JAKARTA — Indonesia has lost an estimated US$908 billion between 1991 and 2024 due to export under-invoicing and profit shifting by commodity exporters, according to the country’s macroeconomic policy briefings. In response, the government has introduced tighter rules governing export proceeds and established a state-controlled commodity export agency, PT Danantara Sumberdaya Indonesia (DSI).

Export under-invoicing and aggressive transfer pricing have been the primary methods used to shift profits out of Indonesia. Under-invoicing involves exporters reporting artificially low prices, shipment volumes, or commodity quality, while aggressive transfer pricing routes taxable profits to subsidiaries in tax havens or low-tax jurisdictions, violating the arm’s length principle.

Despite trade surpluses during periods of high global prices for coal and crude palm oil, the Indonesian rupiah has remained chronically vulnerable to depreciation, and capital flight has systematically drained the country’s financial wealth. A 2016 estimate by Global Financial Integrity found Indonesia lost $6.5 billion in state revenue that year alone due to trade manipulation.

A 2019 investigation by Global Witness revealed that PT Adaro Energy Indonesia Tbk sold coal at below-market prices to its Singapore-based subsidiary, Coaltrade Services International, between 2009 and 2017. The subsidiary then resold the coal at international market rates, booking average annual commissions of $55 million—up from a prior average of $4 million. Profits were accumulated in Singapore, where corporate tax rates were around 10%, compared to Indonesia’s effective upstream mining tax burden of nearly 50% at the time.

Leaked banking documents in 2020 exposed Colestar Resources Ltd, another coal trading entity, as having only $1 of paid-up capital, no fixed assets, and no operational staff. Funds from such offshore subsidiaries were reportedly routed through tax havens like Mauritius and Labuan to avoid Indonesian fiscal oversight.