Crude palm oil producers come under fire
Crude palm oil producers come under fire
JAKARTA (JP): President Soeharto, while hinting that the government will maintain export tax on crude palm oil (CPO), said yesterday that producers must put high priority on the domestic market and people's best interests.
"CPO producers must not think only about foreign currency earnings," Soeharto was quoted as saying by Beddu Amang, the recently installed chairman of the National Logistics Agency (Bulog), after their meeting at the Bina Graha presidential office.
"They (CPO producers) must also show concern for the needs of the people and their welfare," Beddu, whose office controls the distribution of cooking oil and other strategic food stuffs, quoted the President as saying.
Cooking oil and CPO are considered as strategic commodities in Indonesia, whose population is the fourth largest in the world.
Soeharto also said yesterday that CPO exporters are obligated to "assist" state-owned palm oil plantation companies in "satisfying the domestic market".
The government, however, will not limit CPO exports, he said.
The President's remarks came amid recent debates started by an appeal last week by the Federation of Edible Oil and Fats Association (FAMNI), which called for the cancellation of export tax on CPO, which had affected Indonesia's stakes in overseas markets.
The government significantly raised the rates of export tax on CPO last year in order to stabilize domestic prices, encourage investments in palm oil plantations and protect local producers of cooking oils, which are mostly controlled by the Salim and Sinar Mas conglomerates.
FAMNI claimed that the export tax was imposed when CPO prices on the world market reached their highest level since 1984 to US$700 per ton. Analysts and officials expect CPO prices to go down to $460 per ton this year.
Interestingly, the increase in export tax for CPO took place last year, when the country's CPO production exceeded domestic demand.
Bulog figures show that the domestic demand for CPO reached 2.5 million tons last year, while production was 4.5 million tons.
Beddu said that the figures will most likely stay the same this year.
Prices
The recent debates on CPO policies also came amid growing concern about the escalating prices of cooking oils throughout the country over the last two months despite Bulog's market interventions and the export tax.
Although the precise cause of the price rises is yet to be determined, analysts generally blame the rise in demand prior to the Idul Fitri holiday early next month.
Various local news reports said that up to last Saturday, retail prices of the Salim-produced Bimoli cooking oil reached Rp 2,400 per kilogram at Jakarta market places, far higher than Bulog's target price of Rp 1,300.
Beddu reminded the press yesterday that Bulog, assisted by the Salim Group -- this group controls about 60 percent of the domestic market -- began an operation last week by selling cooking oil directly to consumers at 17 different markets in Jakarta.
He also said that this operation is being carried out without involving distributors, who have been blamed by both the government and CPO producers as the culprits of the price increases.
"Past interventions failed because we still involved distributors," Beddu said.
Production
In the meantime, Bisnis Indonesia daily yesterday quoted Wayan R. Susila and Bachtiar Abbas, two leading agricultural experts, as saying that, contrary to the objective, the CPO export tax policy will not encourage greater domestic production in the long run.
The two experts said that, based on their joint research, domestic CPO production will reach 8.64 million tons per year by 2005 if the export tax is abolished.
In contrast, if the policy is maintained, domestic production by 2005 will only reach 8.48 million tons, 1.8 percent less than what could be achieved under a different scenario.
In comparison, figures from the Ministry of Agriculture show that by 2005, Indonesia's annual production of CPO will reach 9.89 million tons, about the same level as that of Malaysia, currently the biggest CPO producer in the world.
It is unclear whether the official figures take the export tax into account.
Wayan and Bachtiar also said that the export tax policy will hurt smallholders.
"Without the tax, smallholders can make about Rp 174 per kilogram of fresh fruit. In contrast, the export tax will lower their earnings to only Rp 159 kilogram of fresh fruit," they said. (hdj)