Palm Oil Farmers Protest Export Mandate Through Danantara — A Reminder of the New Order Tragedy

Jakarta, CNBC Indonesia - During the address by the President of the Republic of Indonesia in the 19th Plenary Session of the DPR RI regarding KEM and PPKF RAPBN 2027 in the 19th Plenary Session of the Indonesian DPR, at the Nusantara Building of MPR/DPR/DPD-RI, Jakarta, on Wednesday (20/5/2026), President Prabowo Subianto announced the issuance of a new Government Regulation (PP) and the establishment of a new state-owned enterprise (BUMN) dedicated specifically to exporting commodities.

With this new PP, Prabowo explained, all sales of all natural resource outputs (SDA), ranging from palm oil, coal, to ferroalloys, would be required to go through a government-appointed BUMN.

The new BUMN will be named PT Danantara Sumber Daya Indonesia.

Responding to this, a coalition of palm oil farmers expressed their protests. The Indonesian Palm Oil Farmers Organisation Union (POPSI) has urged that Indonesia’s future palm oil trade not be handed over to a state monopoly.

“Do not repeat the New Order regime’s clove trade tragedy (Tragedi Tata Niaga Cengkih Orde Baru),” said POPSI Chairman Mansuetus Darto in a statement on Wednesday (20/5/2026).

“This policy could fundamentally alter the structure of national palm oil trade and open broad space for monopolistic trading, rent-seeking practices, elite capture, and control of export chains by groups close to power,” Darto added.

Moreover, according to him, the discussion of this strategic policy was conducted without adequate involvement of palm oil farmers, farmer cooperatives, farmer organisations, or business actors that have long been the backbone of the national palm oil industry.

“We question why a policy as large as this is being discussed without involving palm oil farmers. Palm oil is not only about exports but also concerns the lives of millions of farming families and local economies across Indonesia,” he said.

“POPSI warns the government not to repeat historical mistakes in commodity trade governance, particularly the experiences of BPPC (Cengkeh Supporting and Marketing Agency) during President Suharto’s era,” he added.

Back then, he noted, clove trade governance was centralised and controlled by certain groups. As a result, farmers lost freedom to sell their produce, farmgate prices fell to the farmer level, rent-seeking practices flourished, and the national clove industry sustained long-term damage.

“We once had a bitter experience when commodity trade monopolies were implemented in the name of national interest, but in the end they harmed farmers and enriched a handful of elites. The state must not repeat the same mistakes for palm oil,” Darto said.

In POPSI’s notes, he added, there are serious similarities between the current draft governance of palm oil exports and the clove trade governance patterns of the past.

First, the potential for a monopsony or monopoly over export channels exists. When the state appoints one or several export gatekeepers via a BUMN, private sector players lose direct access to global buyers. In the long term, such market structure could erode healthy competition in the national palm oil trade.

Second, the government will hold very large control over price and trade volume, including export volume, export timing, reference prices, and various forms of hidden market controls. Such a situation is highly prone to abuse and could create market uncertainty.

“Third, the policy uses the argument of ‘national interest’, from economic stability and national resilience to downstream processing and domestic supply protection. POPSI believes these arguments should not be a reason to build a new monopoly in the trade of strategic commodities,” Darto said.

“Fourth, the risk of rent-seeking is very large. The basic question is who will gain access to quotas, who will be the trading aggregator, who will receive export facilities, and who will have close ties with the export-focused BUMN. In a closed market structure, rent-seeking and elite capture are hard to avoid,” he stated.

Fifth, he continued, palm oil farmers could be the most harmed party.

“When the number of buyers narrows and market access is controlled by a single door, farmers’ bargaining power automatically falls. In such a situation, farmers will become price takers and the price of fresh fruit bunches (TBS) will be at risk of being suppressed,” he said.

Nonetheless, he admitted that the current palm oil situation is very different from the clove trade governance of the past.

“Palm oil is a global industry that is highly complex and integrated with international markets,” he said.

“The palm oil industry today involves cross-border trade, a wide range of downstream products, futures market mechanisms, international trading houses, global refinery networks, and strict compliance and traceability systems. Therefore, centralising palm oil trade is far more complex and risk-prone than other commodities in the past,” Darto warned.

Moreover, he added, the current global market is moving towards transparent and auditable supply chain governance.

“International buyers require traceability, compliance, bankability, and ESG assurance. If the palm oil export system becomes overly political, too closed, or too centralised, global traders can shift their supply sources to other countries,” he warned.

“As a result, Indonesia risks losing premium markets, facing higher financing costs, and a loss of trust from international buyers,” Darto stated.

Most importantly, he noted, palm oil today is not just another commodity.

“Palm oil is a major source of foreign exchange for the country, a backbone for millions of farmers, a pillar of regional economies, and a significant factor in maintaining Rupiah stability and the national trade balance,” Darto said.

“Therefore, policy design errors can directly affect farmers’ TBS prices, the cashflow of palm oil mills (PKS), and other linked sectors,” he concluded.