CPO EXPORT TAX TO REDUCE COMPETITIVNESS

By Andi Abdussalam

Jakarta, May 26 (ANTARA) - Crude palm oil (CPO) traders and oil palm farmers have called on the government to review its decision to impose a tax on CPO exports arguing the policy would drag down the price of CPO at home and reduce the commodity's competitiveness in the world market.

        The government's plan to impose a three-percent tax on CPO exports in June, they said, would not only reduce the competitive edge of the Indonesian commodity in the world market but also lower the price of farmers' oil palm fresh fruit bunches (TBS).

        "We are still facing an economic crisis. The government should provide protection for traders and farmers so that they will be able to help stimulate the real sector," secretary of the Indonesian Entrepreneurs Association (Apindo) for North Sumatra, Laksamana Adiyaksa said on Tuesday.

        Laksamana Adiyaksa who is also treasurer of the Indonesian Palm Oil Businessmen's Association (Gapki), said the government was planning to impose a tax on CPO exports after seeing the increase in the price of CPO while actually the increase was not caused by a fundamental factor such as rising demand.

        Therefore, according to Gapki Secretary General Joko Supriyono, the government needs to reconsider its plan to impose the tax. "Gapki is not questioning the three percent tax but the policy to impose the tax on CPO exports as it would reduce the competitive edge of Indonesia's exports in the world market," Supriyono said.

        The government will impose a three-percent tax on CPO exports as of June 2009. He said that the export tax was an odd policy and should be reviewed. The government should explain the reason behind its plan to impose the tax.

        The same opinion was expressed by Gandhi Sulistiyanto, managing director of Sinar Mas, a company which has cooking oil factories in Jakarta and South Kalimantan.

        "It will automatically lower the attractiveness of Indonesian CPO it will reduce the competitive edge of our CPO exports against similar products from other countries such as Malaysia," Sulistiyanto said.

        Gandhi Sulistiyanto said that with the export tax, the price of Indonesian CPO would become higher, although exporters had previously concluded forward contracts for the exportation of the commodity.

        "It will have an impact both in terms of value and volume. Because the price of our CPO is higher we will not be able to compete with China, India and other countries. Malaysia does not impose a tax on its CPO exports so that it will be highly competitive," he added.

        Indonesia is the world's biggest crude palm oil (CPO) producer with an annual production of about 20 million tons. In 2009, Indonesia's CPO production is expected to reach 19.8 million to 20 million tons, an increase from 17 million to 18.6 million tons in the previous year.

        According to Joko Supryiono, it is not correct if the government imposes the export tax in an effort to protect industries at home. Such a policy should be issued not for the state but for the benefit of producers and for subsidizing cooking oil.

        "The export tax that has previously been imposed since 2001 turned out to be unable to offset the increasing price of cooking oil and to develop industries at home," he said.

        According to Supriyono, of the country's estimated 20 million tons of annual CPO production, only about four to five million tons are consumed at home while the remaining ones are exported.

        "It should not happen that we protect the five million tons but sacrifice the remaining 15 million tons," he said.

        After all, the imposition of the tax could also reduced the price of TBS at the farmers level. According to Adyaksa, the policy could cause price to fluctuate. The price per metric ton of CPO in Rotterdam had slightly dropped this week from US$800 to US$780.

        Demand for CPO from Europe also tended to weaken due to global economic crisis. The reduced export price has also affected the CPO price in the local market. On May 4, 2009, the price per kg of CPO happened to reached Rp8,978 but on May 15, 2009 it has dropped to Rp8,670 per kg, according to Laksamana Adyaksa.

        However, according to Trade Minister Mari Elka Pangestu, the imposition of the CPO export tax would keep the price at a stable level. "We have carried out calculation with regard to the plan to impose an export tax. The value of the exports will remain stable though its volume will drop slightly. But the price will increase," the minister said.

        The trade minister said a progressive export tax formula was made by taking into account its impact on export performance and development in the cooking oil price at home.

        "We have calculated its impact on exports and on the stability of the domestic price of cooking oil in the country," the minister said.

        The trade minister had set the CPO export tax for June 2009 at three percent considering that the average price of CPO in Rotterdam, so far used as reference to set the CPO price, in May reached US774.93 per ton, while at the same time the CPO reference price was set at US$700 per ton.

        The minister said that the imposition of CPO export tax at a time the price of CPO in the world market was increasing was effective to keep the stability of the cooking oil price at home.

        The export tax was expected to restrict the flow of CPO exports so that frying oil supply in the country would continue to be guaranteed while its price would not sky rocket. ***2*** (T.A014/A/HAJM/B003) 2. 20:50. (T.A014/A/A014/B003) 26-05-2009 20:58:23