Thursday, 22 May 2008

Govt plans estate for downstream palm oil industry

Govt plans estate for downstream palm oil industry

The Jakarta Post, Jakarta 22nd May

The government will facilitate the development of an industrial estate for downstream palm oil factories to encourage investors to produce palm oil products with higher added values, a minister says.

"The government is preparing a plot of land for an industrial estate, to be equipped with a seaport, in Dumai, Riau. The estate will be developed by the private sector," Agriculture Minister Anton Priantono said after the opening of a three-day world palm oil summit and exhibition Wednesday.

Anton said the country must further develop its downstream palm oil industry to meet the rising demand for value-added products such as cooking oil in both domestic and overseas markets, particularly China and India.

Riau, the largest crude palm oil (CPO)-producing province in Indonesia, is central to the government's plan to boost the development of the downstream palm oil industry, Anton said.

"In the short term, it is more lucrative to sell crude palm oil, but not in the long term due to tighter competition from other countries," Anton added.
Last year, Indonesia, the largest palm oil producer in the world with about 17 million tons produced, recorded exports of US$5.5 billion (Rp 50 trillion) with more than 75 percent of its palm oil production exported as CPO.

In the same year, Malaysia, the second-largest palm oil producer with 15.7 million tons produced, posted a higher export value of RM37.54 billion ($11.37 billion) with 80 percent of its palm oil production exported as added-value products.

Anton said the government had provided incentives to boost the downstream industry such as reducing the export tax on oleochemical-based products like consumer goods and cooking oil.

However, chairman of the palm oil producers association Gapki, Derum Bangun, said the export tax reduction was not enough.

"The difference between export taxes on olechemical derivatives and CPO is slim, so there's no real advantage in processing CPO into oleochemical and then exporting it," Derum said, adding that the difference was only around 10 percentage points.

"The government should provide more incentives to producers of goods with higher added values," he said, adding that incentives could include tax holidays of between three and four years to let producers achieve sustainability.

"The government should also provide long-term policies so companies can make long-term calculations," he said.

"The government's policy on export tax rates, for instance, changes every month," he said.

The government lowered the export tax on CPO to 15 percent this month from 20 percent last month.

Indonesia exports palm oil to more than 150 countries, including India, China, Pakistan and Japan as well as European and Middle Eastern countries.

Indonesia, with 6.6 million hectares of palm oil plantations, aims to produce 18.6 million tons of palm oil this year. (anw)