Dragoman Digest

Indonesia restricts commodity exporters’ ability to repatriate dollar earnings

The move is part of a much broader and increasingly muscular pattern of resource nationalism

On January 21, Indonesia enhanced its earning retention rules for commodity exporters. Under the new rules, which will take effect on March 1, exporters will be required to keep dollar earnings within the Indonesian financial system for at least one year. It will apply to natural resource exporters with shipping documents worth at least US$250,000. Under previous rules, commodity exporters were required to keep 30 percent of profits onshore for at least three months. Indonesia’s Minister for Economic Affairs Airlangga Hartarto claimed that this new policy could increase the country’s foreign exchange reserves by US$90 billion, up from around US$155.7 billion. Given its history of financial crises and persistent current account deficits, Indonesia has long paid close attention to the size of its foreign exchange reserves and strength of the Rupiah. Just before the new profit retention rules were issued, the Rupiah registered its weakest value against the US dollar since July 2024.

Local and foreign businesses were less than thrilled with the rule changes. The executive director of the Indonesian Mining Association, Hendra Sinadia, claimed that even the 30 percent rule had caused appreciable adverse effects on cashflow. To mollify business concerns, the Indonesian Government has recommended companies convert US dollar profits into Rupiah to cover business operations. Indonesia’s Central Bank has also claimed it is offering commodity exporters term deposit instruments with competitive returns. In a sign of pragmatism, Indonesian authorities later exempted oil and gas companies from the new rules. Reviving domestic oil and gas production to improve energy security is a key priority for the new Prabowo Administration.

Goma falls to Rwanda-backed group after battle for the mineral rich DRC city

The EU and US have remained largely silent on the conflict

The Democratic Republic of Congo’s eastern city of Goma has been taken over by Rwandan-backed militia group M23. Last week, M23 seized the Goma airport and launched attacks against various hospitals, in actions that the DRC has characterised as a declaration of war. Goma borders Rwanda. The violence caused an Ebola research lab to lose power, putting samples at risk and threatening regional health security. Protests in DRC’s capital, Kinshasa, have turned violent. Mobs have attacked the embassies of Rwanda, Uganda, Belgium, the Netherlands and the US because of their alleged complicity in M23’s invasion. Rwandan President Paul Kagame denies funding M23 and claims that no Rwandan troops have entered DRC. This latest violence comes despite attempts by Angola to negotiate a peace agreement between the DRC and Rwanda.

The DRC has long accused Rwanda of stealing minerals from Goma. Several UN reports appear to verify the DRC’s claims that it loses around US$1 billion a year from the smuggling of commodities out of Goma by Rwandan-backed forces. Goma has substantial reserves of gold and coltan. There is some speculation that a 2024 strategic minerals deal with Rwanda has influenced the EU’s failure to mount a concerted response to the violence. Rwanda has also sent troops to Mozambique to help secure gas fields in the province of Cabo Delgado.

Rwanda, and Africa in general, does not appear to be a priority for the Trump Administration. The last time Rwanda occupied Goma, then President Obama publicly condemned Rwanda’s support for M23 and suspended the provision of military finance until Kagame backed down. The US had been supporting the Angolan mediated peace process, but it is unclear whether the Trump Administration will continue to do so. So far, only the UK has explicitly threatened to curtail aid to Rwanda.

Chinese AI breakthrough signals possible shift in data centre power demands

Optimising AI training could reshape infrastructure planning while potentially accelerating broader AI adoption

Chinese startup DeepSeek’s latest AI model (R1) has demonstrated significant efficiency gains in computational requirements, challenging assumptions about AI’s future energy footprint. The company claims that its model achieves near-performance parity with leading competitors while using less than 10 percent of the computational resources required by Meta’s Llama model. This advancement comes through innovations like Test Time Scaling, which enhances performance by breaking down complex problems into smaller steps.

These gains could have dramatic consequences for data centre planning and attendant energy demand. Data centres currently consume two percent of global electricity, with a projected 45 percent of US electricity demand growth through 2028 being driven by AI data centre construction. Microsoft and Meta had been planning US$80 billion and US$65 billion in AI data centre investments, respectively, for FY2025. Some analysts are now suggesting 10-20 percent of planned AI training facilities could be delayed or cancelled due to emerging efficiencies unlocked by models like R1.

The share prices of major US energy providers like Siemens Energy and GE Vernova were damaged by the broader market rout following R1’s release. The huge energy demand for data centres has even given a fillip to stalled plans to commercialise small modular nuclear reactors. However, the situation remains incredibly fluid. Energy efficiency gains could paradoxically increase total power demand by making AI more accessible and widespread. In any case, the uncertainty around future power demands will inevitably complicate the development of a data centre pipeline worth hundreds of billions.

India’s clean energy transition hits land acquisition roadblock

Fiendishly complex land ownership system threatens both renewable energy goals and broader economic development

A 100-megawatt solar project by Tata Power in Maharashtra has become emblematic of India’s renewable energy challenges. In raids dubbed “Operation Solar”, state officials sealed off Tata’s project site after accusations that the company had improperly acquired forest land used by local farmers. The incident highlights how land acquisition has emerged as a critical bottleneck in India’s plan for renewables to generate half of the country’s electricity by 2030, requiring an estimated US$200 billion in investment.

This challenge persists despite previous reform attempts. In 2015, Prime Minister Narendra Modi tried unsuccessfully to amend India’s land acquisition laws to remove or dilute requirements for farmer consent and social impact assessments for key strategic projects. The initiative faced fierce resistance from both parliament and rural constituencies. With the average size of agricultural holdings shrinking by a third to just 0.74 hectares in the five years through March 2022, developers have been forced to design projects sub-optimally based on available land. This scarcity is particularly acute given that 60 percent of land in India is farmed, well above the 37 percent global average. The difficulty of land acquisition is compounded by India’s notoriously opaque land market, where widespread absence of accessible ownership records forces developers to rely on middlemen – opening the door to competing claims.

The scale of the challenge is immense. The Institute for Energy Economics and Financial Analysis estimates India’s net zero goals require up to 75,000 square kilometres for solar energy alone – equivalent to the size of Ireland – with each megawatt demanding four acres. Research identifies 31 ongoing renewable projects subject to land disputes affecting 44,000 people, a figure considered conservative. Difficulty acquiring land has far deeper implications for India’s economy. As well as threatening renewables, it remains a key structural obstacle to India’s ambitions to position itself as an alternative manufacturing hub to China.

Japanese and Chinese automakers battle for declining Thai auto market

Thailand’s weakening auto demand undercuts ambitions to increase domestic production and transition to EVs

Japanese and Chinese automakers are lobbying Thai policymakers for policy concessions aimed at hybrids and EVs, respectively. Thailand has long been the so called “Detroit of Asia”, a result of proactive industrial policy and a sustained history of mostly Japanese foreign investment. However, to future-proof its automotive industry, Thailand has been increasingly courting Chinese EV investments. Consumer subsidies and tariff concessions specifically geared towards Chinese automakers have attracted manufacturing investments from companies BYD, Aion, Great Wall, and Chery. These inducements were made contingent on these companies producing a certain number of EVs domestically for every car imported. Across the 2022 to 2023 period, EV sales grew by more 300 percent. This caused a frisson of anxiety among Japanese carmakers. Japan Inc accounts for over 70 percent of sales in Thailand but has been slow to offer EVs.

Slowing EV sales seems to have given Japanese automakers a reprieve. In 2024, EV sales fell five percent year-on-year between January to November, while new vehicle sales fell 27 percent over the same time period. Hybrids, on the other hand, saw a 32 percent increase. Despite the decline in sales, Thailand had initially wanted to retain local EV production quotas for Chinese companies benefiting from preferential treatment. Chinese companies have since persuaded the Thai government to make several policy tweaks. These included allowing EVs imported from China to be re-exported and allowing Chinese companies benefiting from subsidies to defer local production until 2026. Japanese automakers have also registered some successes. In December, Toyota Chairman, Akio Toyoda, met with Thailand’s Prime Minister Paetongtarn Shinawatra who expressed openness to further measures to promote hybrid vehicles. Thailand had earlier kept the excise tax rate for hybrid vehicles at six percent from 2026 to 2032, instead of increasing it by two points annually as initially planned. It has also provided tax incentives for hybrids with certain types of electric motors.