Indonesia tightens forex controls, uncertainty looms over the bulk commodities industry.

Indonesia is planning to require commodity companies to retain their export earnings in the country for a year, posing new challenges for companies already dealing with increasing regulatory uncertainties. This policy tightens existing regulations, which require resource companies to keep 30% of their earnings in the country for at least three months. The aim is to boost Indonesia's foreign exchange reserves and support the Indonesian rupiah, but exporters complain that these policies will affect cash flow, forcing them to borrow more to cover operating expenses. The new policy will come into effect on March 1, while under the leadership of the new President Prabowo Subianto, Indonesia's vast natural resources sector is considering a shift in policy. Media reports last year indicated that Indonesia is also considering reducing nickel mining quotas to boost prices, which could worsen shortages in the smelting industry. Indonesia's largest copper mine is a joint venture between Freeport-McMoRan (FCX.US) and the Indonesian government. Due to unclear statements from Indonesian officials regarding the temporary relaxation of export bans, the copper mine is currently unable to ship its products overseas. Chief Economist of Bank Central Asia David Sumual said, "Sudden measures could shock businesses and affect their cash flow. If they are not prepared, they will face challenges." Although the new government had previously expressed intentions to extend foreign exchange controls, the extent of the changes still came as a surprise to exporters. The new policy applies to all major commodities in Indonesia, including coal, palm oil, and nickel, which make up the majority of Indonesia's non-oil and gas exports. Last year, the export value of goods, including mining, agriculture, forestry, and fisheries products, reached nearly $250 billion, accounting for 94% of Indonesia's total exports. As US President Donald Trump begins his second term and the US dollar strengthens, putting pressure on the Indonesian rupiah, Indonesia has introduced stricter export income policies to boost foreign exchange reserves. Despite multiple interventions by the Indonesian central bank, the US dollar to Indonesian rupiah exchange rate has risen by over 8% since the end of September last year. Last week, the Indonesian central bank unexpectedly cut interest rates, leading to a depreciation of the Indonesian rupiah, prompting the central bank to intervene in the market again.