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Indonesia to ban palm oil exports

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A shelf stands almost empty of packaged cooking oil on January 27 at a supermarket in Bekasi, West Java, Indonesia. THE JAKARTA POST

Indonesia to ban palm oil exports

The Indonesian government has announced a ban on the export of cooking oil and cooking oil ingredients starting April 28 to ensure adequate supplies of the staple product at home.

President Joko “Jokowi” Widodo said in a video statement on April 22 that the ban would last for an “unspecified time” but be continuously evaluated.

“This policy is to ensure abundant and affordable domestic cooking oil supplies,” he explained.

The ban is the latest development in a four-month-long domestic crises over the staple product amid soaring crude palm oil (CPO) prices and a global shortage of cooking oil.

The announcement comes days after vegetable oil producers threatened to withdraw from the government’s subsidised bulk cooking oil programme due to what they consider burdensome cooking oil and CPO regulations.

Producers issued the threat after the Attorney General’s Office (AGO) announced that it had detained a senior government official and three corporate executives as suspects in a graft case involving CPO export permits.

The protest was directed at the industry ministry, which developed and administers the subsidy programme for bulk cooking oil.

The AGO revealed on April 19 that the trade ministry’s foreign trade director general, Indrasari Wisnu Wardana, and three executives from private cooking oil producers Permata Hijau Group, PT Wilmar Nabati Indonesia and PT Musim Mas had been named as graft suspects.

The accused executives are members of the Indonesian Palm Oil Association (Gapki).

The Indonesian Vegetable Oil Refiners Association (GIMNI) called their suspect status “invalid”, saying that Wisnu had worked in line with the existing regulations and had not broken any rule.

GIMNI said the AGO’s move in naming the firms, despite all the “sacrifices” they had made for the country, was detrimental to the cooking oil industry, creating negative sentiment that would make businesses reluctant about future steps.

“If this is the case, we will withdraw from the bulk cooking oil programme. Why? Because we are being prosecuted,” GIMNI executive director Sahat Sinaga told reporters after an event to break the fast on April 19 at Ayana Midplaza Jakarta Hotel.

The trade ministry introduced the bulk cooking oil programme to mitigate the domestic supply crunch and surging prices of cooking oil.

The policy requires producers to sell bulk cooking oil at no more than 14,000 rupiah ($0.97) per litre, with the government subsidy offsetting the difference with global prices through a reimbursement scheme for companies registered with the scheme.

The AGO has alleged that Wisnu illegally approved export permits for several ineligible palm oil producers that had not complied with the domestic market obligation (DMO), which mandates offloading at least 20 per cent of the CPO output to meet domestic demand, and had thereby exacerbated the nationwide cooking oil shortage.

GIMNI’s Sahat said the AGO’s allegations did not add up. He argued that more than 419,000 tonnes of DMO cooking oil were provided between February 12 and March 8, while CPO exports in the same period totalled far less than the regulated amount of five times DMO sales, or 2.2 million tonnes.

The trade ministry was scrutinising DMO contributions by inspecting documents one by one, he said, while businesses were left to wait until the process was done. Sahat claimed that the three executives who were named as suspects had been waiting at the trade ministry for hours until 4am in the morning.

“That’s why the AGO thought they had a close relationship with the official, which led to their arrest,” he suggested.

Trade minister M Lutfi said in a statement on April 19 that the ministry supported the AGO’s move, especially if prosecutors could prove abuse of power, which would hurt both the public and the economy.

Wilmar Nabati Indonesia told the Jakarta Post on April 20 that it had complied with the regulation on export licensing, but nevertheless supported the ongoing AGO investigation.

Meanwhile, corporate affairs director Rapolo Hutabarat of Musim Mas declined to comment on the matter. “Sorry, not today,” he told reporters after April 19’s iftar event at the Ayana Midplaza Jakarta.

Chairman Djoko Supriyono of Gapki also declined on April 19 to comment on the suspects’ detention. He said, however, that he did not know what had gone wrong with the export approval process or the DMO policy and blamed the complex policy, explaining that many Gapki members had complained about the difficulties encountered with the subsidy programme.

Meanwhile, pressure group Indonesian Anticorruption Community (MAKI) has urged the government to “act decisively” by revoking plantation permits for palm oil companies threatening to boycott the subsidised cooking oil programme.

“Let it be known that nine million hectares of private oil palm plantation areas are actually owned by the state, because they are either converted forests or land acquired with government approval, so businesspeople should obey the rules,” MAKI coordinator Boyamin Saiman said in a statement published on April 22.

The group also urged the AGO to expand its investigation and probe individuals and corporations for money laundering, in response to the threats made.

Bhima Yudhistira, director at the Center of Economic and Law Studies (Celios), said on April 19 that the controversy indicated a lack of government supervision over the DMO policy. He said this provided a loophole for businesses to collude with officials and exploit the wide disparity between domestic and international CPO prices for large profits.

Although the government claimed the country had a sufficient domestic supply of cooking oil, Bhima said, many consumers were still struggling to purchase the product.

“As a result, millions of consumers and small businesses are having to pay for the shortage of packaged cooking oil at very high prices,” he said in a statement.

Bhima urged the government to evaluate the operating permits of cooking oil companies and oil palm plantations as a preventive measure.

“The next step is to encourage the AGO to [seek] other suspects,” said Bhima, adding: “This includes other potential suspects at the [trade] ministry.”



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