Economist warns DSI risks hurting resource exports and investor trust

The recent establishment of PT Danantara Sumber Daya Indonesia (DSI) has drawn criticism from economists who fear it could jeopardize natural resource exports and erode investor confidence. Yusuf Rendy Manilet, an economist at the Center of Reform on Economics Indonesia (CORE), described DSI's inauguration as an administrative decision, emphasizing that its actual benefits for natural resource governance and the national economy remain uncertain.

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We do not view DSI as a policy whose benefits have been proven, but rather as a major policy that still holds various risks because its foundation has not been fully prepared.

Manilet expressed reservations about DSI, stating it is not a policy with proven benefits but rather a significant policy with inherent risks due to an inadequately prepared foundation. He highlighted a lack of clarity surrounding fundamental aspects of DSI's operations. Manilet stressed the importance of distinguishing between the government's objectives and the instruments used to achieve them.

While acknowledging the government's aim to strengthen oversight of strategic natural resource commodity exports, Manilet argued that issues like inaccurate reporting of export volumes and values, which reduce state revenue, are primarily surveillance problems. He suggested that improving verification, reporting, and audit systems would be more effective than transforming the entire trade architecture into a single-door system controlled by one entity.

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From the side of natural resource governance, that design raises considerable concerns.

Manilet voiced significant concerns about DSI's institutional design, particularly its role as a sole buyer and seller. This structure, he explained, could disempower producers by limiting their direct access to international buyers, thereby weakening their bargaining position. He warned that such a model, akin to monopsony in industrial economics, could lead to rigid pricing, delayed payments to producers, and reduced flexibility for businesses, disproportionately affecting small to medium-scale palm oil and mining operators.

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The reality is that it could be a transfer of problems, from transaction leaks to the concentration of market power in one institution.