The Indonesian government is moving to consolidate state control over its most valuable commodity exports in a sudden policy shift that has sent tremors through global markets. President Prabowo Subianto told parliament on Wednesday that a newly registered state-owned enterprise, PT Danantara Sumberdaya Indonesia, will by September handle all export transactions for thermal coal, palm oil and iron alloys — a move analysts described as a “hostile takeover” of industries heavily influenced by Chinese investment.
The regulation, officially registered the day before Subianto’s announcement, gives Danantara — an entity 99% owned by the president’s sovereign wealth fund — authority over every foreign sale of the three commodities. The government says the overhaul will close loopholes that have allowed exporters to underreport revenue. Subianto told lawmakers that Indonesia had lost as much as $908 billion because of under-invoicing, transfer pricing and the diversion of export proceeds.
“The primary objective of this policy is to strengthen oversight and monitoring — and to combat under-invoicing, transfer pricing and the diversion of export proceeds,” Subianto said.
A foreign ministry official, Yvonne Mewengkang, described the centralization as “a governance reform, a step toward strengthening our credibility in managing strategic commodity trade in an orderly and accountable manner.”
Indonesia’s role in global commodities lends the move outsized weight. The country is the largest exporter of thermal coal, the largest exporter of palm oil, and possesses the world’s largest known reserves of nickel, a critical mineral for electric vehicle batteries and stainless steel. The overhaul will directly affect China, the biggest buyer of Indonesian commodities and the dominant investor in the country’s nickel processing and mining industries.
Chinese enterprises have reacted with alarm. The China Chamber of Commerce in Indonesia last week sent a five-page protest letter to Jakarta, warning that “excessively stringent regulation, over-enforcement, and even corruption and extortion by competent authorities” were eroding business confidence and undermining long-term investment. Their concerns were underscored by analysts who noted that the policy was announced despite Beijing’s opposition.
“Prabowo didn’t listen to the complaint from these Chinese companies and then did something very, very shocking with this new body to control the export,” said Bhima Yudhistira of the Jakarta-based Center of Economic and Law Studies.
Yudhistira, who called the regulation a “hostile takeover,” said the move could eventually attract new investors — particularly from the United States, which is competing with China for access to critical minerals. “Such a move is a clear signal that U.S. investment is being attracted to come to Indonesia even more,” he said.
The potential opening, however, carries risks. Syahdiva Moezbar of the Centre for Research on Energy and Clean Air said success will depend on transparency in the implementation, something that remains unclear just weeks before the transition begins. Private businesses in the commodities sector said they had not been briefed on the details.
“Exporters usually already have their own established markets,” said Eddy Martono, chairman of the Indonesian Palm Oil Association. “We must ensure we do not lose these markets if they are not managed properly.”
Lei Xie of the London-based think tank Third Generation Environmentalism said China is “closely watching” Indonesia’s initiative to nationalize and evaluating “how it would impact China’s further cooperation.” Li Shuo of the Asia Society Policy Institute’s China Climate Hub noted that the relationship is evolving. “Indonesia has become vital to China” because its commodities “underpin China’s dominance in electric vehicles, batteries, and industrial manufacturing,” he said. “But the relationship is evolving.”