VOI - Voice of Indonesia | RRI - Radio Republik Indonesia

Indonesia needs to expand the market for its crude palm oil (CPO) at home and abroad and resolve the problems being faced by palm oil industry in the production of the commodity. While facing a threat due to the European Union`s plan to phase out its palm oil-based biofuel, Indonesia has to seek new markets, while maintaining its conventional markets overseas, such as India, China, and Pakistan, which are the largest markets for Indonesian CPO.

Thus, the Indonesian and Australian governments have held negotiations on CPO trade. "We are currently carrying out the process with Australia, and we have agreed to come out with the final agreement this August," Trade Minister Enggartiasto Lukita stated in Jakarta on Monday (April 9).

The Minister of Trade continued to communicate intensively with the Australian parliament regarding the drafting of policies on the use of oil palm and its derivative products in Australia.

"There are still some things that are under negotiations..Along with member of the Australian parliament, Steven Ciobo, we have agreed that the next round of negotiation processes between the set teams will take place soon. They will leave out some items, and later, the two ministers will take the final steps," he explained.

The Indonesian government also needs to consider selling CPO to Mexico in an effort to boost cooperation between the two countries. "We should consider selling CPO, because we have a lot of CPO production," Chairman of the Indonesia-Mexico Bilateral Cooperation Group (GKSB) of the House of Representatives (DPR), Djoko Udjianto, stated in a release in Jakarta on Tuesday (April 10). Udjianto noted that although Mexico is supported by sunflower oil and soybean commodities from the US, CPO can still become one of its alternative imports.

Apart from that, the Indonesian government has also looked at Ghana. The governments of the two countries have agreed to cooperate to fight the negative campaign against the palm oil commodity.

"I have met the vice minister of agriculture and food of Ghana. We discussed about several negative campaigns against palm oil. Palm oil-producing countries should unite against these negative campaigns," Minister of Foreign Affairs Retno Marsudi had noted in Bali last week (April 11).

While intensifying the efforts to expand its market abroad, Indonesia, as the world?s largest CPO producer should, therefore, continue to improve production at home. It is admittedly true that Indonesia`s CPO industry still faces three main problems.

According to the Indonesian Palm Oil Producers` Association (Gapki), Indonesia?s CPO industry still faces high production cost, low productivity, and counterproductive policies.

"If these issues are not solved soon, the impact will reduce the competitiveness of Indonesia`s palm oil," Gapki Chairman, Joko Supriyono, noted during the inauguration of the executive and supervisory board members of the Gapki for the 2018-2023 period in Jakarta on Saturday (April 21).

To this end, Supriyono, Chairman of Gapki for the 2013-2018 period, stated that the association must partner with the government, especially for formulating policies or regulations that will not harm the domestic oil industry.

"This issue was also raised by President Joko Widodo (Jokowi), who has carried out extensive deregulation, but investment is still slow," he pointed out.

Jokowi suggested that the industry needs a regulation that creates a conducive climate to tackle issues related to government policies of both the central government and the local government. According to Jokowi, the policy or regulation is not only from within the country but also from the government of Indonesia`s palm oil export destination, such as India, which applies increased import tariff, or the United States, which always imposes tariff and non-tariff barriers on imported products.

Regarding productivity problem, Supriyono remarked that Indonesia`s productivity of palm oil plantations is still below other producing countries, such as Malaysia, Colombia, and Thailand, although Indonesia is the world`s largest producer of the commodity. Meanwhile, the production cost of palm oil plantations in Indonesia is also high, surpassing those of other producer countries.

"In fact, the best palm oil companies in Indonesia are still inferior to the worst firms in Malaysia in terms of production costs," he pointed out.

The Gapki chairman admitted that security and social costs remain contributors of high production costs in Indonesia and are difficult to be avoided by the company. He noted that the current global demand for vegetable oils, including palm oil, continues to grow on an average of five million tons per year.

According to Gapki, the performance of the national palm oil industry is virtually very good throughout 2017. This is evident from the significant increase in production. "In 2017, the performance of palm oil industry was very good and production increased significantly," Secretary General of Gapki, Togar Sitanggang, revealed in a press conference at Gapki Head Office on Tuesday (Jan 30).

Sitanggang explained that the production of CPO in Indonesia reached 38.17 million tons, while palm kernel oil (PKO) production or palm kernel oil reaches 3.05 million tons. Thus, the total production of Indonesian palm oil throughout 2017 reached 41.98 million tons. According Sitanggang, the number increased by 18 percent compared to the same period in the previous year.

In 2016, Indonesia`s palm oil production reached 35.57 million tons. "The stock remained the same from the beginning of the year and slightly increased at the end of the year," Sitanggang was quoted by Kompas.com as saying.

Previous data have indicated that Indonesia is estimated to have 11.6 million hectares of palm oil plantation. Of the total, some eight percent are managed by state companies, 49 percent by private CPO industries, and 43 percent belong to small farmers. The livelihood of about 16-20 million people depends on upstream and downstream palm oil businesses across Indonesia. In 2016, Indonesia produced over 35.57 million tons of crude palm oil, and 25 million tons were exported worldwide, mainly to India, China, Pakistan, and the Netherlands, bringing in US$17.8 billion in revenue, or about an eighth of the country`s total export proceeds. ( antara )