T

he Association of Indonesian Palm Oil Producers (Gapki) called on the government to speed up negotiations of a free trade agreement with India to protect Indonesia’s palm oil market following last week’s India-Malaysia Free Trade Agreement (FTA). The India-Malaysia FTA would allow Malaysian firms to get better concessions for palm oil and refined products.

Gapki chairman Fadhil Hasan urged the government to immediately draft a bilateral FTA with India, the largest importer of Indonesia’s palm oil, to keep its products competitive.

“India surpassed China and the EU last year to become the largest buyer of Indonesian palm oil, with 30 percent of our palm oil going to India,” he said.

Indonesia exported 15.6 million tons of palm oil in 2010. India bought 5.79 million tons, 4.5 million tons of which was crude palm oil. Fadhil said Malaysian palm oil would be cheaper as import duties would be lowered thus reducing the competitiveness of Indonesian palm oil.

He added that Indonesia saw a drop in palm oil exports to Pakistan after the latter inked an FTA with Malaysia in 2008. In 2007, for example, Indonesia exported 750,000 tons of CPO to Pakistan. This figure decreased to 400,000 tons in 2008 after Pakistan reduced import duties on Malaysian palm oil from 15.5 percent to 5.5 percent. Pakistan further reduced the duty by 0.5 percent in 2010, leading to reduced imports from Indonesia of only 87,000 tons.

The director general of foreign trade at the Trade Ministry, Gusmardi Bustami, said Sunday that Indonesia had studied a possible India-Indonesia FTA and would establish a team to start talks with India. Deputy trade minister Mahendra Siregar said he was not overly concerned by the India-Malaysia FTA as Indonesia was expected to export more processed palm oil products to India. (lnd)