Indonesia Export Policy Summary: Impact on Global Food Prices?
- Indonesia plans to route key commodity exports through a state-owned firm.
- The policy targets palm oil, coal, and ferroalloys, with scope to expand.
- A two-phase rollout starts June 2026, with full control by September 2026.
- Indonesia is a top global supplier, giving it strong pricing power.
- Prices for food and commodities could rise amid tighter supply and controls.
On May 20, Indonesian president Prabowo Subianto declared in parliament that it was time to regain control over profits made from the country’s key commodity exports such as palm oil and coal, stating that some US$9bn in revenue had been lost to it due to over three decades of selling these for ‘cheap’.
“The government is of the opinion, which every patriot will support, that Indonesia’s earth, water and resources must be enjoyed by all Indonesians,” he said.
“The export sales of all our natural resources — starting with palm oil, coal and ferroalloys — must be through a state-owned enterprise (Badan Usaha Milik Negara or BUMN) appointed by the Indonesian government as the sole exporter [in order to ensure we can] optimise revenue.”
According to draft documentation that was circulated following this announcement, a BUMN enterprise must either have 1) All or the majority of its capital owned by the Indonesian government directly; or 2) Have special rights to it held by the Indonesian government.
So far, the three commodities mentioned by Prabowo as Strategic Natural Resource Commodities are those designated by the government ‘with regard to the national interest, economic stability, domestic needs, and/or the management of national strategic natural resources’.
Coal and palm oil are already mentioned directly in the document, and the ferroalloys mentioned are expected to include nickel and copper too — but Prabowo has left the door open for many other different items to be designated as Strategic Natural Resource Commodities moving forward.
“The main objective of this initiative is to strengthen oversight and monitoring [of export activities], address under-invoicing, transfer pricing and the loss of export proceeds,” he added.
“This will optimise the receipt of taxes and state revenue for Indonesia, for the management and sales of our environmental resources.”
Prabowo also described the BUMN as a ‘marketing facility’ which would mean that earnings from the sales of all exported commodities would first go to the BUMN, who would then pass these on to the relevant companies involved in the export.
“This policy has been implemented by many other countries that have real control of their natural environmental resources. We must look at and learn from Saudi Arabia, Qatar, Russia, Algeria, Kuwait, Morocco, Ghana, and even from our neighbours Malaysia and Vietnam,” he said.
“With this policy, we hope that our revenue can be like Mexico’s, like the Philippines’, like that of our neighbouring countries. We must not be naïve, gullible or fail to use our common sense.”
Following the speech, Indonesia’s Coordinating Minister for Economic Affairs Airlangga Hartarto along with Investment Minister and Danantara CEO Rosan Roeslani revealed that the BUMN has been established and named Danantara Sumber Daya Indonesia (DSI), to be managed by state-owned investment fund Danantara.
Impacts on the food supply chain worldwide
The main considerations for the international food industry to note is that Indonesia is currently the world’s largest producer and exporter for several of the commodities mentioned by Prabowo: coal, palm oil and nickel.
This also means that Indonesia has a very strong say in terms of global pricing for each of these commodities, and their tighter export policies have a very strong likelihood of affecting global supplies and changing benchmark prices.
Palm oil may have had its ups and downs in terms of reputation over the years, but what cannot be denied is that its widespread role in most food sectors makes it essentially irreplaceable at this time.
Its properties and fat ratios means palm oil has a very unique versatility unmatched by other plant oils like soybean and sunflower, and is the reason it is still the main oil used in food manufacturing and foodservice in Asia, as well as quietly remains in many products behind the scenes in markets where it is unpopular.
The impacts in terms of coal are even more apparent, because it remains a crucial energy source to fuel industrial boilers for steam generation, which in turn power a wide variety of activities whether it is sterilisation, dehydration, pasteurisation, canning, or cooking in large quantities — all of which are crucial to the operation of a food manufacturing company.
Boilers are also used to generate electricity for use throughout entire food production lines especially in countries that are unable to utilise other more sustainable energy production sources such as solar or wind power, so the loss of this could effectively shutter off many small businesses.
Nickel, which was not directly mentioned but is also strongly expected to be on the list, is a key component of batteries and stainless steel.
Tighter government control over these commodities is likely to result in higher prices and profit margins, which carries a strong risk of increasing global prices for these commodities, especially when Indonesia is a leading producer of several of these.
Taking this into consideration alongside other supply chain pressures from current geopolitical events and an economic downturn, it is not a far cry to expect that food and beverage prices are at severe risk of being hiked even higher in supermarkets internationally as a result.
How much more can people expect to pay?
According to trade policy analyst and palm oil expert Khalil Hegarty, a lot is currently still unclear in terms of implementation.
“Several operational questions are not addressed in the circulating draft text and had not been clarified at the time of writing,” he said.
“These include money-related items such as what fee or margin the new enterprise DSI would charge, and how proceeds would be remitted to producers, as well as the reference-price or valuation methodology they would apply.”
Other remaining questions include how export contracts that are already in force at the start of the transition will be treated, and the impacts of this on existing export considerations for the various commodities, such as export levies and domestic market obligations for palm oil.
“What we do know is that a two-stage transition of three months each has been announced for companies and exporters to make the change,” he added.
“From 1 June to 31 August 2026, export transactions would continue to be conducted between companies and their buyers, but export documentation would need to be submitted through DSI. After this first phase, from 1 September 2026 the government’s stated target is for the full export chain — contract, shipment and payment — to be handled by DSI completely.”
Will this really boost Indonesia’s economy?
Although it will of course take time to really see the impacts of this policy, Prabowo’s announcement unsurprisingly brought about some panic in the stock market — share prices for many large Indonesian commodity companies dropped significantly, such as Golden Agri-Resources (-13.8%) and First Resources (21.3%) over May 20 and May 21.
It is also worth noting that a separate policy has mandated all exporters of natural resources out of Indonesia to store ‘100%’ of all export earnings in Indonesian state-owned public banks, another effort by the government to stabilise the value of the Indonesian rupiah.
The local palm oil industry, represented by Indonesian Palm Oil Association chair Eddy Martono, has commented that despite Indonesia’s current strong position as the top palm oil producer globally, this should not be taken for granted and there is a strong need to ensure the BUMN is handled correctly.
“Indonesia’s palm oil industry faces major competition from other vegetable oils in the global market, and our dominant position as the world’s largest producer and exporter of palm oil is not a permanent one. It needs a solid production strategy and price stability, because if prices go too high or supplies decrease, buyers could potentially switch to other vegetable oils like soybean or rapeseed,” he said.
“[Looking at this policy, trading companies which handle small volumes are the ones likely to be more severely affected, with some even facing the potential of closure.”
