Skepticism surrounds Bulog's CPO plan<\/p>\n
JAKARTA (JP): The setting up of a crude palm oil (CPO) buffer
\nstock started earlier this month by the National Logistics Agency
\n(Bulog) is drawing criticism from many observers who call it an
\nineffective way to bring down cooking oil prices.<\/p>\n
Business people in the palm oil industry and market observers
\nhave suggested alternative schemes aimed at pulling down the
\nprices of cooking oil, a primary foodstuff in Indonesia.<\/p>\n
Moh. Nafis Daulay, the chairman of the Federation of Vegetable
\nOil Associations, for example, thinks a more effective way to
\nkeep prices at reasonable levels and prevent the commodity from
\nbecoming a major generator of high inflation rates would be to
\nraise the export tax on CPO to a higher level than, or at least
\nthe same as, that on olein, a derivative of CPO.<\/p>\n
\"If the government continues to impose a lower level of export
\ntax than that on olein, producers will continue exporting CPO,
\nwhich is more profitable. Olein requires a certain amount of
\nprocessing costs,\" Daulay, who is based in Medan, North Sumatra,
\nsaid during a telephone interview with The Jakarta Post last
\nweek.<\/p>\n
Closing<\/p>\n
Daulay pointed out that high prices on the world market --
\nmainly due to a decline in the production of non-CPO-based
\ncooking oil and the small profit margin of cooking oil industries
\n-- have further driven CPO producers to export their products.<\/p>\n
From an estimated production of 4.5 million tons of CPO this
\nyear, about two million tons are being exported and the remaining
\n2.5 million tons sold domestically.<\/p>\n
Daulay said that due to shortages of domestic supplies of CPO,
\nwhich is used as raw material in the cooking oil industry, up to
\n60 percent of all cooking oil producers have had to close down.<\/p>\n
He added that due to the building up of the buffer stock,
\nlong-term supply contracts, which were previously conducted
\nbetween cooking oil producers and CPO suppliers, have now been
\nstopped to allow supplies to go to Bulog.<\/p>\n
\"Long-term supply contracts should not be stopped because
\ntheir stoppage will only reduce the amount of CPO on the market
\nand raise prices again. Any stocking should be done by adding to
\nthe existing CPO stocks, including those used in the contracts,\"
\nDaulay emphasized.<\/p>\n
Cooking oil prices began soaring last year and reached their
\npeak of over Rp 1,600 (70 U.S. cents) around the Idul Fitri
\nholidays last March.<\/p>\n
Bulog, set up to manage the distribution of basic food
\ncommodities and maintain their prices at reasonable levels
\nthrough market operations, was unable to prevent the price rise
\ndespite its market intervention efforts and the increase in the
\nexport tax.<\/p>\n
In a final effort last month, Bulog challenged the
\n\"nationalism\" of private palm oil plantations, when the Chief of
\nBulog, Beddu Amang, asked them to help the agency establish a
\nbuffer stock of 75,000 tons of CPO, with state and private CPO-
\nproducers contributing an equal amount for the stock.<\/p>\n
This effort, plus the imposition of the export tax and the
\napproval on CPO imports if necessary, is expected to gradually
\ncut back cooking oil prices from their current range of Rp 1,547
\nto Rp 1,400 per kilogram.<\/p>\n
Other palm oil observers urged the government to shift its
\norientation from relying on upstream CPO exports to downstream
\nbusinesses.<\/p>\n
Mardjan Ustha, a palm oil business executive, wrote in the
\nBisnis Indonesia daily that by reorienting its export targets,
\nIndonesia would avoid becoming \"trapped\" in a situation where it
\nstands as a major CPO producer on the one hand, but as a poor
\nmanufacturer of cooking oil on the other, so that it may fail to
\nkeep cooking oil prices low on the domestic market.<\/p>\n
Indonesia, with the current production of 4.7 million tons of
\npalm oil per annum, is presently the second largest palm oil
\nproducer in the world after Malaysia, with the production of 7.6
\nmillion tons.<\/p>\n
However, palm oil exports from the two countries differ
\ngreatly in their structure. While Indonesia's palm oil exports
\nconsist entirely of CPO, 99 percent of Malaysia's exports are in
\nthe form of processed palm oil and the remaining one percent is
\nCPO.<\/p>\n
Mardjan pointed out that Indonesia should develop its subdued
\ncooking oil industry -- which is currently dominated by a small
\nnumber of producers -- and refrain from \"playing around\" with
\nonly the upstream variables.<\/p>\n
Owners of major cooking oil industries are presently limited
\nto the Bukit Kapur Group, the Salim Group, the Hasil Karsa Group,
\nthe Sinar Mas Group and the Musim Mas Group.<\/p>\n
Daulay, however, did not consider the domination of the few
\nprivate producers a major problem because the companies, which
\nproduce brand name cooking oil, hold only a 25 percent share of
\nthe total domestic market.<\/p>\n
The majority of cooking oil producers, which are hit by the
\nshortages of CPO supplies, he said, are small and medium in scale
\nand sell their products at traditional market places.<\/p>\n
Another way to cut back cooking oil prices was suggested by
\nH.S. Dillon, an expert assistant to the Minister of Agriculture,
\nwho was quoted by Antara last week as saying that state-owned
\ncompanies should have shares in the cooking oil industry if the
\ngovernment intends to control the prices of cooking oil.<\/p>\n
He added that by partly owning cooking oil plants, not only
\ncould the government control the commodity's production level and
\nprices, but it could also directly manage the industry.<\/p>\n
None of the state-owned oil palm plantation firms have entered
\nthe downstream segment of the palm oil industry, which -- apart
\nfrom cooking oil -- also includes soap and cosmetics
\nmanufacturing.<\/p>\n
A palm oil business executive also suggested that the
\ngovernment allocate subsidies -- taken from the payment of the
\nCPO export tax, for example -- for cooking oil procurements on
\nthe domestic market.<\/p>\n
This, the executive said, could be done by buying cooking oil
\nfrom producers at regular market prices and selling them to the
\npublic at prices which the government felt most reasonable. (pwn)<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/skepticism-surrounds-bulogs-cpo-plan-1447893297",
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