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View all search resultsAnalysis: Indonesia's DHE exemptions create a two-tier export regime
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Export oriented: Using a rubber-tired gantry crane, port workers load export-bound containers onto a vessel flying a Portuguese flag on June 24, 2025, at Tanjung Mas port in Semarang, Central Java. (Antara/Aji Styawan)
I
ndonesia has introduced a new exception to its natural resources export proceeds (DHE-SDA) policy, allowing exporters from the United States, China, Australia and Canada greater flexibility in managing their export proceeds. The announcement marks the first significant relaxation of a policy that, only months earlier, was expanded to require most natural resource exporters to retain 100 percent of their export earnings in Indonesia's state-owned banks (Himbara) for 12 months.
Earlier this year, the government had argued that the year-long lockup was essential to strengthening Indonesia's foreign exchange reserves and financial resilience. The latest exemption, however, creates a noticeably wider gap between the treatment afforded to exporters from the four exempted countries and those from the rest of the world. Rather than simply adjusting an existing policy, the decision effectively establishes two different regulatory regimes for exporters depending on the destination of their exports.
The distinction is particularly significant because Indonesia's DHE-SDA requirements are already among the most restrictive foreign exchange retention measures in the region. By carving out special treatment for a select group of countries while maintaining the full 12-month lockup for others, the government has added a new geopolitical dimension to what was previously presented primarily as a macroeconomic policy.
It is worth noting that the recently revised DHE-SDA regulation, which entered into effect on June 1, included a stipulation for exceptions through article 18A of PP No. 21/2026. The provision allows exceptions where necessary to accommodate Indonesia's bilateral or multilateral commitments. It was only in late July that the government confirmed the provision would apply to the US, China, Australia and Canada, providing the first indication of how the exception mechanism would be implemented.
Finance Minister Purbaya Yudhi Sadewa explained that the exemptions were necessary because Indonesia is bound by bilateral and multilateral commitments with the four countries. Beyond legal obligations, he also noted that the four countries are among Indonesia's major investors and have banks that have long operated in the country, highlighting the importance of providing greater flexibility under the DHE regime.
For context, the four countries each represent strategically important economic partners for Indonesia. The US recently concluded the Agreement on Reciprocal Trade (ART), which secured lower tariffs for Indonesian exports, while China remains Indonesia's largest trading partner and one of its biggest sources of foreign investment. Australia is linked to Indonesia through the Indonesia–Australia Comprehensive Economic Partnership Agreement (IA-CEPA), which provides a comprehensive framework for bilateral trade and investment. Canada, meanwhile, is home to major mining investors in Indonesia, including Vale Base Metals, which holds a stake in PT Vale Indonesia, and Meridian Gold through PT Agincourt Resources. Together, the four countries account for a significant share of Indonesia's trade, investment and access to international capital.
The timing of the exemptions is also notable against the backdrop of Indonesia's weakening external trade position. After years of recording consistent trade surpluses, the country's merchandise trade balance slipped into a US$1.61 billion deficit in May 2026—its first monthly deficit in six years—as exports fell 5.73 percent year-on-year to $23.20 billion while imports surged 22.16 percent to $24.81 billion. The deterioration, driven largely by softer commodity exports and stronger import demand, has heightened the importance of preserving the competitiveness and financial health of Indonesian exporters. Against that backdrop, providing greater flexibility to key export markets through DHE-SDA exemptions can also be viewed as a strategic measure to help sustain trade and investment relationships during a period of increasing external pressure.
