Analysis: Prabowo’s export control plan tests balance between state oversight and market confidence

By Dominikus

President Prabowo Subianto’s announcement of a new Government Regulation (PP) on natural resource export governance marks a potentially significant shift in Indonesia’s commodity trade system.

The policy, announced during a House of Representatives plenary session on May 20, would place exports of key commodities such as palm oil, coal and ferro alloys under a state-supervised marketing structure involving appointed state-owned enterprises (BUMN).

The move reflects Jakarta’s broader effort to tighten control over resource exports, strengthen fiscal revenue, improve export transparency and retain foreign exchange proceeds within Indonesia’s financial system.

The President’s message was straightforward: the government wants clearer visibility over how much of Indonesia’s natural resources are exported, at what price, to whom, and where export proceeds ultimately flow.

Officially, the policy is framed as a “marketing facility,” with exports to be conducted through appointed BUMN entities while proceeds are forwarded to commodity producers and operators. The stated objectives include preventing under-invoicing, curbing transfer pricing, improving monitoring of export proceeds, and strengthening state revenue collection.

However, market participants are still assessing the practical implications.

As of this writing, major industry associations and exporters have yet to issue detailed public responses. Early market reaction has been cautious.

“One coal market observer described the move as unusual. Even China has not been doing so,” Harry Huo, Chief Editor of Sxcoal, told Petromindo.com on Wednesday.

The concern is not simply about tighter export supervision. The key uncertainty is whether the appointed BUMN will function merely as a reporting and coordination platform, or become the legal seller of record in export transactions.

That distinction is critical.

If the BUMN acts primarily as a transparent marketing and reporting intermediary, the policy could improve governance without fundamentally disrupting trade flows. But if the BUMN becomes the contractual exporter, the implications become far broader, potentially affecting export contracts, letters of credit, shipping documentation, payment flows, offshore trading structures and the bankability of long-term offtake agreements.

A state-driven push for tighter commodity control

From the government’s perspective, the rationale is understandable.

Palm oil, coal and ferro alloys remain among Indonesia’s largest export earners and sectors where policymakers have long expressed concern over transfer pricing, related-party transactions, offshore marketing structures and export proceeds held abroad.

Based on Ministry of Trade and Central Statistics Agency (BPS) data, Indonesia’s non-oil and gas exports reached US$269.84 billion in 2025. Coal exports accounted for around US$24.40 billion, palm oil products roughly US$24.42 billion, and ferronickel exports about US$16.39 billion.

Together, these sectors represented more than US$65 billion in export value last year.

The government has already tightened rules requiring 100% of natural resource export proceeds (DHE SDA) from sectors such as mining and plantations to remain within Indonesia’s domestic financial system for 12 months. The new PP appears to extend that strategy beyond foreign exchange retention into direct transaction oversight.

A more integrated audit trail across export permits, customs declarations, invoices, bills of lading, bank receipts, tax reporting and royalty payments would strengthen the state’s visibility over commodity flows.

But the policy’s effectiveness will depend heavily on implementation.

Different commodities, different risks

The risks vary significantly across sectors.

For coal, the main concern is operational complexity.

Coal exports involve highly specific commercial parameters, including calorific value, ash, sulfur, moisture, blending specifications, vessel scheduling and payment terms. If the BUMN signs export contracts without directly controlling the physical supply chain — from mining plans to barge loading and transshipment — dispute risks could rise.

Exporters will want clarity over who bears demurrage costs, handles quality disputes, and assumes payment risk if overseas buyers delay settlement.

The sector is also already tightly regulated through domestic market obligation (DMO) rules, export licensing, royalty adjustments, RKAB approvals and downstreaming requirements. The new PP would add another layer to an already dense regulatory framework.

For palm oil, the main issue is speed and market flexibility.

Palm oil trading relies on fast execution, highly competitive pricing and rapid document processing. Buyers in India, China, Pakistan, the Middle East and Africa are extremely price sensitive. Any delays caused by additional administrative layers could reduce Indonesia’s competitiveness against Malaysia.

The memory of Indonesia’s 2022 crude palm oil export ban also remains fresh among international buyers, reinforcing concerns about policy unpredictability.

For ferro alloys and nickel-linked products, the primary risk is investment confidence.

Indonesia’s downstream nickel industry relies heavily on long-term offtake agreements, integrated industrial parks and foreign financing structures, particularly involving Chinese-linked investors and trading entities.

Investors and lenders will likely seek clarification on whether existing offtake contracts remain valid, whether overseas buyers must transact directly with the appointed BUMN, and whether financing arrangements need to be restructured.

Those concerns come amid broader industry unease over tighter nickel ore quotas, higher royalties, DHE retention requirements and stricter benchmark pricing enforcement.

Execution will determine the outcome

The central issue is not whether the state has the right to improve oversight of strategic commodity exports. Most market participants accept the government’s objective of improving transparency, tax compliance and foreign exchange retention.

The real challenge is execution.

The government’s presentation divides the export process into pre-clearance, clearance and post-clearance stages, covering sales contracts, invoices, customs documentation, vessel booking, cargo manifests, bills of lading and export payments.

In commodity trading, however, even minor documentation mismatches can delay payments or disrupt vessel schedules.

As a result, businesses are seeking technical clarity rather than broad policy messaging.

Key unanswered questions remain:

• Who signs export contracts with overseas buyers?
• Who appears as seller on invoices and bills of lading?
• Who assumes buyer default risk?
• How quickly will producers receive payment?
• Will the BUMN charge fees or impose benchmark pricing?
• How will existing contracts be treated?

The government’s statement that export proceeds will still be forwarded to business operators suggests Jakarta does not intend to appropriate commercial margins directly. But until implementation rules are released, uncertainty will remain elevated.

The lack of broad public reaction from major associations may itself reflect caution, as companies wait for details on the implementing regulations, appointed BUMN structure and transition arrangements.

State control versus business certainty

The likely beneficiaries of the policy are relatively clear.

The government gains stronger visibility over export flows and foreign exchange proceeds. Appointed BUMN entities could gain strategic control over large commodity transaction volumes, while domestic banks may benefit from increased foreign exchange liquidity.

Compliant producers could also benefit if tighter oversight reduces under-invoicing and unfair transfer pricing practices.

The exposed parties are equally clear.

Exporters and offshore trading arms could lose commercial flexibility and margins. Coal producers may face shipment and contractual risks. Palm oil exporters could lose transaction speed. Ferro alloy and nickel-linked investors may face new bankability concerns.

Ultimately, the policy’s success will depend on whether the government can strengthen oversight without disrupting commercial efficiency.

In the best-case scenario, the PP becomes a transparent governance platform that improves export monitoring while preserving market flexibility and contract integrity.

In the worst-case scenario, the system becomes an administrative bottleneck that delays payments, complicates contracts, disrupts shipments and weakens Indonesia’s competitiveness as a commodity supplier.

For now, the policy should be viewed as positive for state control and fiscal visibility, but potentially negative for short-term business certainty until implementation details become clearer.

The government may be trying to close leakages in the export system. The business community, however, will want assurance that the effort does not create a new chokepoint in the commodity trade engine that supports Indonesia’s energy security, downstreaming ambitions and industrial growth.

Editing by Reiner Simanjuntak