S&P Warns Indonesia Commodity Export Plan Risks Revenue

Indonesia unveiled a sweeping plan on Wednesday, May 20, to route all exports of palm oil, coal, and ferroalloys through a new state-controlled trading company overseen by sovereign wealth fund Danantara, drawing an immediate warning from S&P Global Energy that markets face transitional uncertainty. President Prabowo Subianto announced the measure in a speech to parliament in Jakarta, framing it as an effort to end decades of under-invoicing and transfer pricing by private commodity exporters.

The new entity, PT Danantara Sumberdaya Indonesia, will act as a centralised channel for commodity sales to overseas buyers. During a three-month transition period beginning in June, private exporters may continue using their existing buyer networks, but all transactions must be overseen by the state firm, according to the Jakarta Post. The government may extend the list of controlled commodities at three-month intervals after that.

S&P Global Energy cautioned that the plan carries real financial risk, regardless of its stated aims. “Markets may price in some degree of transitional uncertainty until there is greater clarity on execution, documentation processes and trade flows,” said Pritish Raj, senior manager for APAC and EMEA thermal coal pricing at S&P Global Energy, as reported by Reuters.

Prabowo told parliament the government had quantified the scale of the problem: Indonesia has lost as much as $908 billion in revenue over the past 34 years because its commodities were sold below fair market value. “We’re the biggest producers of palm oil but the price of palm oil is decided in other countries,” he said. A separate government estimate, reported by the Jakarta Globe, put annual revenue leakage from under-invoicing practices at up to $150 billion.

The president’s rhetoric in parliament left little room for compromise with international buyers. “I tell my cabinet, formulate prices for nickel, gold. Every price must be determined by us,” Prabowo said. “If they don’t support our price, then they don’t have to buy it. We can use it ourselves.”

Danantara’s new subsidiary will not set commodity prices itself, the fund’s representatives clarified at a press conference in Jakarta on May 20. Rohan Hafas, a Danantara official, said PT DSI would oversee transactions to ensure export prices align with global market benchmarks and to detect under-invoicing — not to unilaterally dictate price levels, Tempo reported. Coal and crude palm oil prices already have internationally recognised reference points, he added.

The distinction did not immediately calm investors. Rumours about the plan circulated on Tuesday, May 19, sending Jakarta’s main stock index down 3.5%. The index fell a further 0.82% on Wednesday after the official announcement, according to Reuters. The rupiah also dropped to a fresh record low against the U.S. dollar, with the currency trading at around Rp 17,700 per dollar, the Jakarta Globe reported.

Indonesia’s central bank responded on the same day by raising its benchmark interest rate by 50 basis points — the first increase in two years and a larger move than markets had expected — in a bid to stabilise the currency.

A separate regulation issued alongside the export control plan requires all natural resource exporters to deposit 100 percent of their foreign currency earnings in Indonesian state-owned banks from June 1. Senior Economic Minister Airlangga Hartarto said the measure aims to shore up the rupiah by keeping export dollars inside the domestic financial system.

Investor Pressure Mounts

The announcement deepened concerns that have been building among foreign investors for months. The China Chamber of Commerce in Indonesia wrote to President Prabowo earlier in May warning that tighter nickel ore quotas, higher taxes, and a new pricing formula were raising costs and threatening investment, Reuters reported.

“Investors are increasingly concerned on policy direction, and this has driven outflows from Indonesia’s capital markets,” said Jayden Vantarakis, head of ASEAN research at Macquarie Capital in Singapore. “It’s hard to see how this announcement will change the direction,” he said, adding that state-owned companies were already embedded across every major resource sector from energy to copper, tin, nickel, and gold.

Oil palm farmers also raised alarms. An oil palm farmers’ association warned that the single-gate export policy could trigger monopolistic conditions and hurt independent smallholder farmers, Tempo reported.

Regional and Global Impact

Indonesia is the world’s largest exporter of palm oil and thermal coal, and a dominant global supplier of nickel. Any disruption to how these commodities move through international markets carries direct consequences for buyers across Asia, Europe, and beyond.

If the centralised system slows export processing or introduces pricing uncertainty, trading companies and downstream manufacturers relying on Indonesian supply chains will face higher costs and logistical delays during the transition period. Countries dependent on Indonesian thermal coal for power generation — including China, India, Japan, and South Korea — could face supply uncertainties if the new system creates bottlenecks, according to IndexBox.

The plan also adds to a pattern of resource nationalism that has already altered global nickel supply chains. Indonesia banned raw nickel ore exports in 2020 to force downstream processing onshore, a decision that reshaped global battery material markets.

Background

Indonesia’s fiscal position has deteriorated steadily under the Prabowo administration. The 2025 budget deficit reached 2.9 percent of GDP, prompting Moody’s to revise Indonesia’s credit outlook from stable to negative in February 2026. S&P Global Ratings flagged at the same time that interest payments had very likely exceeded 15 percent of government revenue in 2025 — a key threshold that, if sustained, could prompt a further negative rating action. The Prabowo government has denied that its debt and deficit levels are unmanageable. The rupiah has weakened repeatedly this year, with the central bank conducting daily bond market interventions to limit the decline. The new export policy arrives as Prabowo pursues ambitious social programmes, including a free nutritious meals initiative worth roughly 2 percent of GDP.

What Happens Next

The three-month transition period for PT Danantara Sumberdaya Indonesia is set to run from June through August 2026, with exporters conducting business as normal under state oversight. A full handover of export transactions and contracts to Danantara is scheduled for September 2026, according to IndexBox. The mandatory export earnings deposit rule takes effect on June 1. The government has stated it may expand the list of controlled commodities every three months after the initial rollout. Indonesia’s central bank will continue monitoring currency conditions following its May 20 rate increase, and officials have indicated further market intervention remains on the table.