Govt going ahead with export tax on cashews, cocoa

JAKARTA (JP): The government is nearing realization of its plan to impose an export tax on a number of unprocessed farm commodities despite protests from farm groups and industry associations.

Director of agroindustry at the Ministry of Industry and Trade Yamin Rachman said on Thursday export taxes of between 20 percent and 30 percent would soon go into effect on unpeeled cashew nuts, untreated leather and unfermented cocoa beans.

He said the measure was important to encourage development of the processing industries for the commodities and boost the latter's exports.

"Our studies show that export taxes should be imposed on three primary products -- unprocessed cashew nuts, untreated leather and unfermented cocoa beans. We also received input from related associations in studying the plan," he said.

Yamin said exporting processed products would not only earn a larger amount of foreign exchange but also could create new job opportunities.

Domestic production of cashew nuts reaches about 75,000 tons per year. Around 30,000 tons of the total is earmarked for the domestic industry, with the remainder exported, mainly to India.

Traders prefer to sell unprocessed cashews overseas to benefit from higher prices, but it has caused a shortage among local cashew processors.

Restricted supply has forced many local cashew nut processing companies to stop their operations. Currently, only five cashew nut processing enterprises are still operating from a total of 11 in 1997.

Yamin said a similar predicament also occurred in the local leather tanning and chocolate industry, which suffered from a lack of raw materials due to the predominance of exports of untreated leather and unfermented cocoa.

The local chocolate and leather tanning industries have been forced to import cocoa and raw leather for the past two years, he added.

The government's plan to impose export taxes on primary products was first announced by Minister of Industry and Trade Rahardi Ramelan last month.

Export associations, including the Indonesian Cocoa Association, have objected to the plan, saying they feared export taxes would make Indonesian commodities less competitive on the world market.

The Indonesian Farmers Union (HKTI) also objected the plan, arguing it pointed to inconsistencies in the government's stated objectives to improve the lot of local farmers and boost exports.

"The government has pledged to protect farmers. But, in fact, the government is imposing zero percent import duties on sugar and rice, while imposing an export tax on CPO (crude palm oil), and on other primary agriculture products."

He said booming Indonesian exports of agricultural products in the past two years were not due to an increase in productivity, but to the rupiah's sharp depreciation against the U.S dollar and the enhanced competitiveness of Indonesian products in the international market.

"Let farmers enjoy the profits they get. By imposing export taxes, the government eats up their earnings," he said.

Similar concerns also were expressed by the Association of Indonesian Food and Beverage Producers, which urged the government to conduct further study of the impact of imposing export taxes on agricultural commodities.

Association chairman Thomas Dharmawan said the government should be selective in choosing commodities which need export taxes. (gis)