Goverment urged to drop taxes on CPO, oleins
Goverment urged to drop taxes on CPO, oleins
JAKARTA (JP): The Federation of Edible Oil and Fats Associations yesterday called on the government to drop export taxes on crude palm oil (CPO) and oleins -- CPO products for cooking oil production -- to regain Indonesia's stake in overseas markets.
The chairman of the federation, Sawarno, told a hearing with the Trade and Logistics Commission of the House of Representatives that the introduction of the export taxes has caused Indonesia to lose its market shares on the world market, particularly in European and Middle East countries.
"We are already having difficulties in reentering European and Middle East markets ... And I'm afraid, in the future, Indonesia will lose more of its market shares," Sawarno said.
The government introduced the export taxes on CPO and oleins last September to protect local producers of cooking oils and stabilize their domestic prices.
When the government introduced the taxes, CPO prices on the world market reached its highest point since 1984 to US$700 per ton.
"However, the prices on the world market have fallen to $600 per ton. And I believe it will continue to drop in the future and such taxes, therefore, will not be necessary anymore," Sawarno said.
He argued that the prices of agricultural commodities, including CPO, widely fluctuate on the world market and, therefore, he suggested that the government not worry about price changes.
Meanwhile, Moh. Nafis Daulay, chairman of the Association of Cooking Oil Producers, said that the introduction of progressive tax rates on CPO exports may discourage new investments in CPO production.
The government is currently engaged in an intensive campaign to encourage investors to open palm oil plantations in a bid to increase annual CPO production to around seven million tons by year 2000 from around four million tons at present.
Trust
Nafis explained that the export taxes have also diminished foreign buyers' trust in Indonesia's exporters because the latter cannot ensure stable supplies.
"They might have turned to Malaysia's exporters, which are becoming more powerful on the world market," Nafis said.
Malaysia produces some seven million tons of CPO annually, controlling almost 60 percent of the world's output.
Nafis noted that the government has failed to protect local producers because the current export taxes are encouraging people to export CPO because the tax rate on it is much lower than that on oleins.
He also questioned the government's effort to stabilize domestic cooking oil prices by imposing export taxes, saying that the government should better liberalize trade so that there is no significant difference between domestic and overseas prices.
The government-run semi-buffer stock agency Bulog has targeted to maintain the price of cooking oil at Rp 1,300 ($59 U.S. cents) per kilogram.
Operation
Bulog, which has bought 150,000 tons of CPO and sent it to Salim Group's and Sinar Mas' processing plants, has been using the additional cooking oil products for market operations to stabilize domestic prices during the New Year and the fasting month.
Meanwhile, Wulani W. Rismono of Hasil Group, which produces cooking oil under the Vetco brand, noted that the current surge of cooking oil prices, reaching between Rp 1,800 and Rp 2,000 per liter, is the psychological effect of the fasting month.
She said cooking oil prices from the plants remain the same -- at between Rp 1,300 and Rp 1,400 per liter.
"It must be the retailers who get the largest portion of profits," she said. "However, it must be kept in mind that there are losses of about 20 percent of cooking oil sent from factories to retailers due to technical reasons." (rid)