Muhammad Maulidan – On 20 May 2026, addressing a House of Representatives (DPR) plenary in Jakarta, President Prabowo Subianto announced that exports of strategic natural resource commodities – palm oil, coal, and ferroalloys – would now be handled through a single door: the state-owned enterprise PT Danantara Sumberdaya Indonesia (DSI).
The policy, as outlined in Government Regulation 24 of 2026 on the Governance of Strategic Natural Resource Commodity Exports, has four purposes: stop illegal mining and plantations, optimise state revenue, prevent foreign exchange leakage, and eradicate fraud such as under-invoicing and transfer pricing.
However, markets responded negatively to the policy. Opening 1% up at 6,459 earlier in the day, the IHSG plunged over 2% shortly after Prabowo's announcement. Did the market sense a sinister scenario unfolding – the return of a New Order-style state monopoly?
The BPPC and the New Order's clove monopoly
Even after the collapse of the New Order in 1998, the Indonesian state has never been truly absent from the commodity market. For decades, it has taxed, licensed, and set the rules for palm oil, coal, and ferroalloys.
What is new about Prabowo's single-door export policy is not the degree of the state's involvement in the commodity market, but the role it plays in it.
The Indonesian state has now shifted its primary role from regulator to a single gateway for all export flows. This shift is critical. A regulator sets limits and lets transactions run, while a single gateway sits atop the cash flow and decides who may pass.
This type of buffer agency, usually touted as a state institution designed to serve the public interest, is not without precedent. However, that precedent is far from encouraging.
In the 1990s, then-president Soeharto created the Clove Buffer Stock and Marketing Agency (BPPC), which was later led by his youngest son, Hutomo 'Tommy' Mandala Putra. Under Presidential Decree 20 of 1992 on the Trade Governance of Domestically Produced Cloves, which established the BPPC, the agency exercised control over the trading, distribution, and marketing of all domestic cloves.
Presidential Instruction 1 of 1992, meanwhile, authorised it to set floor prices for farmers' cloves via Village Unit Cooperatives (KUD): Rp 7,900 (about US$3.89) per kg for high-quality cloves and Rp 6,000 per kg for lower-quality cloves. Farmers received only part of the revenue up front. The rest was withheld as KUD equity, and deposits were paid out only after the cloves were sold. At the chain's end, the government set the delivery price for kretek (clove-flavoured cigarettes) factories.
The result was a single-door mechanism involving three key players. PT Kembang Cengkeh Nasional, a private consortium of clove producers, including Tommy's company, held primary control and the BPPC's top seat. The Induk Koperasi Unit Desa cooperative coordinated KUDs nationwide, taking cloves straight from farmers. The state-owned trading company, PT Kerta Niaga, meanwhile, completed the regime's legitimacy and formal distribution line. The chain was: farmers, cooperatives, the BPPC, cigarette factories.
The BPPC operations ran on bailout funds that were staggering at the time: around Rp 569 billion (US$280 million, or about US$660 million in today's dollars) in Bank Indonesia liquidity credit and Rp 190 billion in commercial loans via state-owned bank Bank Bumi Daya. From upstream to downstream, the state ran it all, glueing it together with a populist narrative: protecting farmers via price stabilisation.
In fact, the opposite happened. Farmers were obliged to sell only to designated KUDs, which routed cloves to the BPPC and on to kretek factories. Under that monopsony, farmers were left without bargaining power, and KUD deductions thinned what little reached them. Farm-gate prices collapsed. Locked into a system they could not refuse to enter, farmers responded with the only exit available. In Aceh, they switched crops or abandoned their groves, as harvests no longer met their daily needs. Some felled and burned their trees, and South Sulawesi farmers dubbed the BPPC a 'new-style VOC'.
Six years later, Habibie replaced Soeharto, and he issued Presidential Decision 21 of 1998 to dissolve the agency and return the clove trade to the market.
Lessons learned from the BPPC's fiasco
It is true that Danantara Sumberdaya is not entirely the same as the BPPC.
The commodities it handles are palm oil, coal, and ferroalloys, not cloves. Its rationale is fiscal: plugging revenue leakage, not price control. Its suppliers are mostly corporations, not smallholders. These differences tempt us to conclude that history will not repeat itself.
But the two entities do have some strikingly similar features: they both serve as a single gateway atop cash flow, are formally framed by hard-to-rebut public-interest rhetoric, and operate with untested accountability. This resemblance matters. It warns us about what could go wrong.
There are at least two lessons that we can learn from the BPPC fiasco.
First, the use of populist rhetoric to justify a gateway policy lowers our guard against the pitfalls of a monopoly. Once a gateway is framed as 'protecting farmers' or 'saving foreign exchange', criticism becomes immoral, cast as a refusal to defend the public interest. And when a policy debate is turned into a moral question, demands for accountability weaken.
Second, a single intermediary atop a cash flow is nothing but a rent machine, whoever fills it. Robert Klitgaard argues that corruption grows when monopoly meets discretion without accountability. The BPPC met all three criteria, and so could the DSI.
In a similar vein, Anne Krueger contends that state-granted exclusive rights are always prone to rent-seeking. The problem, therefore, is structural, not moral. It is never about who leads the BPPC or the DSI.
I am not saying that the DSI will inevitably repeat the BPPC's mistakes. That said, it faces the same risks. Whatever the commodity is, and whoever is in charge of the institution, things will go south unless oversight is tightly designed from the start. The new policy is to be implemented in stages until 1 January 2027; this might be long enough to build the gateway, but not necessarily its oversight.
It is worth noting that back then, the head of BPPC, Tommy Soeharto, was Prabowo's brother-in-law. The president should therefore know what went wrong with that type of buffer agency. He should now take the necessary measures to prevent DSI from making the same mistakes.