JAKARTA – Indonesian palm oil industry is facing a tough challenge in the international and national markets due to global economic recession that will affect the economic condition of Indonesian people and the global society. The industry hopes the government will create supportive policies to generate its growth and to anticipate the impacts of trade barriers in the countries of export destinations.
The challenge was revealed by the forum of agriculture journalists (Forwatan), the association of Indonesian biofuel producers (APROBI), the association of Indonesian oleo-chemical producers (APOLIN), and the association of Indonesian vegetable oil industries (GIMNI) during an iftar (break-the-fast) ceremony in Jakarta on Monday, 27 March 2023.
The three associations reminded the fact that the palm oil industry is still dealing with the trade barriers at global market. Currently, Indonesia is waiting for a legal decision on a lawsuit against the European Union’s (EU) RED II filed to the World Trade Organization (WTO). The legal case is still probed by the WTO’s Dispute Settlement Body under the registration code of WT/DS 593. The legal process is hindered by a number of issues, which include the unavailability of arbitrators at its appellate body as a result of US blockade against the appointments of arbitrators since 2017.
Sahat Sinaga, Executive Director of GIMNI, said that the global market during the first quarter this year saw a declining trend of production of 17 vegetable oils at 2% to around 58 million tons, from the initial target of 61 million tons. “At domestic market, the price of palm oil so far this year averaged at lower level than the average of over US$ 1000/ton last year,” he said.
“Currently, the palm oil export drops due to the global recession. As a result, it’ll be hard to meet the target of domestic market obligation (DMO). The export decrease was started since the end of 2022 when the rights of exports at 6.1 million tons are not fully realized. Another impact was the supply shortage of “minyakita” cooking oil as it is subsidized from the fund derived from palm oil exports,” he said.
Sahat said that the DMO policy is no longer effective in securing the supply of cooking oil. “The government should focus on helping the people of low income at around 33 million people across the country with their cooking oil need at around 42 million kiloliters,” he said.
He proposed that the government postpone the export levy of palm oil to maintain the competitiveness of Indonesian palm oil at global market. “If the government continues applying the export levy, then the exports will drop and domestic market will see an oversupply of palm oil. Price is lower this year than that of last year. The global market is also weakening. So, the exports need incentives to push up competitiveness at global market,” said Sahat.
APOLIN Chairman Rapolo Hutabarat expressed his appreciation to the Indonesian government in dealing with the impacts of the outbreak of Covid-19 pandemic. “Indonesia is very lucky in having domestic production of oleo-chemical which is very beneficial during the pandemic for the production of disinfectant, detergent and health products,” he said.
According to him, Indonesia has become the world’s largest producer of oleo-chemical products. “Currently, Indonesia’s production capacity of oleochemical reached 11.38 million tons, which is higher than that of Malaysia at 2.5 – 3.0 million tons. It’s mostly exported to India, China and EU,” Rapolo said, adding that the oleochemical positive performance is also due to the government’s policy to incentivize it with cheap gas, at US$6 per mmbtu, until 2024.
But he noted that in EU the oleo-chemical product has been slapped with anti dumping duties at 15%-46% since December 2022. “As a result APOLIN member companies find it hard to enter the EU market,” he said.
Paulus Tjakrawan, the chairman of APROBI said that the biodiesel mandatory program has been upgraded to 35% this year. “In 2023, the target of biodiesel use at domestic market will reach 13.15 million kiloliters. It can reduce the import of diesel fuel up to the total value of Rp140 trillion.”
“We hope it will be further increased during the next few years. It is part of the national target of zero emission in 2060. That’s why we need to push up the other bioenergy programs to produce palm oil-based bioavtur, bioethanol, and bio-gasoline,” he said. (*)
Source: KONTAN.CO.ID/WartaEkonomi/Investor.id
