Jakarta. Indonesia’s new export regime has fueled monopoly concerns as ASEAN grows less integrated.

Indonesia -- Southeast Asia’s biggest economy -- has decided to take direct control of its key commodity exports, starting with coal, palm oil, and ferroalloys. All export procedures have to go through the single agency of Danantara Sumberdaya Indonesia (DSI) starting next year, with a transition period slated for June 1. The newly established body will also directly purchase the commodities from domestic producers and handle transactions with the foreign buyers.

Asked about DSI’s impact on intra-ASEAN trade, Lili Yang Ing, the secretary-general of the International Economic Association (IEA), warned of the agency’s powers to become both a single buyer (monopsony) and seller (monopoly). Jakarta should have drawn lessons from the Suharto-era clove cartel BPPC’s failures. BPPC at the time sought to stabilize prices, but the agency helmed by the leader’s son Tommy Suharto evolved into a highly centralized monopoly before its collapse.

“BPPC failed due to its monopoly and monopsony power. ... DSI, which operates for international markets, has both," Lili told Jakarta Globe Insight conference.

“Anything that is a regulations-driven monopsony and monopoly power will only raise prices. This will be a burden for producers and consumers,” Lili said.

Lili commented on the government’s rationale behind the centralized export regime. Jakarta insisted the move was necessary to prevent under-invoicing, the practice that sees exporters underreporting their shipment volumes to evade taxes. 

“The government should improve the role of administrative agencies responsible for [addressing these issues]. … The solution is not by expanding government interventions, but by improving governance,” she said. 

Iman Pambagyo, the ex-Indonesian ambassador to the World Trade Organization, fears that malicious actors may exploit this single-gate scheme.

“We [Indonesia] are inclined to being corruptive and committing nepotism. This should be addressed. Whatever design that you want to put on the table, if human integrity and capacity fail to support these ideas, we are going nowhere,” Iman said.

The Central Statistics Agency (BPS) data showed that some ASEAN members had been importing Indonesian coal, which will soon be subject to the new regime. Indonesia’s coal shipments to Malaysia totaled almost 27.2 million tons in 2024, while deliveries to the Philippines hit 38.9 million tons. Thailand-bound coal neared 13.9 million tons that year.  

As the clock ticks on Jakarta’s new export rule, Southeast Asian nations are not doing business with each other as much. Intra-ASEAN trade ranged between 21 to 25% of the group’s total export-import activities over the past 25 years. The figure now reaches 21% annually amid non-tariff barriers, according to Lili’s estimates. 

Iman, too, pointed out the weakening economic integration, which he attributed to members following their own path in the face of US tariffs and the Covid-19 pandemic, rather than making a united front.

“Members engage in this beauty contest vis-à-vis the US. What we see today is a broken ASEAN. There is potential for ASEAN to rise as a group, but this requires strong leadership,” Iman explained.

While Indonesia has the “critical mass” to lead ASEAN, Jakarta was "among the first to break" the club by pursuing bilateral trade deals, Iman said, alluding to Jakarta’s tariff pact with Washington.