Indonesia on Wednesday began steering key commodities—including coal, palm oil and iron alloys—through a newly created state-owned enterprise, a sudden policy change that reshapes how the resource-rich country manages exports. President Prabowo Subianto presented the plan to parliament as a regulation that requires private companies to transfer transactions in stages, with the state entity expected to manage exports by September.
Under the regulation, exports of the commodities will be handled by a recently set up state-owned enterprise, PT Danantara Sumberdaya Indonesia, starting on a timeline that runs from June through August. In that initial phase, private businesses are expected to turn over their import and export transactions to the company, and by September the entity should manage trade dealings with foreign buyers.
Prabowo said the policy is designed to increase tax revenues and restore government reserves that had been depleted by energy shocks tied to the war in Iran, according to his remarks to lawmakers. He also told lawmakers that the policy’s “primary objective” is to strengthen oversight and monitoring and to combat under-invoicing, transfer pricing and diversion of export proceeds, framing the move as an attempt to improve control over how exporters report and remit money.
The policy pivots on the scale and speed of the transfer of power from private operators to the state-backed entity. The company at the center of the change, PT Danantara Sumberdaya Indonesia, was officially registered the day before Prabowo’s announcement, and it is 99% owned by Danantara, the sovereign wealth fund launched last year by the president. Indonesia’s Ministry of Foreign Affairs described the arrangement as a governance reform intended to strengthen the country’s credibility in managing strategic commodity trade in an orderly and accountable manner.
The government also sought to narrow expectations of disruption by describing how it will communicate with investors ahead of the operational handover. Indonesia’s coordinating economic minister, Airlangga Hartarto, said there would be an explanation for investors later so stakeholders are informed before June 1, adding that the first phase focuses on transparency in reporting. Trade analysts, however, said they were skeptical the government could seamlessly take over export operations across multiple industries in less than four months.
Because Indonesia is a major supplier of raw materials used in energy and manufacturing, the policy’s effects are likely to be felt abroad, particularly in China. Indonesia is described as the world’s largest exporter of thermal coal and palm oil, and it has the biggest known nickel reserve, a mineral needed for electric vehicle batteries and stainless steel. With China described as Indonesia’s largest trading partner, experts said Beijing could feel the brunt of the policy pivot.
Lei Xie, of the UK-based think tank Third Generation Environmentalism, said China was closely watching Indonesia’s approach as it considers how it would impact China’s cooperation. Li Shuo, of the U.S.-based Asia Society Policy Institute’s China Climate Hub, said China’s relationship with Indonesia is changing, arguing that Indonesia supplies commodities that “underpin China’s dominance in electric vehicles, batteries, and industrial manufacturing” while China adjusts to the new structure.
At the same time, some observers said the state centralization could open a door for investment from other countries as Indonesia tries to diversify investors. Bhima Yudhistira of the Jakarta-based Center of Economic and Law Studies called the move a “hostile takeover” and said every contract in industries controlled by China may be revised, while warning the shift could intensify the race for resources between the U.S. and China. Other researchers said whether the policy attracts new investors will depend on how transparently it is implemented, pointing to areas that private firms say remain unclear.
Indonesian industry groups also voiced concerns about how specific parts of the supply chain would be handled. Eddy Martono, chairman of the Indonesian Palm Oil Association, said the impact on small-volume trade, specialized product exports and downstream industries still needs to be spelled out and warned that exporters “usually already have their own established markets,” adding that Indonesia must ensure those markets are not lost if they are not managed properly. Other reporting in the cluster also notes that Chinese business groups had protested earlier, warning about what they described as unstable business conditions and regulatory pressure.