Indonesia to ‘Listen to Market’ on New Commodity Export Body

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(Bloomberg) — Indonesia is “listening very closely to the market” as it builds a body to oversee key commodity exports, according to Pandu Sjahrir, chief investment officer of sovereign wealth fund Danantara, after a shock announcement that sowed confusion among traders and producers this week.

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President Prabowo Subianto even caught many of the administration’s own top officials by surprise this week with a radical plan to channel shipments of palm oil, coal and nickel through a state-owned entity, to be managed by Danantara.  

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“The idea is to increase transparency, accountability, traceability — and of course it will have to be market friendly,” he said in a Bloomberg TV interview. “We are listening to the players, to the market. We want to make sure this is accretive both for producers and for shareholders involved.”

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Asked about perplexity in the market, Sjahrir said investors were trying to absorb the news. Details would be provided over “the next few weeks”, he added, though the policy would focus initially on coal and crude palm oil, two commodities in which Indonesia is a major player.

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“What is important to highlight is a clear distinction, this will be an operator of business, not a regulator,” he said, adding that the new body would seek to hire “the best people from the market” to run a new body that would run with similar governance standards. 

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“Hopefully by the first part of January you will see us operate in full force,” Sjahrir said.

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Indonesia is the world’s top exporter of thermal coal, palm oil and ferronickel — and shipments of all three will be handled Danantara Sumberdaya Indonesia, under the sovereign wealth fund, according to Prabowo’s announcement. The policy is aimed at curbing under-invoicing, or under-declaring the value of cargoes, a practice that Prabowo says costs the country $150 billion every year.

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The former special forces commander has railed against elites that he says profited from Indonesia’s natural wealth at the expense of its population. But he is also under pressure to boost government revenue to fund fuel subsidies during an energy crisis, plus costly policies introduced by his own administration including free school meals.

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Concerns about excessive government spending and deteriorating governance have battered the Indonesian currency, prompting the country’s central bank to surprise markets with a 50 basis point rate hike on Wednesday. The Jakarta stock benchmark has slumped to a one-year low as investors seek clarity on what the policy will mean for a key segment of Southeast Asia’s largest economy.

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(Updates with additional comments from Sjahrir.)

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