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Jakarta Post

RI palm oil dodging barriers

  • Linda Yulisman

    The Jakarta Post

Jakarta   /   Mon, March 24, 2014   /  09:13 am

Palm oil business players are shifting their focus to new foreign markets this year amid trade remedies and other barriers implemented in some key export destinations.

Throughout this year, business players are expecting to export their products to some prospective countries, like Pakistan, Bangladesh, Iran, Turkey and some Eastern European countries, as well as the United States, according to the Indonesian Palm Oil Producers Association (Gapki).

They hope that shipments to those countries will, at the very least, help them maintain their palm oil exports at 21.2 million tons this year, as forecast by the association. It is the same level estimated for last year'€™s exports,

'€œOur exports to these countries and the US climbed sharply last year, offsetting the declines in China and Europe '€” our major markets,'€ Gapki executive director Fadhil Hasan said.

Indonesia has been able to export a higher amount of palm oil to Pakistan due to a preferential trade agreement between Indonesia and Pakistan that took effect last year.

Higher demand for renewable energy is also behind the rise in demand for palm oil in the US.

Exports to these expanding markets would still primarily be made up of crude palm oil (CPO), with the rest comprising derivative products, Fadhil added.

Indonesia is the world'€™s largest producer of the commodity with last year'€™s exports amounting to over US$19.2 billion or 13 percent of total non-oil and gas exports, according to the Central Statistics Agency (BPS).

The sector employs more than 6.7 million workers, mostly in Sumatra and Kalimantan, according to Gapki.

The association has projected that palm oil exports may remain flat this year compared to last year as the supply will be diverted for local consumption due to a new government policy requiring a higher content of a palm oil derivative, fatty acid methyl ester (FAME), in the local biodiesel blend.

Meanwhile, domestic biodiesel producers suffered losses last year in the European Union (EU) market, which, since last year, has imposed five-year anti-dumping duties of up to 20 percent of the product'€™s price. That significantly eroded the domestic producers'€™ competitive edge, posing a risk of losing out to competition from a similar product from Malaysia.

To counter losses in the EU market as result of the high anti-dumping duties, domestic producers may shift outbound shipments to other markets where demand still has plenty of room to grow, according to the Indonesian Biofuel Producers Association (Aprobi).

'€œChina and India will contribute greatly to our exports, making up more than half of our sales [this year],'€ Aprobi executive director Paulus Tjakrawan said.

Australia, South Korea, Taiwan and the US also had promising outlooks, he added.

The business group expects to ship 2.2 million kiloliters of biofuel this year, up 22.22 percent from last year.

In addition to EU anti-dumping duties, a potential blow may also come from India, which may place temporary safeguard duties following its recent investigation into surging fatty alcohol imports.

The duties will affect exports of fatty alcohols from Indonesia that jumped considerably due to lower export taxes.

Another existing trade barrier is particularly related to the sustainability aspect of Indonesia'€™s palm oil production.

The US, for example, notified in early 2012 that palm oil-based biofuel could not be included in its renewable fuel standard program as it reduced green house emissions by only 17 percent compared to the gasoline and diesel fuel it was set to replace, slightly lower than the 20 percent ceiling required for its eligibility.

The US, along with the EU, has frequently raised the sustainability issue despite the fact that most major Indonesian oil palm growers are among the 110 members of the Roundtable on Sustainable Palm Oil (RSPO).

The RSPO serves as an international multi-stakeholder organization and certification program for sustainable palm oil.

It comprises bankers, investors, retailers, traders, manufacturers and activists from social and environmental non-profit organizations.

 

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