Indonesia's New Trade Policy Sparks Debate
Quick Look
Indonesia's new trade policy, aimed at curbing under-invoicing and transfer pricing, faces criticism from economists, farmers, and industry groups concerned about potential state monopolies and market access disruption.
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Why It Matters
Indonesia is implementing a new trade policy aimed at combating financial malpractices like under-invoicing and transfer pricing, which Prabowo claims have drained the economy and hindered public service funding. The policy has drawn criticism from various sectors concerned about its potential negative impacts.
Prabowo framed the move as a necessary step to tackle under-invoicing, transfer pricing and other practices he said had drained money from Indonesia’s economy and weakened the state’s ability to fund public services.
But the plan has also triggered warnings from economists, farmers and industry groups, who say the shift could create a state monopoly, disrupt existing contracts and complicate Indonesia’s access to global markets.
“Over the past 22 years, Indonesia recorded a trade surplus of US$436 billion, but US$343 billion flowed out of the country. This is why teachers’ salaries remain low, why civil servants struggle, and why our budget often feels insufficient,” Prabowo said.
“One of the major causes is under-invoicing, a form of fraud. Some exporters deliberately report lower export values than the actual transaction value, often through overseas shell companies they control. This practice occurs in palm oil, mining, and many other commodities.”
Open Questions
- What specific measures will be implemented to prevent a state monopoly?
- How will existing contracts be handled under the new policy?
- What are the projected impacts on Indonesia's access to global markets?
- What is the timeline for the implementation of this new policy?
