Arya News - A senior minister highlighted the significant price gap between what Indonesia receives for selling commodities to neighbouring countries and the prices at which they are eventually traded in their destination markets.
JAKARTA – Indonesia wants to bypass “neighboring countries” as intermediaries for natural resource exports, including crude palm oil (CPO), arguing that routing shipments through third countries costs the country billions of rupiah in potential revenue and weakens its control over the commodity trade.
Coordinating Food Minister Zulkifli Hasan said the country should ship palm oil, as well as other top export commodities, directly to final buyers rather than selling it to neighboring countries that subsequently re-export the commodity at higher prices.
“Indonesia is the world’s largest CPO, nickel and tin producer, yet our exports go through neighboring countries. That sometimes frustrates me,” Zulkifli said in Batam on Wednesday, as quoted by state agency Antara.
He cited a significant price gap between the price Indonesia receives for CPO sold to neighboring countries and the price at which the commodity is eventually traded in its destination market.
“CPO is priced at Rp 27,000 [US$1.50], but we sell it to our neighbor for Rp 15,000. That means we lose Rp 12,000. This has gone on for years. We no longer want to turn a blind eye,” he continued. “We want direct exports.”
Zulkifli framed the issue as one of Indonesia losing control over its natural-resource supply chains and surrendering potential gains to intermediary countries, despite being a leading producer.
“Whenever something goes wrong, Indonesia is the one that loses,” he said, citing other instances in which he felt Indonesia bore the costs, including forest fires, fuel shortages in Bali and pressure on financial markets.
The remarks come amid renewed friction between Jakarta and Singapore over natural gas supplies and transboundary haze.
Singapore is Indonesia’s largest foreign investor and a major trading partner, importing Indonesian natural gas, metals and jewelry, petroleum products, electronic components and processed foods. Indonesia, in turn, relies on the city-state for fuel, industrial machinery and specialty chemicals.
The government previously argued that cutting out neighboring countries as intermediaries would allow Southeast Asia’s largest economy to capture more value from its natural resources and strengthen its bargaining power in international markets.
The push follows an earlier call by Coordinating Downstream and Energy Transition Minister Bahlil Lahadalia for Indonesia to end the export of natural resources through intermediary countries, warning that transit countries could claim the commodities as their own exports and benefit from the trade through tax revenue and export reporting.
“It is no longer permissible for our natural resources from the energy and mineral sector to be shipped this way,” Bahlil said on Tuesday.
“If we are sending goods to China, they should go directly from Jakarta to China, not stop over in that ‘particular’ country.”
The National Energy Council (DEN) backed the push, saying direct exports could reduce margin losses to intermediaries, improve transaction transparency and strengthen Indonesia’s bargaining power with final buyers, according to council member Satya Widya Yudha.
However, the council has yet to quantify the potential increase in state revenue, saying further calculations are needed to assess the policy’s economic benefits.