Indonesia is implementing a sweeping overhaul of its trade policies for key commodities, a sudden move that experts are likening to a ‘hostile takeover’ of major industries within the resource-rich nation. Announced by President Prabowo Subianto, this strategic pivot mandates that a newly established state-owned enterprise will take direct control over the country’s exports of coal, palm oil, and iron alloys by September, a decision poised to send significant ripples across international supply chains and reshape global trade dynamics.
New State Entity to Centralize Exports
The new regulation, presented to parliament on a Wednesday, establishes PT Danantara Sumberdaya Indonesia as the sole entity responsible for these critical exports. This enterprise, officially registered just the day before Prabowo’s announcement, is 99% owned by Danantara, the sovereign wealth fund launched by the president last year. The directive requires private companies to transition their import and export transactions to Danantara between June and August, with the state-owned firm expected to manage all foreign buyer transactions by September. This consolidation aims to strengthen the government’s influence on setting commodity prices.
Driving Revenue and Oversight
President Prabowo articulated the primary objectives behind this aggressive policy shift: to increase tax revenues and replenish dwindling government reserves. These reserves, he noted, have been exhausted by the energy shocks stemming from the war in Iran. Prabowo told lawmakers that Indonesia had lost an estimated $908 billion due to exporters underreporting sales to evade taxes and other fees. He emphasized, “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.” Yvonne Mewengkang with Indonesia’s Ministry of Foreign Affairs added that this “represents a governance reform, a step toward strengthening our credibility in managing strategic commodity trade in an orderly and accountable manner.”
Global Supply Chain Repercussions
Given Indonesia’s pivotal role as a major commodities exporter, the new rules are expected to have far-reaching global implications. The Southeast Asian nation, home to roughly 287 million people, is the world’s largest exporter of thermal coal, a vital energy source, and palm oil, an ubiquitous ingredient in products ranging from cosmetics to biofuels. Furthermore, Indonesia boasts the world’s largest known reserve of nickel, a critical mineral for electric vehicle batteries and stainless steel production. This centralized control over such significant resources will inevitably impact numerous international markets, including the U.S., the European Union, India, Japan, South Korea, and neighboring Malaysia, Vietnam, and the Philippines.
China’s Strategic Vulnerability
China, as Indonesia’s largest trading partner and a top importer of the affected resources, is anticipated to “feel the brunt of this policy pivot,” according to experts. Lie Xie, from the UK-based think tank Third Generation Environmentalism, stated that China is “closely watching Indonesia’s ‘initiative to nationalize’ and considering ‘how it would impact China’s further cooperation.'” The swiftness of the new rule’s implementation could particularly affect China’s clean technologies industries, which rely heavily on Indonesian commodities to meet the surging demand for renewable energy. Li Shuo, with the Asia Society Policy Institute’s China Climate Hub, underscored this reliance, noting, “Indonesia has become vital to China” as it supplies commodities that “underpin China’s dominance in electric vehicles, batteries, and industrial manufacturing.” However, Li added, “the relationship is evolving.”
Geopolitical Investment Shift
The move also carries significant geopolitical weight. Analysts suggest that if managed effectively, this centralization of Indonesia’s trade could open doors to increased American investment, positioning the nation as a more competitive player in the global race for key resources. Bhima Yudhistira of the Jakarta-based Center of Economic and Law Studies (CELIOS) explicitly called the new policy a “hostile takeover,” asserting that it “is a clear signal that U.S. investment is being attracted to come to Indonesia even more.” He further suggested that “every contract in industries controlled by China may be revised,” indicating a deliberate strategy to diversify Indonesia’s investor base and potentially reduce Chinese dominance. This, Yudhistira warned, will only intensify the race for resources between the two superpowers.
Industry Skepticism and Challenges
Despite the government’s stated intentions, the rapid implementation timeline has generated skepticism among trade analysts, who question the feasibility of seamlessly taking over trade across multiple industries within less than four months. Airlangga Hartarto, the coordinating economic minister, stated, “There will be an explanation for investors later, so that stakeholders will be informed before June 1,” adding, “After all, in the initial phase, we are focusing on transparency in reporting.” However, the China Chamber of Commerce in Indonesia had already sent a five-page protest letter highlighting investors’ concerns about an “unstable business climate” and “excessively stringent regulation, over-enforcement, and even corruption and extortion” faced by Chinese enterprises. Yudhistira observed that “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.” Private businesses, too, remain largely “in the dark,” with Eddy Martono, chairman of the Indonesian Palm Oil Association, expressing concerns that “Exporters usually already have their own established markets; we must ensure we do not lose these markets if they are not managed properly.”
This policy is consistent with President Prabowo’s broader agenda of increasing state control over strategically important commodities, which has included cracking down on unauthorized mining operations, taking over plantations, and promoting domestic refining for critical minerals. While analysts like Yudhistira believe reducing Chinese control could attract other investors, intensifying the “race for resources” between superpowers, the ultimate success of this new policy in attracting new investment will hinge on the transparency of its implementation. Syahdiva Moezbar of the Centre for Research on Energy and Clean Air emphasized this point, stating that Danantara’s impact on small-volume trade, specialized product exports, and downstream industries still needs to be clearly defined for stakeholders.
