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🇮🇩 Indonesia /Economy & Trade

Academics Question Centralized Export Policy's Impact on Competitiveness

From Republika · () Indonesian

Translated from Indonesian and summarized by DistantNews. Read the original for the full story.

At a glance

News Named sources Context piece
  • Indonesian academics are scrutinizing the government's plan to centralize exports of strategic commodities, including palm oil.
  • Professor Sudarsono Soedomo warns that a hasty implementation could create market uncertainty, deter investment, and weaken Indonesia's global competitiveness.
  • He argues that Indonesia's export issues stem less from a lack of state authority and more from the capacity and credibility of existing institutions, cautioning against new bodies without addressing governance and law enforcement.

A significant concern is emerging from Indonesia's academic circles regarding the government's proposed policy to centralize the export of strategic commodities, a move that directly impacts the vital palm oil sector. Professor Sudarsono Soedomo, a respected figure from IPB University's Faculty of Forestry and Environment, has voiced strong reservations, urging the government against a rushed implementation.

The state has actually been very present all along through customs, taxation, the banking system, Export Proceeds Obligation (DHE), permits, and various other oversight instruments.

· Sudarsono SoedomoQuestioning the necessity of a new centralized system when existing state mechanisms are already robust.

Professor Soedomo understands the government's objectives: enhancing export oversight, boosting foreign exchange control, and curbing practices like under-invoicing and transfer pricing. However, he points out that Indonesia already possesses robust state oversight through customs, taxation, banking systems, and export regulations. The critical question, he argues, is not whether the state has enough authority, but whether the existing institutions are sufficiently capable and credible to manage these functions effectively. Simply creating a new centralized body, he warns, will not solve the root problems if the core issues lie in weak governance and inconsistent law enforcement.

Therefore, the fundamental question that the government needs to answer is whether the main problem lies in the lack of authority or precisely in the weak capacity and credibility of existing institutions.

· Sudarsono SoedomoHighlighting the core issue as institutional capacity rather than a lack of state power.

From an Indonesian perspective, the potential risks of a centralized export system for a commodity as globally significant as palm oil are substantial. Palm oil trade thrives on speed, flexibility, buyer networks, and international market trust. Concentrating all transactions through a single entity could lead to inefficiencies, decision-making delays, economic rent-seeking, conflicts of interest, and excessive discretionary power. This approach risks undermining the very competitiveness Indonesia seeks to bolster, potentially creating more problems than it solves and diverging from the nuanced, market-driven approach that has historically served the industry.

The formation of a new institution does not automatically solve the root problems if the main problem lies in the quality of governance and law enforcement.

· Sudarsono SoedomoWarning that new institutions may not fix underlying issues without addressing governance and enforcement.
About this summary

Originally published by Republika in Indonesian. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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