There is a classic adage in political economy: the road to economic ruin is often paved with populist good intentions. When President Prabowo Subianto announced plans to establish PT Danantara Sumber Daya Indonesia (DSI) on May 20, 2026, as the sole state-owned exporter of strategic commodities, the narrative of economic sovereignty immediately gained traction.
However, within just a few days, the market responded with brutal honesty: panic. This policy proposal, which was not yet finalized, immediately triggered a massive shock in the upstream sector. Prices for fresh fruit bunches (FFB) of oil palm plummeted sharply. Fearing regulatory uncertainty, several palm oil mills (PKS) opted to play it safe by halting purchases of fruit from external sources and prioritizing supplies from their own core plantations.
At the end of the supply chain, smallholder farmers are the hardest hit; palm fruits rot on the trees and lose their market value. A policy introduced abruptly, with minimal dialogue and a lack of transparency, instantly disrupted the market even before the agency officially began operations.
The government’s desire to intervene in and monopolize the commodities business is nothing new. To date, the private sector and people-based enterprises have proven to be the primary drivers of the domestic economy.
As a historical comparison, the world has witnessed how Zimbabwe’s Grain Marketing Board (GMB) transformed from a buffer agency into a single monopoly entity following independence. Instead of improving welfare, the centralization of control there ended in systemic bankruptcy due to acute corruption, food shortages, and the collapse of the domestic agricultural sector.
Transforming the DSI into an extension of state capitalism that monopolizes palm oil exports is clearly not a panacea. On the contrary, this move has the potential to cripple the national palm oil industry through four major structural threats.
Placing full control over palm oil exports in the hands of a single bureaucratic entity like DSI will create an extraordinarily long chain of red tape. In the field of economic governance, the longer the licensing process and the greater the monopoly power of an institution, the higher the risk of rent-seeking. A monopoly without strict public accountability opens a wide gap for practices such as document manipulation, collusion in export quota allocation, and manipulation of reference prices. When export flows are held hostage by an unreliable system, the country will not receive optimal foreign exchange earnings.
Conversely, these hidden costs will be passed down the chain, cutting into the purchase price of fresh fruit bunches (FFB) at the farmer level and systematically harming the national economy.
The lifeblood of the business world is profitability, which can only be achieved through high efficiency and relentless innovation. For more than three decades, Indonesia’s palm oil industry has grown robustly, penetrating more than 160 countries because businesses were driven by the market to continuously innovate—both in the diversification of upstream and downstream derivative products and in logistics efficiency.
Once DSI emerged as the sole operator, the climate of healthy competition immediately vanished. Without competition, the incentive to reduce operating costs and upgrade technology will disappear. The industry will become complacent, taking refuge under the state’s protective wing, and neglecting rational profitability standards. As a result, our palm oil industry will lose its edge in the international market because it is less efficient than competing producer nations.
Palm oil is not a static, homogeneous commodity like corn or raw wheat. This industrial landscape is far too complex; in fact, 90 percent of our current exports already consist of specific downstream products. Today’s global market demands strict technical specifications, precision, and the certainty of rapid delivery in response to daily fluctuations in world prices.
How can a rigid bureaucratic institution like the DSI suddenly become agile enough to keep up with the dynamic global market? Expecting flexibility from such a centralized agency is clearly unrealistic. Once the bureaucracy starts to interfere and prolong the decision-making process, it’s only a matter of time before the golden opportunity in the market slips away. Slow responses to changing trends, global regulations—such as the European Union Deforestation Regulation (EUDR)—and daily price fluctuations will slowly but surely erode the export competitiveness that the private sector has built over decades.
The greatest threat posed by this economic centralization is the loss of investment agility. Both global and domestic investors require legal certainty, business flexibility, and an agile ecosystem to be willing to inject capital into high-value-added downstream projects. The discourse on DSI monopolies, further exacerbated by the current overlap of domestic regulations—ranging from the confusion surrounding Land Use Rights (HGU) to the Domestic Market Obligation (DMO) policy that frequently changes format—serves as a warning sign for the investment climate.
When business actors’ room to manoeuvre is locked down by rigid, one-door control, investors will choose to pull out or redirect their capital to other, more market-friendly countries.
The much-touted ambition of downstream processing to boost value-added will eventually grind to a halt.
The market panic triggered by the emergence of this DSI discourse must be read as a stark warning. If this trend of economic power centralization continues to be forced through without restraint, we are soon going to witness the twilight of the green gold industry.
Centralizing trade control under a single authority without transparency and the involvement of business actors is merely an illusion of sovereignty. Such misguided steps never solve the problem of foreign exchange leakage; they merely shift an old wound into a new vessel that has the potential to be far more destructive.
Now, the government must be realistic. We must not, out of stubbornness in pursuing monopolistic ambitions, end up creating regulatory blunders that cripple the future and kill the competitiveness of our own palm oil industry on the world stage.
