(Good article from the Jakarta Post - Keep those data in your spreadsheet so that you can refer it again.)
Trade Minister Muhammad Lutfi ruled out Friday the possibility of raising the export duty on the country’s crude palm oil (CPO) as a response to Malaysia’s move to remove its export tax for the commodity.
The minister said the government would maintain the current export rates imposed on CPO products, although the export tax cut announced by Malaysia on Thursday would make Indonesia’s CPO products less competitive overseas.
Export tax on the commodity remains at 9 percent for September, its lowest level since November last year, as its global price fell further on weak demand. “It would be impossible for us to issue a new policy that does not comply with what has been laid out,” Lutfi told reporters at his office.
Malaysia, the world’s second largest palm oil producer after Indonesia, removed its export tax on CPO for September and October to help push up outbound shipments and avert a further slide in prices, which had already plunged to a five-year low, Bloomberg reported.
The tariff removal may boost Malaysia’s exports by 600,000 metric tons and help contain stockpiles at 1.6 million tons at the end of this year. The zero-percent duty may be extended as demanded by the industry and the Malaysian government will soon study the proposal.
Lutfi said that the government was anticipating a higher absorption of palm oil domestically as its mandatory fuel blending was executed.
Indonesia has raised the portion of palm oil derivative, fatty acid methyl ester (FAME), in blended fuels — both subsidized and non-subsidized — to 10 percent, up from 7.5 percent. Power plants are also required to use 20 percent biodiesel in their energy mixes.
The installed capacity of the domestic biodiesel facilities totaled 5.6 million kiloliters (kl) each year, while the utilized capacity is above 2 million kl.
The measure aims at reducing the heavy reliance on fuel imports, which has widened the country’s trade deficit and put pressure on the state budget due to ballooning energy subsidy expenditure.
The mandatory blending policy last year pushed down diesel fuel imports by 1.05 million kl, equal to US$831 million.
However, the implementation of the policy has been hampered by various obstacles, from price issues to infrastructure for distribution and biodiesel blending.
Local absorption of blended subsidized fuel will only reach 1.32 million kl this year, or 90 percent of the 1.46 million kl targeted earlier.
The Indonesian Palm Oil Producers’ Association (Gapkindo) executive director Fadhil Hasan said that the government should react to counter Malaysia’s move as it would certainly impact on local palm oil exporters.
“We will certainly be unable to compete with our rivals because our price is higher. We hope the government will take a similar move to maintain the competitiveness of our exports,” he said in a text message.
The export tax should be pushed down to at least between 2.5 and 4 percent to anticipate tighter competition in overseas markets, according to Fadhil.