Indonesia plans to bypass intermediaries in palm oil exports to boost revenues

Indonesia, the world’s largest palm oil producer, plans to restructure its export system by reducing shipments through neighboring countries acting as intermediaries. The government aims to establish direct sales of crude palm oil (CPO) to end buyers to increase export revenues and retain a larger share of profits domestically. The initiative also covers other strategic commodities, including nickel and tin.

According to Coordinating Minister for Economic Affairs Zulkifli Hasan, the existing trading model prevents Indonesia from fully benefiting from its production potential. He cited palm oil as an example, noting that prices can reach 27,000 Indonesian rupiah/kg (approximately $1.49), while previous sales through neighboring countries generated only around 15,000 rupiah/kg ($0.83). The government believes this price gap reflects substantial revenue losses associated with trading intermediaries.

The authorities aim to strengthen control over export supply chains and provide Indonesian producers with direct access to international markets. Eliminating intermediary arrangements is expected to allow the country to capture a larger share of added value, improve transparency in foreign trade transactions and strengthen its negotiating position with major palm oil importers.

A similar position was previously expressed by Coordinating Minister for Downstreaming and Energy Bahlil Lahadalia. He called for an end to natural resource exports through transit countries, which may reclassify Indonesian commodities as their own exports and benefit from additional tax revenues and trade advantages. In particular, he argued that shipments to China should be made directly from Indonesia without passing through intermediary countries.

Indonesia’s National Energy Council supported the initiative, noting that direct exports could reduce profits lost to intermediaries and strengthen the country’s competitive position. However, the specific economic benefits of the proposed policy have not yet been calculated. The government still needs to assess the potential increase in revenues and determine how to implement direct shipments, which could reshape established palm oil trade flows in Southeast Asia.

Tags: export, Indonesia, palm oil