INTERVIEW: Indonesia's DSI sees path to broader export role with five-year strategy

Indonesia's state-backed commodity oversight body, Danantara Sumber Daya Indonesia, or DSI, is evaluating long-term operating models that could eventually position it as the primary exporter for Indonesian commodities, even as its immediate focus remains improving transparency and understanding the country's complex export ecosystem, President Director and CEO Luke Mahony said in an interview with Platts.

"At some point, you could have a system where people say DSI is the exporter from Indonesia," Mahony said, adding that the near-term horizon is to understand the complexity of Indonesia's trade. "We need to understand how the system works before determining what the next stages look like."

Speaking to Platts, part of S&P Global Energy, after the Coaltrans Asia conference in Bali, Mahony said DSI is currently developing a five-year strategy to determine what level of oversight and control delivers the greatest benefit to Indonesian businesses, the government, and society.

"We are working on a number of models and scenarios as part of a five-year plan," Mahony said, adding, "The purpose is to understand what level of control is good for the country, good for businesses, and good for the people of Indonesia."

The comments offer one of the clearest indications yet of how DSI may evolve beyond its current role as a transaction-monitoring body, as global coal market participants seek greater clarity on the future structure of Indonesian commodity exports.

Since June 1, DSI has been collecting export transaction data under Indonesia's new oversight framework. According to figures presented by Mahony at Coaltrans, the agency recorded more than 11,500 export declarations covering 154.1 million mt of commodities valued at approximately $25.5 billion between June 1 and Sept. 24.

The figures presented by Mahony showed that coal accounted for 93% of reported export volume and 42% of total export value, highlighting the importance of the thermal coal sector to Indonesia's broader export economy.

The possibility of DSI taking on a larger role has been among the market uncertainties since Indonesian President Prabowo Subianto announced, earlier this year, plans to strengthen oversight of exports of strategic commodities, including coal, crude palm oil, and ferroalloys.

Until now, DSI has focused on reassuring market participants that existing commercial arrangements, ownership structures, contract negotiations, physical shipments, and payment mechanisms would remain unchanged during the transition period.

Capturing value

Mahony said DSI's creation was driven largely by concerns that Indonesia is not fully capturing the economic value generated by its natural resources.

"For a country that is so rich in natural resources, it is a concern that issues such as transfer pricing and under-invoicing can go unnoticed," Mahony said, adding, "It is a significant blow to the exchequer."

He argued that improving visibility over commodity exports is essential if Indonesia wants to maximize the benefits generated by its mining sector.

Transfer pricing typically involves commodities being sold to affiliated overseas entities at below-market prices before being resold to end-users at higher prices, allowing profits to be recognized outside Indonesia. Under-invoicing involves declaring export values below actual transaction values.

Mahony said DSI's objective is not to penalize miners but to create a framework that helps them realize fuller value for their products.

"We do not want to discourage miners," he said. "We want to help build a robust system that allows them to realize the true value of their products." If that occurs, both producers and the government stand to benefit, he said.

"Miners can realize the true value of their products, while the government can benefit from improved tax collection and additional revenues that can ultimately be spent on public welfare," Mahony said.

Monitoring, not enforcement

Mahony said DSI itself will not investigate or prosecute suspected cases of transfer pricing or under-invoicing.

Instead, the organization is developing systems designed to identify potentially anomalous transactions and flag them for review.

Under the proposed framework, cases would then be transferred to the relevant government agencies, including financial, trade, and regulatory authorities, which would determine whether enforcement action is required.

"Our role is to identify potential anomalies and ensure the relevant authorities have the information they need," Mahony said.

He added that DSI is also studying ways to ensure more of the value generated through Indonesian commodity exports remains connected to the domestic economy.

"The money that belongs to the country as a result of the sale of those products should ultimately come back into the country," Mahony said.