Govt imposes new 40% tax on CPO exports

Govt imposes new 40% tax on CPO exports

JAKARTA (JP): The government imposed yesterday export taxes of
up to 40 percent for crude palm oil (CPO) and its by-products
following the lifting of the export ban on the commodities.

It also imposed new export taxes on coconut oil products.

The new decree is in compliance with the terms agreed upon
with the International Monetary Fund (IMF) on April 8 in exchange
for a US$43 billion bailout.

"This is what has been agreed on with the IMF," Minister of
Trade and Industry Mohamad "Bob" Hasan said after a meeting of
the Council for Economic and Monetary Resilience yesterday.

"When the domestic market of the commodities strengthens, we
will adjust the tax again, so that the prices of cooking oil will
be stable and the domestic supply will be enough."

The tax decree, issued by Minister of Finance Fuad Bawazier,
states that a 40 percent tax will be imposed on the exports of
CPO and crude olein.

Exports of refined bleached deodorized (RBD) palm oil, RBD
olein, crude stearin and crude palm kernel oil will be charged a
35 percent tax.

The government has also imposed a 30 percent export tax on RBD
stearin and RBD palm kernel oil.

The decree also puts a 20 percent export tax on crude coconut
oil, and a 15 percent tax on RBD coconut oil.

Hasan said he was optimistic that prices of CPO in the
international market would drop, thus stabilizing the local
supply of the cooking oil.

Coordinating Minister for Economy, Finance and Industry
Ginandjar Kartasasmita said lower international prices would
affect domestic prices.

"It is impossible that the international price would continue
to be high when the supplies have increased."

In January, Hasan's predecessor Tunky Ariwibowo banned exports
of CPO and its derivatives to stabilize the prices of the cooking
oil, which had increased sharply due to the drastic fall of the
rupiah against the U.S. dollar.

But the move failed to stabilize the prices, while the rupiah
continued to sink.

When the government signed its second economic reform
agreement with the IMF on Jan. 15, it agreed to abolish the ban
by April, but later backtracked on the pledge.

In the deal made with the IMF on April 8, the government
agreed to remove the ban by April 22 and replace it with the
export tax.

Export taxes will be evaluated continually, and the government
has said they will be reduced when local market prices stabilize
and the rupiah's value strengthens.

The taxes are scheduled to be lowered to 10 percent before the
end of December 1999.

The lifting of the country's ban on crude palm oil exports
will help ease a supply shortage in the world market and lower
prices, analysts and trade sources in Malaysia said yesterday.

"We would expect the sudden reintroduction of Indonesian
exports will relieve some of the pressure in the global market
for palm oil -- even here in Malaysia, where refiners need more
crude palm oil to keep their factories going," said Greg
Feldberg, a plantation analyst at ABN-AMRO Asia.

"We would also expect some short-term downward pressure on the
price as the market receives a new source of supply," he was
quoted as saying by Reuters.

Trade sources in Indonesia claimed that at least 100,000 tons
of CPO was ready for loading on waiting vessels in an Indonesian
port as soon as the government lifts the export ban.

Feldberg said the lifting of the export ban had been expected
for a long time and some buyers had been waiting to buy in
anticipation of lower prices.

Meanwhile in London, palm and coconut oil prices opened firm
in Europe yesterday as Indonesia lifted its ban on palm oil
exports.

Crude palm oil opened in Europe $10 to $15 a ton, but traders
said buys were around $12.50 below the asking prices.

"These are very early prices, the market is firm, but we
expected prices to settle down later in the day," said
one. (das/prb)

Table: New export taxes on palm oil and coconut oil products

(Commodities, Export Tax):
Crude palm oil (CPO), 40 percent;
RBD palm oil, 35 percent;
Crude olein, 40 percent;
RBD olein, 35 percent;
Crude stearin, 35 percent;
RBD stearin, 30 percent;
Crude palm kernel oil, 30 percent;
RBD palm kernel oil, 30 percent;
Crude coconut oil, 20 percent;
RBD coconut oil, 15 percent.