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Indonesia envisions global leader in processed palm oil products

Jakarta Globe - June 28, 2021

Novy Lumanauw, Jayanty Nada Shofa, Jakarta – Indonesia is eyeing to lead the world's downstream palm oil industry by 2045, according to the Coordinating Ministry for Economic Affairs on Monday.

The ministry's food and agribusiness coordination deputy Musdhalifah Machmud said the government is trying to switch Indonesia's position from being world's biggest crude palm oil (CPO) producer to leader of the downstream palm oil industry by 2045. To speed up the process, the government has rolled out numerous policies in the past few years.

"Among them are tax incentives, the development of a port-equipped integrated industrial area for downstream palm oil products, export duties and levy, as well as the mandatory biodiesel program to substitute diesel fuel imports," Musdhalifah said.

Exports for palm oil-based products are seeing improvements, in contrast to 15 years ago when CPO dominated 60-70 percent of the exports. "Downstream product exports now reach 60-70 percent, whereas the upstream products only account for 30-40 percent," Musdhalifah said.

Indonesia is currently walking down three downstream paths dubbed as "complexes". The first is the oleofood complex whose products include palm cooking oil and vitamin A. Then the oleochemical complex with products such as detergents, biolubricants, and biomaterials. Last but not least is the biofuel complex which includes biodiesel, biogas, and biopremium, a mix of bieofuel and gasoline.

As of 2020, Indonesia has 170 downstream products which are mostly food and chemicals. This is a huge leap from just 70 downstream products in 2011, according to the ministry data.

Export duties

The Indonesian Vegetable Oil Refiners Association (Gimni) sees the export duties on palm oil as a boon for downstream exports.

"The scheme of higher tariffs for palm oil duties on upstream products and lower tariffs on downstream products strongly supports the competitiveness of Indonesia's downstream exports in the global market, both oleofood and oleochemicals," Gimni chairman Bernard Riedo said.

"It also helps maintain the price stability for palm products for food in the domestic market."

Bernard also noted the downstream industry would bring greater added value for employment, taxes, and foreign exchange.

According to the Indonesian Oil Palm Farmers Association (Apkasindo), thanks to the export duties, farmers are enjoying high prices for fresh fruit bunches in 22 palm-producing provinces. Apkasindo chairman Gulat ME Manurung said CPO producers are considering of downstreaming in the country due to the lower export levy.

This would help the downstream sector to grow and eventually spur employment.

Under the 2020 Finance Ministry regulation, the progressive export duty on CPO can range from $55 per ton to $255 per ton, depending on the reference price.

Source: https://jakartaglobe.id/business/indonesia-envisions-global-leader-in-processed-palm-oil-product