By The Straits Times | Created at 2026-06-10 21:06:52 | Updated at 2026-06-11 16:25:05
19 hours ago
JAKARTA -- Indonesia is scaling back a controversial proposal to centralise the export of its strategic commodities, after buyers and exporters raised concerns, The Straits Times has learnt.
Instead, the authorities will impose tighter monitoring on exports of key commodities to prevent exporters from understating shipment values and evading taxes, two government officials told ST.
The shift marks a retreat from an earlier plan that would have channelled overseas sales of commodities such as coal, palm oil and ferroalloys through a state-linked entity, a proposal that sparked concerns over market disruption and tighter export control.
But Indonesia is not going ahead with such restructuring, said the officials, who spoke to ST on condition of anonymity.
One official said Indonesia will instead impose tighter monitoring on exports to prevent under-invoicing – an illicit trade practice in which exporters deliberately understate the value of shipments on official trade documents to evade taxes, reduce royalties and shift profits offshore.
“We will establish a transparent pricing methodology. If an export price is deemed too low, we will require exporters to revise it,” the official told ST. The system is intended to ensure export prices align with prevailing market rates, preventing goods from being sold below market value.
On May 20, President Subianto Prabowo had unveiled plans to centralise all strategic commodity exports under a new state-controlled entity. The entity, called Danantara Sumberdaya Indonesia (DSI), would fall under the broader Danantara sovereign wealth fund structure.
As reported earlier in May, under draft regulations seen by ST then, foreign buyers would no longer deal directly with Indonesian exporters, but instead via the new body, which would oversee contracts, shipping and payments. The transition period was to have begun on June 1, before stricter rules kick in from Sept 1.
By pivoting to an oversight role, Jakarta avoids becoming a single export intermediary, a structure that some investors and market participants had viewed as close to a state monopoly and potentially disruptive to existing market arrangements.
Still, the government says it remains focused on reducing economic leakages. The tighter monitoring framework aims to recover billions in lost revenue while preserving business certainty and a competitive investment climate.
“We will be tightly monitoring (the situation). But DSI is not going to be a single export trader. It is more of a solo, middle-man entity, whose main job is to ensure fair pricing,” the second government official told ST. The official said this objective would be achieved if Indonesia curbs under-invoicing.
He also dismissed concerns, widely reported in local media, about possible rent-seeking – where profits are extracted without adding real economic value – stressing that the proposed DSI framework would ease exporters’ worries: “DSI would likely take only a very small profit margin – between 0.05 per cent and 0.1 per cent – on traded commodities in order to sustain its operations.”
“The commercial relationship between buyers or traders overseas with exporters may continue. They just need to report to us to make sure there is no under-invoicing,” he added.
The overseas sales of coal, palm oil and ferroalloys, according to government data, totalled US$66.13 billion (S$84.43 billion) in 2025, accounting for about a quarter of Indonesia’s total exports.
The Jakarta Composite Index plunged 3.54 per cent on May 21, following the announcement to centralise commodity exports, before recovering modestly in the next session.
The market’s initial reaction should be read as doubt rather than a rejection of economic nationalism, said Achmad Nur Hidayat, an economist and public policy expert at public university UPN Veteran Jakarta.
“The market does not just read intent. The market reads design,” he told ST. In other words, markets focus less on what governments say they want to do, and more on how the policy would actually work.
Achmad likened the policy shift to repairing a leaking roof: investors are not objecting to the repair itself, but are concerned about the process.
They are asking “whether the contractor chosen is genuinely an expert, whether the materials are available, and whether the renovation process won’t force the occupants to move out temporarily without knowing when it will be finished”.
If DSI slows down exports or reduces contract certainty for global buyers, investors will price in higher risk and potentially reduce investment or trading activity, he warned.
A foreign banker told ST in a written message on June 6 that some palm oil exporters had cancelled planned cargo shipments for fear of breaching rules and incurring penalties.
When Prabowo announced that a new state entity would become the sole exporter of key commodities, the government’s argument was that too much value from Indonesia’s resource wealth has moved offshore. The officials who spoke to ST say much of this value flows through Singapore.
By the Indonesian government’s own calculations, decades of under-invoicing and rerouted documentation have resulted in significant losses.
Large volumes of Indonesian palm oil have historically been traded through Singapore before being resold at higher prices to buyers in the US and Europe, according to an April 2026 research report by Jakarta-based think-tank NEXT Indonesia Centre.
Merchanting trade, in which goods are bought and sold through a trading hub without physically entering the country, is a standard and legal practice in international commerce. Indonesia’s concern relates to alleged under-invoicing rather than the merchanting activity itself.
The NEXT report added that some palm oil exports were sold to affiliated trading entities at prices below prevailing market rates before being resold overseas, contributing to lost export and tax revenues for Indonesia.
Prabowo’s May 20 speech put the cumulative loss from poor natural resource management at around US$908 billion over 34 years.
Following the announcement, state investigators launched a probe into alleged under-invoicing in palm oil exports involving Indonesian exporters and affiliated trading companies in Singapore.
Jakarta-based news portal Kontan reported that the national police detective unit visited the Jakarta office of a major palm oil exporter on May 29, confiscating trade documents.
The Indonesian government has argued that pulling the export chain onshore could help repatriate earnings, trading desks and financial services long rooted in Singapore.
Indonesian public policy expert Lin Che Wei noted that cargoes may never physically enter Singapore – sailing directly from Indonesian ports to the destination country – even though the trade is booked in Singapore. This practice is known as merchanting trade.
“Singapore’s role is often about contracts, credit, freight, insurance, arbitration and optionality, not just physical transshipment,” Lin said.
A Jakarta-based industry analyst pointed out that Singapore’s true added value lies in its infrastructure, with links to more than 600 ports, around 200 shipping lines, and more than 400 international trading companies.
“Singapore becomes attractive when a deal needs financing, aggregation, flexible routing, insurance, chartering, or the ability to switch destinations after the cargo has lawfully left port,” said the analyst, who declined to be named because he isn’t authorised to speak the media.
He added that Singapore’s status as a leading arbitration seat provides a “compelling reason” for buyers to choose the jurisdiction. “Singapore’s laws are written entirely in English, giving greater confidence to buyers compared with navigating legislation drafted in Bahasa Indonesia.”
