Indonesia's Commodity Export Overhaul Is Here, and the Competitive Advantage Is Changing

On 1 September, Indonesia begins routing the export of three of its biggest commodities through a single state-owned company. From that day, every shipment of the country’s coal, crude palm oil and ferroalloys must pass through PT Danantara Sumberdaya Indonesia, or DSI, an arm of the sovereign wealth fund Danantara set up to handle these sales. Those three commodities brought Indonesia around US$65 billion in export earnings last year. DSI declared on 25 August that it was ready to begin operations on 1 September, with around US$14 billion of exports already under its oversight.

When the plan first appeared in May, much about it was vague, but the details have since fallen in place. From September, DSI’s new platform will bring contracts, shipment data and other export records into a single system, giving the government a much closer view of each transaction. The plan reaches further: by 2027, DSI is meant to buy the commodities itself and resell them at prices set on a new exchange, though the details are still being worked out. In any case, it is clear that the state has placed itself in the middle of Indonesia’s commodities trade.

The government has been open about its reasons. In his May address to parliament, President Prabowo Subianto said Indonesia had lost as much as US$908 billion since the early 1990s because its commodities were priced too low when they left the country due to under-invoicing, transfer pricing and misstated volumes. Officials describe it like this: a cargo is sold on paper to a sister company abroad at a low price, then resold at its real market price in the final destination. The profit stays offshore, and the tax and export earnings never arrive home. DSI’s role is to bring those transactions into a single channel, giving the state greater visibility over the prices at which commodities are actually sold. One estimate puts the potential recovery at around US$5 billion a year. The exchange that will set those reference prices is due to open in January under the financial regulator, with nickel, coal and palm oil among the first commodities it will trade, and gold and tin among those the government wants to price later.

An Indonesian producer now sells and reports through DSI, with the prices it declares subject to comparison against the reference prices available to the state. Once the benchmark price arrives in January, there will therefore be less room to compete on price. The market will favor buyers who can lock in supply for years rather than chase the cheapest cargo, giving an advantage to large, well-funded companies able to honour long-term contracts. Producers, meanwhile, will benefit from proper documentation and the ability to deliver reliably.

In coal, palm oil and ferroalloys, DSI now sits between Indonesian producers and overseas buyers. That gives the state greater control over pricing and export revenues, and thus changes how importers and exporters of Indonesian commodities will do business. As the system takes shape, price will matter less than structural advantages — scale, capital, reliable supply and the ability to meet the new requirements.