Experts suggest CPO export tax should be reduced to below 15%
Experts suggest CPO export tax should be reduced to below 15%
JAKARTA (JP): Leading analysts suggest that the government cut
the current 60 percent export tax on crude palm oil (CPO) to
below 15 percent or abolish it altogether to collect more badly
needed foreign exchange.
Bungaran Saragih of the Bogor Institute of Agriculture said on
Saturday that he could understand the maintenance of export tax
on CPO to curb a drastic outflow of the commodity to the overseas
market but the tax should be lower than 15 percent.
The government, nevertheless, has planned to cut the current
CPO export tax to no lower than 40 percent.
"Lowering the CPO export tax to 40 percent doesn't make any
sense at all. The tax should be removed, or, if we want to
control CPO trading, it should be set no higher than 15 percent,
the level which would still attract foreign buyers and encourage
farmers to cultivate their oil palms," he told The Jakarta Post
from Medan, North Sumatra.
Bungaran noted that the current 60 percent export tax was set
in July when the rupiah reached Rp 13,000 to the U.S dollar.
The rupiah is now traded at between Rp 8,000 and Rp 9,000 per
U.S dollar. With the rupiah at this level, the CPO export tax
should be set at 15 percent.
Executive Director of the Center of Agriculture Policy Studies
H.S. Dillon said the government's policy of maintaining the
export tax on CPO, although the tax will be cut, is
counterproductive to its pledge to adopt a people-oriented
economy.
Dillon said the high export tax on CPO and its byproducts had
halved the incomes of oil palm farmers as prices for oil palm
kernels had dropped sharply.
"The high export tax has adversely affected the welfare of oil
palm smallholders and benefited the urban consumers, those who
are already rich," Dillon told the Post.
Bungaran agreed and said that maintaining a low cooking oil
price should not be a top government priority in tackling the 17-
month long economic crisis.
"CPO is not an essential commodity. We're not going to starve
if we don't consume fried food," he said.
Bungaran said the government policy on imposing a high export
tax on CPO resulted in a 70 percent drop in its export value last
year.
He said the country would earn at least $2.5 billion from CPO
exports this year if the government liberalized the trade.
The export value of CPO last year reached only US$420 million,
compared to $1.5 billion in 1997, he said.
In times of depleting foreign exchange reserves, the
government should actually promote more exports of potential
commodities like CPO.
Dillon noted that the government's intervention in CPO trading
had caused foreign buyers to turn to other CPO producers,
especially Malaysia.
"Inconsistency in government regulations covering trade in CPO
will kill the business in the long term because the international
market will view this as increasing risk and uncertainty." (gis)