Indonesia significantly strengthens resource export controls! Establishes a state-owned enterprise; the President says it will “become the sole exporter for all resources, from palm oil and coal to ferroalloys.”

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Indonesia has announced 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 20, according to the UK Financial Times, Indonesian President Prabowo Subianto announced in parliament on Wednesday that the government will establish a state-owned enterprise to act as the sole exporter of multiple Indonesian commodity classes.

"The sale of all our natural resources, from palm oil, coal, to ferroalloys, must go through a government-designated state-owned enterprise as the sole exporter," he stated, "the prices of all commodities must be determined in our own country." The new regulation will be implemented in phases starting June 1.

After the announcement, Malaysia's benchmark palm oil prices rose nearly 2%, and nickel prices also climbed due to supply concerns. London-listed palm oil producer AEP Plantations' shares plunged more than 20% in early Wednesday trading, reflecting deep investor fears about the profit outlook for commodity exporters.

Monopoly Export Structure: State Firms as Intermediaries, Producers Lose Direct Sales Rights

According to reports, Prabowo's remarks signal the new regulation will fundamentally change Indonesia's commodity export chain.

Currently, Indonesian producers can sell products directly to overseas buyers; after the new regulation is implemented, producers must sell to the state-owned agency, which will then negotiate pricing with foreign buyers.

Prabowo stated that this move aims to combat longstanding export fraud—he noted that from 1991 to 2024, losses from underreported invoices amounted to as much as $900 billion.

The report said Prabowo did not specify which ferroalloy varieties would be involved, but analysts pointed out that the scope may cover certain nickel products—nickel is a key material for stainless steel and electric vehicle batteries.

This export control is not Indonesia's first aggressive resource management measure. In 2020, Jakarta abruptly banned the export of raw nickel ore, forcing foreign companies to invest in nickel processing facilities inside Indonesia, ultimately making Indonesia a dominant force in the global nickel market.

The establishment of the new agency also has its fiscal logic. The report stated that as tensions in the Middle East push global oil prices higher, Indonesia's macroeconomic and fiscal risks have increased, and the government hopes to expand national revenue by controlling commodity exports.

Since taking office at the end of 2024, Prabowo has launched a series of costly populist policies, including free meals for schoolchildren, putting significant pressure on the fiscal situation of Southeast Asia's largest economy.

Indonesia also implements large-scale fuel subsidies, and rising oil prices have further increased the fiscal burden.

Meanwhile, Indonesia's central bank announced a 50 basis point rate hike to 5.25% on Wednesday, the first hike in two years, aimed at stabilizing the rupiah exchange rate, which has recently hit new lows.

Rising Supply Concerns, Small and Medium Traders Hit First

The impact of the new policy on global commodity markets is already reflected in prices. The immediate rise in palm oil and nickel prices shows market concerns about potential disruptions to Indonesia's export supply.

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

Dedi Dinarto, associate director of strategic consulting firm FGS Global, pointed out that the core issues currently watched by the market include: how prices will be determined, how existing contracts will be handled, how much profit the state agency will retain, and whether exporters can keep enough commercial flexibility.

"If investors see this as a signal of the government's shift to broader discretionary state control, it may suppress future investment willingness," he stated.

This policy change comes against the backdrop of an already stressed Indonesian business and investment environment. Prabowo’s push towards economic centralization, as well as his fiscal and economic policies, have left the business community and investors uneasy. Global index provider MSCI earlier this year warned it may downgrade Indonesia to frontier market status, further hurting market confidence.

The resource industry has already been hit by Prabowo’s push to seize millions of hectares of land from palm oil and mining companies (citing environmental violations), but the business community generally accuses the government of not following due process.

Dedi Dinarto's judgment points out the current core contradiction: The actual impact of the new policy will largely depend on implementation details and policy transparency—these are precisely the most difficult variables for outsiders to assess at present.

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