China must cut its import duties for palm oil to help boost Indonesian exports that are little changed at 2 million tons this year, an industry association said on Thursday.
China is the world’s top palm oil importer, and analysts say consumption in the world’s second-largest economy will rise about 10 percent this year to 7.3 million tonnes.
“Unfortunately, they treat our CPO [crude palm oil] with import tax,” Joko Supriyono, secretary general of the Indonesian Palm Oil Association (Gapki), said ahead of Chinese Prime Minister Wen Jiabao’s visit to Indonesia this week.
Chinese import duties for edible vegetable oils is currently 9 percent, and 2 percent for industrial palm oil use. Industrial palm oil imports, for cosmetics and soap, are small.
“The percentage of import tax for CPO is bigger than the import tax for the derivative product,” Joko said. “They want to protect their domestic industry and domestic refineries.”
Wen is visiting Malaysia and Indonesia this week to seal a series of agreements covering everything from banking and energy to palm oil and infrastructure.
“The Indonesian concern is that there are so many products that cannot compete with China,” Joko said.
In early March, benchmark crude palm oil prices rose to a one-week high on speculation about potential Chinese import duty cuts. Global output for palm oil was about 45 million tons last year, with China importing 5.696 million tons.
China is expected to buy around 2 million tons of palm oil from Indonesia this year, little changed from 2010, Joko said.
“China is now looking for a local partner to develop the downstream industry in Indonesia,” he said. “[If] Indonesia has a partner from China, then exporters can bring this product to China... rather than directly export with a higher import duty.”
Indonesia, the world’s top producer of palm oil, is expected to produce 21 million to 23 million tons of palm oil this year, having overtaken Malaysia as the top palm oil producer in 2007. China is also a big buyer of Malaysian palm oil, although its imports of the vegetable oil last year fell 12.5 percent to 3.4 million tons.
Indonesia’s government is trying to spur domestic industries to create higher-value exports from a country that is a leading producer of raw materials such as CPO, tin and thermal coal.
Its palm oil export tax, currently 22.5 percent, has been criticized by the industry, which is lobbying for changes. The tax aims to ensure domestic requirements are met and to reduce volatility in local cooking oil prices.