Indonesia to bring commodity exports under centralised control, President Prabowo says
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Indonesia's President Prabowo Subianto said the country had lost as much as US$908 billion (S$1.2 trillion) in revenues in the last 34 years.
PHOTO: EPA
JAKARTA – Indonesian President Prabowo Subianto said on May 20 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.
Mr Prabowo said in a fiery speech to Parliament that Indonesia had lost as much as US$908 billion (S$1.2 trillion) in revenues in the last 34 years because its commodities were being sold on the cheap, adding that key exports like palm oil and coal would in future be sold via 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 management of commodity exports,” Mr Prabowo said.
“The issuance of this regulation is a strategic step to strengthen management of commodity exports,” he said.
“All sales of our resources, from palm oil, coal must be through a state-owned enterprise (SOE) selected by the government... as sole exporters,” he added.
Mr Prabowo’s 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.
Expanding on Mr Prabowo’s announcement, Senior Economic Minister Airlangga Hartarto said in the first stage the commodities affected 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 in which exporters and buyers can continue to do business as usual, but the government-appointed entity would monitor export transactions.
The chief of sovereign wealth fund Danantara Indonesia, Mr Rosan Roeslani, speaking alongside Mr Airlangga, said that this period could be extended to the end of 2026.
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, he said.
In addition, as part of another regulation, starting June 1 all exporters of natural resources from Indonesia must store 100 per cent of their export earnings in Indonesian state-owned banks, Mr Airlangga said.
He said this was being done to stabilise the rupiah which has plummeted in recent days.
Rumours about the plan spooked the market on concerns that it could lead to changes in pricing mechanisms and squeeze trader margins.
Jakarta’s main stock index shed 3.5 per cent on May 19 and was down 2 per cent on May 20 before paring losses.
‘Optimising revenue’
The move by Mr Prabowo, who has vowed to optimise revenue from the country’s natural resources, is aimed at addressing concerns about under-invoicing and how exporters account for their transfer pricing, Mr Airlangga said.
Mr Prabowo said Indonesia’s natural resources were sufficient to deliver welfare to the entire country if they were managed according to 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.
Despite being rich in resources as well as a G-20 country, Indonesia had not managed the economy well enough to boost state revenues, he added.
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 assistant professor Rizki Siregar, an international trade economist at the University of Indonesia. REUTERS
