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)