A New Exchange to Break Malaysia's Grip
Indonesia, the world's largest producer and exporter of palm oil, is taking steps to end its secondary role in setting global crude palm oil prices. President Prabowo Subianto announced on August 14 the creation of a new commodity exchange that will trade palm oil, nickel, and coal, with operations targeted to begin on January 1. The move comes as part of a broader push for greater state oversight of export prices, volumes, and revenue.
Speaking at his annual budget speech before Indonesia's House of Representatives, Prabowo declared: "We do not merely want to be a producer of global commodities. We must become a setter for prices of global commodities."
Indonesia is already the world's biggest exporter of thermal coal, palm oil, and nickel, and a major supplier of tin, copper, bauxite, and coffee beans, according to a report by The Straits Times. But despite this dominance in physical supply, analysts note that Indonesia still "plays second fiddle" to Malaysia when it comes to setting crude palm oil prices, as reported by South China Morning Post.
The new Strategic Mineral and Commodity Exchange (BMKS) will be supervised by the Financial Services Authority (OJK), which has appointed Henry Rialdi as deputy commissioner responsible for the exchange's regulation and oversight, a decision announced on August 19.
Will Traders Abandon Bursa Malaysia?
The central question is whether international traders will shift their pricing and hedging activities from Bursa Malaysia's crude palm oil futures contract (FCPO), the industry's principal reference. Analysts quoted by South China Morning Post argue that dominance in physical supply does not automatically translate into pricing power, and that Jakarta's move to set new benchmarks may not be enough to persuade traders to ditch the established Malaysian contract.
This skepticism reflects the practical challenge of displacing a mature, liquid futures market that traders have relied on for decades. While Indonesia's new exchange aims to offer an alternative, the FCPO's entrenched position as the global benchmark remains a significant hurdle.
Building Trust in the New Bourse
In a separate development, attention has turned to who will regulate the new exchange. Sarjito, who goes by one name, is President Prabowo's sole candidate for the position of chief supervisor of commodity trading at OJK. He appeared before a parliamentary "fit-and-proper" hearing on August 24, where he emphasized the need to build a trustworthy market infrastructure.
Sarjito, who retired in 2024 as OJK's deputy commissioner of consumer protection, told lawmakers that the market will be assessed for transparency, fairness, orderliness, and liquidity. He stressed that the exchange's credibility is crucial from the outset: "People will always assess the market, whether it is transparent, fair, orderly, liquid, or not," he said. "If the market is not deep, has no integrity, industry players and traders would not trust it."
He also stated: "The exchange does not have to become huge on its first day, but it has to be trusted from the first transaction." Sarjito requires parliamentary approval to assume the role, and he told lawmakers that the OJK, the bourse, clearing agencies, warehouses, and other stakeholders must work together to build market trust.
The focus on trust reflects a recognition that the exchange's success depends not just on its rules but on the confidence of domestic and international participants. As Indonesia positions itself to influence global commodity prices, the credibility of its institutions will be as important as the physical volumes it commands.