Letters in Economic Research Updates
Centralizing Commodity Exports: State Trading, Competitive-ness, and Governance Trade-Offs Indonesiaâs Palm Oil and Coal Sectors
Abstract
Loso Judijanto
Indonesia is the world’s leading exporter of both palm oil and thermal coal. In May 2026, the government announced sweeping export reforms requiring exports of palm oil, coal, and other resources to be channeled through a state trading firm. This policy aims to capture lost export revenue, improve price transparency, and stabilize domestic markets. This paper reviews the theory and evidence on single-exporter (monopoly) regimes and export controls, drawing lessons from agriculture and mining sectors globally, to assess likely impacts on Indonesia’s palm oil and coal. We examine how state control can boost revenue and prevent illicit practices, but also how it may distort markets and reduce welfare if poorly managed. In the palm oil sector, we review production, global market share, and environmental and social issues (deforestation, smallholder livelihoods). In the coal sector, we analyze Indonesia’s record production and recent export bans, highlighting energy security trade-offs. Our integrated analysis compares palm and coal outcomes under the new policy, emphasizing trade-offs between government revenue, domestic supply, and trade competitiveness. We find that coordinated export control may improve short-term revenue and supply stability but risks inefficiencies and underinvest- ment unless accompanied by strong governance, processing capacity, and market monitoring. Policy implications include the need for transparency, safeguards for producers, and complementary measures (e.g., downstream investment) to ensure the reform strengthens rather than undermines Indonesia’s resource sectors.