Indonesia significantly strengthens resource export controls! Establishes state-owned enterprises, with the president stating "becoming the sole exporter of all resources from palm oil, coal to ferroalloys"

Indonesia announces that it will monopolize commodity exports through a state-owned enterprise, a move that will profoundly reshape the business landscape of the world's largest exporter of palm oil, thermal coal, and nickel, and impact global markets dependent on Indonesian commodities.

On May 20th, according to the Financial Times of the UK, Indonesian President Prabowo Subianto announced in parliament on Wednesday that the government will establish a state-owned enterprise as the sole exporter of multiple Indonesian commodities.

"All sales of our natural resources, from palm oil and coal to ferroalloys, must go through a government-designated state-owned enterprise as the sole exporter," he said, "All commodity prices must be set within our own country."** The new regulation will be implemented in phases starting June 1st.**

Following the announcement, benchmark palm oil prices on the Malaysian exchange rose nearly 2%, and nickel prices also increased due to supply concerns. Shares of London-listed palm oil producer AEP Plantations plummeted over 20% in early Wednesday trading, reflecting investor deep worries about the profitability prospects of commodity exporters.

Monopoly Export Framework: State Enterprises in the Middle, Producers Lose Direct Sales Rights

According to reports, based on Prabowo's statements, the new rules will fundamentally change Indonesia’s commodity export chain.

Currently, Indonesian producers can sell directly to overseas buyers; after the new rules take effect, producers must sell their products to this state-owned entity, which will then negotiate prices with foreign buyers.

Prabowo stated that this move aims to combat long-standing export fraud—he pointed out that between 1991 and 2024, losses caused by under-invoicing reached as high as $900 billion.

The report did not specify which ferroalloy varieties are involved, but analysts suggest that the scope may include some nickel products—nickel being a key raw material for stainless steel and electric vehicle batteries.

This export control is not Indonesia’s first aggressive resource management move. In 2020, Jakarta suddenly banned the export of raw nickel ore, forcing foreign-invested companies to invest in nickel processing facilities within Indonesia, which ultimately elevated Indonesia to a dominant position in the global nickel market.

The establishment of the new agency also has fiscal logic. The report states that as tensions in the Middle East continue to push up global oil prices, Indonesia’s macroeconomic and fiscal risks are rising, and the government hopes to expand national revenue through controlling commodity exports.

Since taking office in late 2024, Prabowo has implemented a series of costly populist policies, including free meal programs for schoolchildren, which have put significant pressure on the economy of Southeast Asia’s largest economy.

Indonesia also provides large-scale fuel subsidies, and rising oil prices further strain fiscal resources.

Meanwhile, the Indonesian central bank announced on Wednesday a 50 basis point rate hike to 5.25%, marking the first rate increase in two years, aiming to stabilize the rupiah, which has recently hit new lows.

Supply Concerns Worsen, Small and Medium Traders Hit First

The impact of the new policy on the global commodity markets is already reflected in prices. The immediate rise in palm oil and nickel prices indicates market worries that Indonesian exports may be hindered.

Eddy Martono, president of the Indonesian Palm Oil Association, warned that if the new agency is poorly managed, export volumes could be affected. "Trade companies handling small batches may be hit harder, with some even facing closure risks, leading to layoffs," he said.

Dedi Dinarto, deputy director of strategic consultancy FGS Global, pointed out that the core issues currently most concerning to the market include: how prices will be determined, how existing contracts will be handled, how much profit margin the state-owned enterprise will retain, and whether exporters can maintain sufficient business flexibility.

"He said, 'If investors see this as a signal that the government is shifting toward greater discretionary control, it could suppress future investment appetite.'"

This policy adjustment occurs against the backdrop of an already strained business and investment environment in Indonesia. The trend of economic centralization promoted by Prabowo, along with fiscal and economic policies, has caused widespread unease among businesses and investors. Earlier this year, global index provider MSCI warned that Indonesia might be downgraded to frontier market status, further dampening market confidence.

The resource sector had already been impacted by Prabowo’s push to seize millions of hectares of palm oil and mining company lands (allegedly for environmental violations), but the business community generally accuses the government of not following proper procedures.

Dedi Dinarto’s assessment highlights the core contradiction: the actual impact of the new policy will largely depend on implementation details and transparency—variables that are currently the hardest to assess.

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