Govt's policy on CPO gets cool response

Govt's policy on CPO gets cool response

JAKARTA (JP): The government's recent move to cut the export
tax on crude palm oil (CPO) has received a cool response from
producers.

Chairman of the Indonesian Palm Oil Producers Association
(Gapki) Derom Bangun said here on Friday the cut in the export
tax was meaningless because the government had raised the
reference price of the commodity.

He said if the government wanted to raise the reference price
of CPO -- the price level used to calculate tax payments --, the
tax export should be totally removed.

"With the higher price reference, the cut in the export tax
brings no help at all in improving the competitiveness of the
country's CPO in the world market," he told The Jakarta Post.

He said Gapki would send a letter to the government next week
demanding a review of its export tax policy. "We want the
government to scrap the export tax of CPO," he said.

The government cut on Tuesday the export tax of CPO to 5
percent and its by-products to 2 percent. The export tax of CPO
was previously set at 10 percent while that for by-products such
as refined bleached deodorized (RBD) palm oil and RBD palm olein
was set at 8 percent and 6 percent respectively.

The reference price of CPO was, however, raised to US$190 from
$120. The new reference price of oil palm kernel is $40, RBD palm
oil $200, crude palm olein $195 and RBD palm olein $215.

The government's announcement of the reduction in the export
taxes of CPO and its by-products was made amid plans by Malaysia
to increase palm oil exports by about one million tons over the
next six months in a bid reduce its stock pile and boost prices
which are at a 13-year low.

Derom said in order to support the local CPO producers in
coping with the current volatile market, the Malaysian government
had offered tax incentives to its producers and a credit facility
for foreign buyers.

Malaysia has given special treatment to six local CPO
producers to ship their products overseas without any export tax
charges. Four other local companies were earlier given the same
treatment.

The Malaysian government has also offered a credit facility
totaling $135 million to five countries, namely Russia, Myanmar,
Bangladesh, Egypt and South Korea, so that those countries could
import more CPO from Malaysia. The country expects the credit
facility will boost its CPO exports by about 500,000 tons.

Derom said it would be difficult for Indonesia to compete with
Malaysia if the government maintained the current tax and
reference price level.

"Unfortunately, in Indonesia, not only is the will of the
government missing, but it also doesn't seem to have any
understanding," Derom said.

He acknowledged that it would be difficult for the Indonesian
government to introduce similar incentives like those provided by
Malaysia but he said that the total removal of the export tax
would be quite feasible.

Indonesia's total CPO production is predicted to increase this
year to 6.5 million tons and to over seven million next year.

The country, which is the world's second largest CPO producer,
produced 5.9 million tons of CPO last year, up 6 percent from
1998's output of five million tons.

Derom predicted about three million tons of this year's total
CPO production would be shipped to overseas markets.

Local producers were now facing difficulties in selling the
commodity in the domestic market as demand had fallen behind the
available supply, he said.

He said the recently slow domestic trading of CPO had resulted
in higher stock of more than 700,000 tons, all of which must
immediately be exported to avoid bigger losses on the producers'
side. (cst)