, the question boils down to implementation ultimately, right? Because this announcement has arrived. Uh it is a huge change from the previous way things were done for Indonesia, particularly for commodity exports. Ultimately, everything right now will boil down to implementation.

[00:02:08]How Dhanantara and the new entity under Dhanantara will be staffed to implement such a huge undertaking. Already, confusion reigns in the palm oil industry over which products are covered and which may be exempt. Some buyers are demanding discounts. Others are hedging against possible supply disruption.

[00:02:28]Improved transparency, perhaps, but investors see a different side of the coin. This at a time of rising interest rates, a weakening local currency, and concern about the national balance sheet. Indonesia, like we say, is a twin deficit economy. We do have deficits on the fiscal side as well as the current account side. We also got the balance of payments deficit for Q1, which was large as well, over $9 billion, which would suggest that the external side of this economy is being looked at very closely by investors as well. Those uncertainties feeding into an economic loop that ultimately puts investor confidence at risk as buyers potentially delay deals and demand lower prices.

[00:03:12]The buyers, the miners, definitely do not like this policy.

[00:03:19]But, will there be a big response? I don't think so. I think there will be a quiet response. But, that's actually the most damaging response possible. The largest commodity investors in Indonesia, China, Singapore, the US, have much at stake as the government adds another layer of uncertainty to business. None of those incidents or facts on their own would be a crisis, but together, they are a pattern.

[00:03:50]And patterns are what investors and traders act on. The onus is really on the authorities to communicate. It is on the authorities to prove to provide comfort to the private sector particularly that pre-existing contracts will not be negated and to be essentially continue keeping Indonesia as as the strong commodity exporter that it is.

[00:04:31]Politically, the president's message is powerful. Indonesia should capture more value from its own resources.

[00:04:39]But confidence is also a commodity.

[00:04:42]And right now, that is what Indonesia has to protect.

[00:04:47]For CNA Explains, I'm Olivia Marzuki.

[00:04:52]Earlier, an expert looked at the impact on consumers and foreign investors.

[00:04:58]From the latest speeches by Dan Adara officials and by other public officials, it seems that the new trading company will become a profit-making trading company, which means that they will maximize profit. So, it's not only a government agency where export of natural resources will be passed through, but they will try to maximize a profit. And this could mean that they will buy low from domestic producers and will sell high to international buyers.

[00:05:35]That could squeeze the margins of domestic producers and that could be like a worrying sign for domestic producers. And because of this, I think the greater concern is that it may disincentivize domestic producers uh to produce and and to export uh because of the uh lower prices that they could sell to the international market.

[00:06:02]And in terms of the pass-through to uh the consumers, uh certainly when this new trading company sell high to international uh buyers, then it could affect also uh the international consumers uh because of the higher prices that the Indonesian government uh will sell their natural resources uh to. As of right now, the regulation uh stipulates that they will control export of only three strategic commodities, namely palm oil, coal, and ferroalloy. But, uh I think it is uh possible that uh it will be expanded to other strategic commodities, including critical raw minerals such as nickel, in which the Chinese uh businesses and investors have uh have invested a lot in recent years in its downstreaming industry.

[00:06:59]So, if uh if it's expanded to other critical raw raw minerals in which the Chinese businesses and and investors have invested a lot in, then it will certainly hurt uh these Chinese businesses and investors because now they cannot export directly their products uh where they have invested in uh directly to China, but have to go through this trading company.