Indonesia’s commodity exchange bid won’t work without global trust

Indonesia’s ambition to evolve into a global price-setter for commodities was formally unveiled by President Prabowo Subianto on August 4, 2026, during his State of the Nation Address before the joint session of the People’s Consultative Assembly (MPR), the House of Representatives (DPR), and the Regional Representative Council (DPD). Delivered amid the presentation of the 2027 State Budget Bill and the accompanying Financial Note, the speech signaled the establishment of a “Mineral and Strategic Commodity Exchange,” targeting an operational launch by January 1, 2027, under the supervision of the Financial Services Authority (OJK). The government positions this move as the logical successor to the single-door strategic commodity export policy that sparked intense debate among market participants just months ago. The idea stems from a commodity paradox that has long plagued Indonesia. While the archipelago stands as one of the world’s largest producers of palm oil, nickel, tin, coal, coffee, and rubber, the pricing of these assets has historically been determined in markets far beyond Indonesia’s borders. Prabowo, a former soldier with a penchant for free-market intervention, seeks to upend this status quo through what he calls an “Indonesia Reference Price.” The goal is to shift Indonesia from a nation that sells commodities at prices dictated by others to one that hosts its own vibrant, price-discovery hubs. From a political-economic perspective, the rationale is compelling. Nations possessing strategic resources have every reason to capture a larger share of the rents generated along the value chain. A transparent exchange could improve price discovery, close loopholes for under-invoicing, connect producers and buyers more efficiently, and bolster the bargaining power of Indonesian exporters. However, Prabowo must not overlook a fundamental truth: possessing commodities is not the same as having the power to set their prices. Likewise, launching an exchange does not automatically make Indonesia a “price maker.” The core question is not whether Indonesia needs a strategic commodity exchange; the clear answer is yes. The more difficult question is whether Indonesia can convince the global market to trust the prices generated and commanded by that exchange. Price-maker ambition To be sure, the narrative driving the Prabowo administration is built on a solid economic foundation. Indonesia is a major player in global commodity markets. In nickel, for instance, Indonesia has cemented its position as the world’s dominant producer. In 2025, the nation’s nickel mine production was estimated at approximately 2.6 million tons, far outstripping any other competitor. It maintains a similar top-tier status in palm oil, a leading role in global coal exports and a prominent position in tin production. This scale provides Indonesia with significant market power. Yet, market power is not synonymous with pricing power. A nation may control supply but remain a price taker if price discovery continues to occur in markets that are more liquid, transparent, trusted and integrated into global trade. Nickel is the quintessential example. While Indonesia commands a lion’s share of global production, international nickel prices remain tethered to the London Metal Exchange (LME). The LME is more than a mere transaction platform; it is an ecosystem featuring extensive warehousing networks, “good delivery” standards, physical delivery mechanisms, robust clearing and risk management systems, and a diverse pool of international participants. This combination allows futures and physical market prices to self-correct through arbitrage. The challenge, therefore, is not “why doesn’t Indonesia have an exchange?” but “why should global market participants abandon a trusted benchmark to switch to Indonesia?” Malaysia offers a more relevant lesson. Bursa Malaysia Derivatives successfully established its Crude Palm Oil (CPO) futures as a primary global price-discovery center. Even the CME Group offers dollar-denominated CPO contracts that settle against the Bursa Malaysia FCPO contract. In essence, the global market integrated the Malaysian benchmark into its own infrastructure. Indonesia produces more palm oil than Malaysia, but production alone is insufficient. Malaysia succeeded by fusing exchange standards, contract norms, delivery mechanisms, liquidity, international participation, financial infrastructure and institutional reputation. Ecosystem of trust An international commodity exchange is fundamentally a machine for generating trust. It requires clear quality standards, credible warehousing and delivery points, well-capitalized clearinghouses, robust margin and default management systems, dispute-resolution mechanisms, market-manipulation surveillance, transparent positions, cybersecurity and verifiable transaction data. Perhaps most daunting of all is liquidity. Without massive transaction volume, bid-ask spreads widen. Without competitive spreads, traders depart. Without traders, there is no price discovery. Without price discovery, the exchange fails to become a benchmark. Without a benchmark, it remains nothing more than a domestic market wearing an international label. Consequently, the January 1, 2027, target should be viewed as a goal for establishing a market, not as a deadline for becoming a global price center. An exchange can be administratively launched in months, but a global benchmark requires years of track record. Indonesia also doesn’t need to build an “Indonesian LME” for every commodity at once. A more rational approach is to start with commodities that offer the strongest combination of production dominance, trading volume, product standardization, and global market appetite. Palm oil is the most logical candidate. Nickel holds greater strategic significance but is significantly more complex. Tin is worth considering given Indonesia’s strong global production position, though the challenge lies in shifting away from LME reliance. Coal offers massive volume but faces long-term global demand pressure from the energy transition. Indonesia should focus on establishing one or two truly credible benchmarks rather than chasing breadth for the sake of scale. Another paradox the government must come to terms with: the more Indonesia wants the world to trust its exchange prices, the more open that exchange must be to the world. Foreign participants must be able to enter, hedge, deploy capital, settle transactions and exit positions without unreasonable friction. Prices must emerge from competition, not administrative decree. This is the new exchange’s ultimate tipping point. It should not be designed as a tool to force the world to accept Indonesian pricing, but as a market that compels the world to choose it voluntarily. If international buyers deem Indonesian prices too high, they will seek alternatives. If Indonesian sellers find the prices inadequate, they will trade elsewhere. Arbitrage will always prevail. Global markets do not bow to nationalism. Therefore, the success of Prabowo’s project will not be measured by the construction of a building, the number of commodities listed or the launch ceremony on January 1, 2027. The yardstick will be higher and clearer: trade volume, open interest, the depth of foreign participation, the competitiveness of spreads, the volume of physical settlements and—most crucially—how many international contracts begin to use the “Indonesia Reference Price.” Indonesia already possesses advantages others cannot replicate: resources, production scale, a massive domestic market, geographic positioning and an expanding industrial base. What it lacks is the global institutional trust required to convert production dominance into global pricing power. This project is worthy of support, but it should not be shielded from criticism simply because it bears the banner of “economic sovereignty.” The government must distinguish between sovereignty over resources and the power to set prices. The former can be acquired through state policy and ownership; the latter can only be earned through a deep, liquid, transparent and trusted market. Ronny P. Sasmita is a senior analyst at the Indonesia Strategic and Economic Action Institution, a Jakarta-based think tank. He holds a PhD from the University of Tokyo.