Norman Joshua – On May 20, 2026, President Prabowo Subianto unexpectedly presented the government's macroeconomic projections in the DPR (Indonesia's House of Representatives) – a task that ordinarily falls to the finance minister.
He used the occasion to announce a structural change to how Indonesia sells its natural resources. Exports of coal, palm oil, and ferroalloys, Prabowo declared, would now be channelled through a single state-owned enterprise (SOE), PT Danantara Sumberdaya Indonesia (DSI). This, he said, would be a remedy for the under-invoicing and transfer pricing that has pervaded the sector for many years.
At first glance, this new export control regime seems timely. The Indonesian state has long been an active player in the economy through its SOEs, even if its regulators are dogged by corruption and mismanagement, as the recent scandal at the Customs and Excise Agency attests.
But the deeper significance of the new policy lies elsewhere. Prabowo is using the momentum generated by announcement to advance his agenda of centralisation by extending state control over the movement of goods and capital. This signals a broader shift in Indonesia's economic statecraft.
To be clear, this statist turn did not begin with Prabowo. His predecessor, Joko Widodo (Jokowi), already banned raw nickel-ore exports in 2020, pursuing a hilirisasi (downstreaming) agenda that compells foreign investors to process minerals onshore. This created concerns that Indonesia is moving towards what one scholar has called as resource nationalism.
What distinguishes Prabowo, however, is the object of state intervention. Where Jokowi sought to capture value by dictating where the country's commodities are processed, Prabowo seeks to capture the flow of commodities and capital itself by positioning the state as the sole intermediary through which the nation's resources are sold.
This statist logic runs through the energy sector. When prosecutors arrested executives from the state energy company Pertamina in a fuel-quality corruption scandal in 2025, consumer demand shifted to private oil retailers such as Shell, BP, ExxonMobil, and Vivo. As these private retailers were not able to obtain additional supply under Indonesia's strict gasoline import quota system, they subsequently suffered chronic shortages.
Rather than expanding the quotas, Energy Minister Bahlil Lahadalia later ruled that these private retailers could only buy from Pertamina, and, by January 2026, he was paring their import quotas back altogether.
This policy may be defensible on the grounds of securing precious foreign exchange, but some scholars say it has led to scarcity at privately owned fuel stations, creating a Pertamina monopoly that undermines Indonesia's investment climate. Excessive state control over a distribution channel distorts the economy by favouring centralisation over market mechanisms and consumer preferences.
The export control regime announced in May is the most ambitious expression of this centralising turn. Government Regulation 26 of 2026 on Export Controls of Strategic Resources, promulgated at the same day as Prabowo's speech, empowers the DSI to set export prices and profit margins, while naming it the single channel through which coal, palm oil, and ferroalloys may be exported.
This new regime is to be implemented gradually, as exporters will keep selling under their own names while reporting their transactions to DSI, through to December 2026, with full single-channel exports beginning in January 2027.
What remains unclear, however, is how DSI will ultimately price commodities, since there are no formulas governing domestic pricing or guaranteeing transparency for foreign buyers. Furthermore, the Regulation also opens the possibility of the same rule being applied to other commodities.
The market reaction to the DSI announcement was immediate: The Jakarta Composite Index fell more than three percent the next day, and palm oil farmers reported price slumps as buyers turned cautious.
In response, the government softened its messaging by stressing that DSI would, for now, only monitor rather than intermediate these exports, and existing contracts would be honored.
But rather than reading this as a government rollback, it is better understood as sequencing, as phased implementation was built in from the outset. The single-gate export regime remains intact in the government regulation. What bent under market pressure was the government's rhetoric, not its policy architecture.
Meanwhile, the export control regime has a financial twin. On the same day that Prabowo announced DSI, a parallel set of rules tightened the state's grip on the proceeds.
Under the new Government Regulation 21 of 2026, which revised Government Regulation 36 of 2023 on Natural Resource Export Earnings (devisa hasil ekspor, DHE), such exporters must hold all foreign-exchange earnings in state-owned banks for twelve months. Only limited exemptions apply, including shorter holding periods and retention requirements as low as thirty percent for exporters trading with countries covered by Indonesia's trade agreements.
If the export control regime centralises the channel through which the nation's goods depart, the export earnings rules centralise the capital they bring back. Together, the new regime of commodity export and capital controls ensures that neither the goods, nor the dollars they earn, escape the state's grip.
Prabowo's centralising impulse is not receding soon, and it carries enormous risks.
Markets do more than allocate resources; they also work by processing information. Prices emerge from the interaction of many buyers and sellers possessing different information, resources, and expectations. When a single institution emerges to replace that mechanism by controlling a large share of the economy, the quality of outcomes depends heavily on its institutional capacity and competence.
Indonesia has run a version of this experiment before, and it failed miserably. In 1990, the New Order regime created the Clove Marketing Agency (Badan Penyangga dan Pemasaran Cengkeh, BPPC), chaired by Soeharto's son Hutomo Mandala Putra. It became the sole buyer of cloves from farmers and the sole seller to the kretek cigarette industry.
BPPC was justified as a way to protect farmers and stabilise prices. Instead, prices collapsed, unsold stock piled up, and the agency limped along on central-bank credit until it was dismantled under IMF conditionality in 1998.
The lesson here is not that state planning always fails. It is that a monopoly that substitutes a single institution's judgment for the market's dispersed knowledge is prone to failure, especially when that institution lacks the competence its mandate demands. In the end, it is the producers and consumers it claims to protect who pay the price.
The question for Indonesia today is whether Prabowo's unbridled centralisation will deliver the sustained economic growth that it promises, or merely build new institutions that distort the coordinating work of markets. Economic centralisation certainly offers more command over the nation's wealth and a stronger hand in bargaining with the world, but any policy is only as good as the hands that work it.
Whether these new export and capital control regimes become instruments of economic sovereignty or merely more efficient ways to squander it will depend less on the president's fiery speeches than on the competence of the people who are running them.
Source: https://indonesiaatmelbourne.unimelb.edu.au/indonesias-economic-centralisation-under-prabowo