Govt to set quota on palm oil export to boost supply

Govt to set quota on palm oil export to boost supply

JAKARTA (JP): The government will impose a quota on crude palm
oil (CPO) exports to boost domestic supply and stabilize
inflating prices.

Minister of Industry and Trade Tunky Ariwibowo said yesterday
the government would also require CPO producers to increase their
allocations to the State Logistics Agency (Bulog).

The minister said that with more stock, Bulog would be able to
carry out its market intervention more effectively.

"The supply of CPO and related products would be prioritized
to meet domestic demand. What remains after domestic demand is
met can then be exported," Tunky said after his meeting with
President Soeharto yesterday.

Tunky said that he, along with Minister of Agriculture
Sjarifudin Baharsjah and head of Bulog Beddu Amang, would study
domestic demand further before coming up with a new ruling.

The government requires companies to allocate a portion of
their CPO products to Bulog, which then distributes the products
to local olein and cooking oil factories. The agency uses part of
the products to intervene in the market when the price increases.

The government also imposes an export tax on palm oil and
related products as part of its strategy to stabilize the
domestic supply.

Tunky said the new move was to anticipate the upcoming
Christmas, New Year, and Ramadhan festivities in December and
January, when prices usually surge, especially since this year's
prolonged drought would affect agriculture.

"The rise in prices of cooking oil and rice contributed
significantly to the surge in inflation in October," Tunky said.

Tunky said commodity prices had continuously climbed in the
past few months because of the price hike in CPO in the
international market to US$540 from $516 in July.

The factory price of olein had risen by 50 percent to Rp 2,200
from Rp 1,450 in July, he said.

He said the 50 percent cut in palm oil exports in July had
triggered the increase in exports, which in turn caused a sharp
increase in domestic olein prices.

Exports of palm oil and related products in the first eight
months of this year rose 25 percent to over US$1.2 billion, Tunky
said.

At yesterday's meeting, President Soeharto also ordered Tunky,
Beddu, Sjarifudin and Minister/State Secretary Moerdiono to
ensure the procurement and distribution of other foodstuff,
including rice and wheat flour.

Beddu said it was likely the government would not import rice
this year because the country's rice stock was at 2.3 million
tons.

"We've prepared one million tons for the market operation to
stabilize the price for the 1997/1998 fiscal year," Beddu said.

The government would closely watch the impact of the drought
on rice and other crops, he said.

Indonesia had a 1.99 percent inflation rate last month, the
highest month-on-month increase in the last 10 years.

Food prices rose 3.61 percent, housing prices increased 1.18
percent, clothing rose 2.35 percent and services rose 0.65
percent.

The inflation rate for the last 10 months was 7.36 percent
from 5.35 percent in the same period last year.
(das/prb)