- Indonesia is bringing palm oil, coal, and ferronickel exports under a new state-controlled system.
- The government says the reform will improve transparency and increase export revenues
- Full implementation is due in January 2027, though some investors have raised concerns.
Indonesia has launched a new regulatory regime, placing some of the country’s most important commodities under centralised state control. The policy, announced by Indonesian President Prabowo Subianto in late May, took effect on Monday, 1 June.
Under regulations revealed this week, exports of certain commodities including palm oil, coal, and ferronickel will be routed through a new state-owned institution, PT Danantara Sumberdaya Indonesia (DSI) – a subsidiary of Indonesia’s sovereign wealth fund, Danantara Indonesia.
The new approach will be implemented through a transition period lasting until the end of the year, with full compliance scheduled to begin on 1 January 2027.
During the transition phase, private exporters may continue shipping under existing arrangements, but they must submit electronic transaction reports to the DSI. Once fully implemented, the DSI will take full responsibility for contracts, payments, and shipping.
According to the Indonesian government, the reform is aimed at increasing transparency and boosting state revenues, while preventing under-invoicing, where the invoice entails a lower value than the actual cost of the transaction.
Indonesian state officials have argued that the South-East Asian state has already lost hundreds of billions of dollars in potential revenue due to opaque trade flows and a lack of export oversight.
However, “businesses that are already implementing sound export practices will not face obstacles in conducting their business,” noted Danantara.
The DSI is also developing a digital platform to analyse export transaction data and identify any pricing irregularities, said the government’s communication agency.
The regulations cover a broad range of palm oil products: crude palm oil, refined palm oil, olein cooking oil, used cooking oil, and palm oil residues. Affected coal exports include anthracite, bituminous coal, lignite, and peat products.
Ferronickel and ferro-silico-manganese are among the impacted ferroalloys – concentrated metal alloys containing iron, alongside a high proportion of one or more other elements like manganese or nickel.
Indonesia accounts for over half of global palm oil exports, and is the world’s largest exporter of coal. The ongoing global energy crisis – which is set to have a particularly dire impact in Asia – has already led to certain countries across the continent boosting their coal production, and has triggered discourse about Indonesia taking greater advantage of its coal reserves.
Recent regulation is also reminiscent of when Indonesia made headlines for banning its nickel ore exports in 2022, intended to push mining companies to build processing facilities.
The government’s decisions in the last few years thereby reflect a state-driven effort to maintain control and maximise revenue of domestic resources.
However, investor concerns have emerged over state-controlled pricing and reduced flexibility for exporters. The government has also suggested that more commodities could be brought into the system following periodic reviews.
