Indonesia has announced plans to route all exports of coal, palm oil and ferroalloys through a government-appointed state enterprise, in a sweeping move that has unnerved commodity markets.
President Prabowo Subianto unveiled the policy in a speech to parliament on Wednesday, citing decades of revenue losses he attributed to under-invoicing and transfer pricing by exporters. He said Indonesia had forfeited as much as $908bn in revenue over the past 34 years because its commodities were sold at a discount.
“All sales of our resources – from palm oil to coal – must be through a state-operated enterprise selected by the government as sole exporter,” Prabowo said.
The world’s largest exporter of both thermal coal and palm oil, Indonesia plans to have the designated trading entity overseen by sovereign wealth fund Danantara, with an initial three-month transition period during which existing export arrangements can continue under government monitoring. Senior economic minister Airlangga Hartarto said the transition could be extended to the end of the year, and that additional commodities would be evaluated for inclusion at three-month intervals.
From June 1, all exporters of Indonesian natural resources will also be required to hold 100% of their export earnings in Indonesian state-owned banks.
Prabowo defended the policy as consistent with international practice. “This is not some strange policy. Many countries protect their national interests and manage their strategic commodities carefully,” he said.