JAKARTA, May 20 — Indonesian President Prabowo Subianto has said that his government will centralise exports of key commodities as part of efforts to boost state revenues and tighten the country's grip over its abundant natural resources.
He noted that Indonesia had lost as much as US$908 billion in revenue over the last 34 years because its commodities were sold at a discount, and that key exports like palm oil, coal and ferroalloy would be sold through a central government-run enterprise.
Indonesia, a global commodities powerhouse, is the world's largest exporter of thermal coal and palm oil.
"Today, the Indonesian government that I lead will issue a regulation on the management of commodity exports. The issuance of this regulation is a strategic step to strengthen the management of commodity exports.
"All sales of our resources, from palm oil, coal must be through a (state-operated enterprise) selected by the government ... as sole exporters," Prabowo said in a strongly worded speech to Parliament today.
His remarks confirm earlier accounts from two sources familiar with the matter, who said Indonesia was planning the move as part of a drive to strengthen government oversight over its natural resources.
Transition period
Expanding on Prabowo's announcement, Senior Economic Minister Airlangga Hartarto said that, in the first stage, the affected commodities will be coal, palm oil, and ferroalloy, and every three months, the government will evaluate which commodities can be added to the plan.
He added that there will be a three-month transition period during which exporters and buyers can continue to conduct business as usual, but the government-appointed entity will monitor export transactions.
Sovereign wealth fund Danantara Indonesia's chief Rosan Roeslani, speaking alongside Airlangga, said that this period could be extended to the end of the year.
At the end of the transition period, all exports will have to be done through the state-appointed firm, which will be overseen by Danantara.
In addition, as part of another regulation, starting June 1, Airlangga said that all exporters of natural resources from Indonesia must store 100 per cent of their export earnings in Indonesian state-owned banks.
He said this was being done to stabilise the rupiah, which has plummeted in recent days.
Rumours about the plan spooked the market, raising concerns that it could lead to changes in pricing mechanisms and squeeze traders' margins. Jakarta's main stock index shed 3.5 per cent yesterday, and was down two per cent today before paring losses.
'Optimising revenue'
Airlangga said that Prabowo's move, which aims to optimise revenue from the country's natural resources, is intended to address concerns about under-invoicing and exporters' transfer pricing.
The President remarked that Indonesia's natural resources were sufficient to provide welfare for the entire country if they were managed in accordance with the constitution.
"In the opinion of the government — and I am sure every patriot will support this — the earth, water, and all the resources within it must be enjoyed by all Indonesians," he said.
Prabowo observed that despite being rich in resources and a member of the G20, Indonesia had not managed its economy well enough to boost state revenues.
Many observers and experts are not convinced the move will work.
"The (export control) agency may create more distortions instead of being the solutions to the distortions, on top of already severe distortions that exporters face," said University of Indonesia international trade economist Rizki Siregar.
