JAKARTA, Indonesia — Indonesia is overhauling its trade policies for key commodities in a sudden move that some experts liken to a hostile takeover of major industries in the resource-rich nation, with global implications.<\/p>\n
The new regulation announced to parliament Wednesday<\/a> by Indonesian President Prabowo Subianto<\/a> mandates that a recently set up state-owned enterprise will handle the country’s exports of coal, palm oil and iron alloys by September.<\/p>\n Prabowo said one aim is to increase tax revenues. That would help restore dwindling government reserves that have been exhausted by the energy shocks<\/a> from the war in Iran<\/a>. Given Indonesia’s role as a major commodities exporter, the new rules likely will ripple across international supply chains.<\/p>\n Indonesia is the largest exporter of thermal coal<\/a>, which is burned for energy, and palm oil, a key ingredient in everything from cosmetics<\/a> to biofuels<\/a>. The Southeast Asian nation of roughly 287 million people also has the world’s biggest known reserve of nickel, a mineral needed for electric vehicle batteries<\/a> and stainless steel.<\/p>\n As Indonesia’s largest trading partner, China will feel the brunt of this policy pivot, experts say.<\/p>\n China is closely watching Indonesia\u2019s \u201cinitiative to nationalize\u201d and considering \u201chow it would impact China\u2019s further cooperation,\u201d said Lie Xie, with the UK-based think tank Third Generation Environmentalism. \u201cThe future path that Indonesia is taking is highly important for China.\u201d<\/p>\n The swiftness of the new rule’s implementation could affect access to needed resources for China’s clean technologies industries<\/a>, which use Indonesian commodities to supply growing demand for renewable energy<\/a>. Chinese companies are major investors in many Indonesian industries, including critical minerals.<\/p>\n \u201cIndonesia has become vital to China” since it supplies the commodities that “underpin China\u2019s dominance in electric vehicles, batteries, and industrial manufacturing,\u201d said Li Shuo with the Asia Society Policy Institute\u2019s China Climate Hub. \u201cBut the relationship is evolving.\u201d<\/p>\n If handled well, the centralization of Indonesia’s trade may also open the door to more American investment, analysts said, as it competes with China for key resources. <\/p>\n \u201cSuch a move is a clear signal that U.S. investment is being attracted to come to Indonesia even more,\u201d said Bhima Yudhistira of the Jakarta-based Center of Economic and Law Studies. He called the new policy a \u201chostile takeover\u201d that will mean every contract in industries controlled by China may be revised.<\/p>\n Prabowo told lawmakers Indonesia had lost as much as $908 billion because exporters underreport their sales to avoid paying taxes and other fees. <\/p>\n \u201cThe primary objective of this policy is to strengthen oversight and monitoring \u2014 and to combat under-invoicing, transfer pricing and the diversion of export proceeds,\u201d he said.<\/p>\n The new entity taking over Indonesia’s exports of these commodities \u2014 PT Danantara Sumberdaya Indonesia \u2014 was officially registered the day before Prabowo’s announcement. It is 99% owned by Danantara, the sovereign wealth fund the president launched last year, and will strengthen the government’s influence on setting the price of its commodities.<\/p>\n This \u201crepresents a governance reform, a step toward strengthening our credibility in managing strategic commodity trade in an orderly and accountable manner,\u201d said Yvonne Mewengkang with Indonesia\u2019s Ministry of Foreign Affairs.<\/p>\n From June to August, private companies are expected to turn over their import and export transactions to Danantara, which by September should manage all trade transactions with foreign buyers.<\/p>\n \u201cThere will be an explanation for investors later, so that stakeholders will be informed before June 1,” said Airlangga Hartarto, the coordinating economic minister in Indonesia. \u201cAfter all, in the initial phase, we are focusing on transparency in reporting.\u201d<\/p>\n Trade analysts are skeptical that the government will be able to seamlessly take over trade in all those industries within less than four months.<\/p>\n China is Indonesia’s top trading partner and one of its biggest sources of foreign direct investment.<\/p>\n Chinese firms dominate Indonesia’s nickel industry and China is a top importer of the resources affected by the trade takeover.<\/p>\n Other major importers of Indonesian palm oil, coal and nickel include the U.S. and the European Union. India, Japan and South Korea and neighboring Malaysia, Vietnam and the Philippines would also be affected.<\/p>\n Under Prabowo<\/a>, the government has been increasing control over strategically important commodities, cracking down on unauthorized mining operations, taking over plantations and pushing for the development of a domestic refining industry for critical minerals.<\/p>\n Even before Prabowo’s announcement, the China Chamber of Commerce in Indonesia sent a five-page protest letter last week highlighting investors’ concerns about Indonesia’s unstable business climate.<\/p>\n Chinese enterprises recently have faced \u201cexcessively stringent regulation, over-enforcement, and even corruption and extortion by competent authorities,\u201d the letter said. This has \u201cseverely disrupted normal business operations” and \u201cundermined long-term investment confidence.”<\/p>\n \u201cPrabowo didn\u2019t listen to the complaint from these Chinese companies and then did something very, very shocking with this new body to control the export,\u201d Yudhistira said.<\/p>\n By exerting state control over key industries, Indonesia is trying to diversify its investors, according to Yudhistira with CELIOS. Reducing Chinese control may attract interest from others, like the U.S.<\/p>\n This will only intensify the race for resources<\/a> between the two superpowers, he warned.<\/p>\n Whether this new policy does attract new investors, however, will depend on the transparency of its implementation, said Syahdiva Moezbar of the Centre for Research on Energy and Clean Air.<\/p>\n Private businesses say they are still in the dark.<\/p>\n Danantara’s impact on small-volume trade, specialized product exports and downstream industries still needs to be spelled out, according to Eddy Martono, chairman of the Indonesian Palm Oil Association.<\/p>\n \u201cExporters usually already have their own established markets; we must ensure we do not lose these markets if they are not managed properly,\u201d he said.<\/p>\n ___<\/p>\n Delgado reported from Bangkok.<\/p>\n ___<\/p>\n The Associated Press\u2019 climate and environmental coverage receives financial support from multiple private foundations. 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Find AP\u2019s standards<\/a> for working with philanthropies, a list of supporters and funded coverage areas at AP.org<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"JAKARTA, Indonesia — Indonesia is overhauling its trade policies for key commodities in a sudden move that some…\n","protected":false},"author":2,"featured_media":688238,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,17881,164,32512,482,35315,10523,73008,105,1346],"class_list":["post-688237","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-climate-and-environment","tag-economy","tag-energy-industry","tag-general-news","tag-government-policy","tag-international-trade","tag-metals-and-mining","tag-technology","tag-world-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/688237","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=688237"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/688237\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/688238"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=688237"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=688237"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=688237"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}