Indonesia’s New Trade Regime and Rate Hike Deliver Double Blow to Markets
Jakarta Globe (24/05/2026) - Jakarta. Indonesia’s decision to centralize exports of key natural resource commodities under a new state-controlled entity, combined with Bank Indonesia’s surprise 50-basis-point benchmark interest-rate increase, is being viewed by business groups as a double blow to investors, companies, and consumers.
Earlier this week, President Prabowo Subianto announced that exports of palm oil, coal, and ferroalloys would eventually be routed through the newly established state-owned company Danantara Sumber Daya Indonesia to prevent export invoice manipulation that allegedly reduces foreign-exchange earnings and state revenues.
“Single-gate exports for natural resources are a highly counterproductive policy and could trigger negative sentiment among investors and markets, especially when public trust in the government is already declining,” said Jahja Soenarjo, chairman and chief executive of Business Forum Indonesia.
“International confidence in Indonesia is also not improving, particularly if natural resource exports become controlled by a government institution,” he added.
Jahja said he understood the government’s intention to secure export earnings, but warned that the policy should not come at the expense of businesses and private-sector confidence.
“The country may indeed need more revenue, but businesses and the private sector should not become the ones forced to bear the burden,” he said.
“Our recommendation is that the policy should be reviewed, especially if there are political objectives behind it. Otherwise, confidence in the government could deteriorate further,” he added.
At the same time, the higher BI rate is expected to increase borrowing costs across key sectors, including housing and automotive financing.
“This will affect consumer lending and cause people to cut back spending, which could eventually slow the economy,” Jahja said.
He also warned that a higher interest-rate environment would encourage investors to move funds into safer bank deposits rather than volatile equity markets.
Negative Market Reaction
Josua Pardede, chief economist at Permata Bank, said the government’s rationale for establishing Danantara Sumber Daya Indonesia could be understood from a policy perspective.
The objectives include reducing underreporting of export values, strengthening state revenues, ensuring export earnings flow into the domestic financial system, and improving oversight of strategic commodities such as crude palm oil, coal, and nickel.
Those three commodity groups accounted for around 25.14% of Indonesia’s total exports, or about $71.1 billion in 2025, making them a logical focus for tighter foreign-exchange and export supervision, he said.
However, Josua noted that equity markets reacted negatively because the policy appeared to be introduced rapidly and in a highly centralized manner.
Businesses remain uncertain whether the measure represents governance reform or a broader expansion of state control that could disrupt contracts, pricing mechanisms, exporter cash flow, and investor confidence.
The decline in Indonesia’s stock market following the president’s announcement reflected uncertainty over implementation rather than merely opposition to the policy itself, Josua said.
Under the new framework, the government would gradually assume control over exports of major commodities -- beginning with palm oil, thermal coal, and nickel products -- through a state-designated export channel.
Markets interpreted the move as a sudden expansion of state intervention that could disrupt commodity trading flows and market dynamics.
“So while the government’s objective of plugging foreign-exchange leakages may be understandable, markets see the risk that overly centralized implementation could reduce efficiency, increase transaction costs, and create greater uncertainty for commodity-related stocks,” Josua said.
Regarding comments from Finance Minister Purbaya Yudhi Sadewa that Danantara Sumber Daya Indonesia could eventually improve the valuation of exporting companies, Josua said such optimism depends on strict conditions.
“In theory, if the institution functions only as a reporting and monitoring channel without taking margins, altering commercial contracts, interfering with market pricing, or disrupting export-payment certainty, then transparency could improve and risk premiums on exporters could decline,” he said.
However, markets could also view the policy as adding another layer of bureaucracy, delaying payments, disrupting price negotiations, altering direct relationships between exporters and overseas buyers, and creating unclear additional costs for companies.
According to Josua, valuations of natural resource exporters depend not only on export volumes but also on contract certainty, transaction speed, profit margins, buyer flexibility, regulatory stability, and global customer confidence.
“If overseas buyers feel they must deal with an untested state-controlled export channel, they may demand price discounts, extend payment processes, or shift part of their demand to other countries,” he said.