Indonesia Creates State Entity to Control Coal, Palm Oil and Nickel Exports

Indonesian President Prabowo Subianto announced a new regulation to parliament on Wednesday that transfers control of the country’s coal, palm oil and iron-alloy exports to a state-owned enterprise by September. The entity, PT Danantara Sumberdaya Indonesia, was registered the day before the announcement.

It is 99 percent owned by Danantara, the sovereign wealth fund launched last year, and will set prices and oversee all export transactions with foreign buyers. Prabowo said the policy aims to increase tax revenue and reduce losses from under-invoicing.

He told lawmakers that Indonesia had lost as much as $908 billion from exporters underreporting sales.

June to August, private companies must transfer their import and export transactions to Danantara. By September the state entity is scheduled to handle all trade with foreign buyers. Airlangga Hartarto, the coordinating economic minister, said an explanation for investors will be provided before June 1, with an initial focus on transparency in reporting.

Yvonne Mewengkang of the Ministry of Foreign Affairs stated that the change represents a governance reform aimed at strengthening credibility in managing strategic commodity trade.

China is Indonesia’s largest trading partner and a major importer of the affected commodities. Chinese firms dominate the nickel industry and have made substantial investments in critical minerals. Lei Xie of Third Generation Environmentalism said China is watching the nationalization initiative and assessing its impact on future cooperation.

Li Shuo of the Asia Society Policy Institute noted that Indonesia supplies commodities that underpin China’s electric-vehicle and battery sectors. S. investment and may lead to revisions of contracts held by Chinese companies. Eddy Martono, chairman of the Indonesian Palm Oil Association, said private exporters are still awaiting details on how the transition will affect established markets and downstream industries.