Doubtful CPO Export Prohibition Policy Will Effectively Lower Cooking Oil Prices

JAKARTA - It is doubtful that the policy of banning the export of CPO along with its derivative products will be effective in stabilizing cooking oil prices. The policy is also considered not to be able to ensure the price of cooking oil will soon fall.

However, the negative impact of this policy will immediately be felt on the national trade side. Director of the Center of Economics and Law Studies Bhima Yudhistira said this, Thursday, April 28.

"Because, palm oil entrepreneurs who lose income from CPO exports will compensate for the loss to the price margin of derivative products, including cooking oil. Moreover, seeing the price of CPO on the international market rose 9 percent in the past week due to the export ban," he said.

Even more fatal, if the export ban is only valid for a short time, while the benchmark price of CPO remains high. That way, packaged cooking oil that still uses the market mechanism will be more expensive.

The next factor, the momentum of Lebaran also makes the demand is high to meet the needs of households and food stalls.

Reflecting on the trade balance data as of March 2022, the value of CPO exports reached US$ 3 billion or equivalent to Rp. 43 trillion per month. Practically, Bhima said, if the export ban was carried out for a whole month, the export value of that amount would be lost.

In turn, this will also have an impact on the weakening of the rupiah exchange rate. This is because around 12 percent of the total national non-oil and gas exports come from CPO shipments.

"The lost foreign exchange flows instead to Indonesian competitor vegetable oil players such as Malaysia, for example, which enjoys an abundance of demand, or soybean oil and sunflower oil players also get sustenance," he said.

It is not over yet, the same phenomenon will also have an impact on state finances, which may decline, due to sloping tax revenues and non-tax revenues. Bhima reminded that until March 2022 the high state revenue was due to the boom in commodity prices, one of which was CPO.

On a different occasion, Public Policy Observer Trubus Rahadiansyah assessed that the policies of President Joko Widodo (Jokowi) in overcoming the cooking oil problem could confuse the public. Trubus considered that the changing policies showed that the team at the Presidential Palace was not working optimally.

"Mr. Jokowi should have staff, there is KSP, there is a Cabinet Secretariat, which provides accurate information. This is not only Pak Jokowi's fault, but how the mechanism for the procedure was given to the President," Trubus said.

Trubus sees that the leadership of a president must be firm. With changing policies, the public is at a disadvantage.

Previously, the government explained to the public regarding palm oil products that were still allowed to be exported, namely Crude Palm Oil (CPO) and Red Palm Oil (RPO). But in a matter of hours, the rules were revised again in which CPO and RPO are also prohibited from being exported.

Coordination

Chairman of the Communications Division of the Indonesian Palm Oil Association (GAPKI) Tofan Mahdi said that his party is currently communicating and coordinating with associations of palm oil business actors in both the upstream and downstream sectors, including Bulog, RNI and other SOEs.

This is done to ensure the smooth implementation of the policy for a temporary ban on the export of crude palm oil; refined, bleached, and deodorized palm oil; refined, bleached, and deodorized palm olein; and used cooking oil in the Regulation of the Minister of Trade 22/2022 which takes effect on April 28, 2022.

"(Coordination) to maximally carry out the directions from the President of the Republic of Indonesia, so that the availability of cooking oil is in accordance with the prices set in the community," said Tofan.

In general, palm oil business actors respect every government policy related to the palm oil industry. Including the policy of banning the export of crude palm oil (CPO) and its derivative products, including olein (cooking oil).

GAPKI also underlines that there are unavoidable negative impacts of this policy in the long term.

"A total ban on the export of CPO and all its derivatives, if prolonged, will have a very detrimental negative impact. Not only plantation, refinery and packaging companies, but also millions of small oil palm planters and people," he concluded.