Minister of Trade Mari Pangestu has come under fire from an analyst for her plan to “rescue” the nation’s palm oil producers by attempting to create new markets overseas.
At a press conference in Jakarta on Monday, Mari announced a plan to open up new export markets in the Middle East and Russia as part of the government’s attempt to rescue its crude palm oil market.
But Aviliani, an economist with the Institute for Development of Economics and Finance, or Indef, criticized the government’s strategy of redirecting CPO exports to new market as “too little, too late.”
“Creating new markets means that we need to work from zero,” Aviliani said.
She added that the government would be better off focusing on cultivating the domestic market for CPO or finding better ways to process the product.
“Ask a state company to buy the CPO, or process it into something useful to the people,” she said.
In discussing the proposal on Monday, the trade minister said that “the CPO market has been shrinking recently, but this will not be a big problem as long as we can find new markets by using another trade strategy.”
Mari said that Indonesia had been working through trade missions to some Middle Eastern countries to promote palm oil, which is widely used for cooking and biofuels. “But we are also attempting to maintain our CPO markets in China, India and European countries,” she said.
“The countries in the Middle East and Russia are potential markets for CPO products,” she said, adding that crude palm oil was categorized as a “basic needs” product and was easily salable because it was a basic foodstuff.
The trade minister believed that CPO export volumes this year would not decline from last year’s target of 14 million tons because customer demand for the product was still high.
In early 2008, government set a target to reach CPO export volumes of 14 million tons from a total production target of 18.8 million tons.
Indonesian CPO exports fell dramatically last year from around one million tons a month at the beginning of 2008 to around 500,000 to 700,000 tons a month in August.
Palm oil producers have blamed the decline in exports on decreased demand amid the economic downturn, which has also created a supply glut in the market. The price of CPO has fallen accordingly from between $1,000 and $1,300 a ton in the first quarter of 2008 to between $400 and $500 a ton.
More recently, the price of CPO has risen again as stockpiles have been reduced, with one ton hitting $525 on Monday in Kuala Lumpur.
Before the credit crisis began, the price of crude palm oil was rising on the back of high oil prices and increased demand for the oil as a food product in developing nations.
India, the Netherlands and China are three of the largest buyers of Indonesian CPO, together consuming more than $2.3 billion worth of Indonesian palm oil in 2007. That same year, the country’s total CPO exports were valued at $7.8 billion.