President Jokowi's Steps Are Wrong, CIPS Values CPO Export Bans Disrupt Economic Recovery

Illustration/Photo: Antara

JAKARTA - Board Member Center for Indonesian Policy Studies (CIPS), Arianto Patunru, said the ban on exports of Crude Palm Oil (CPO) and its derivatives which began on April 28, 2022, has distorted markets, harmed farmers, and disrupted economic recovery.

“This ban will also disrupt the economic recovery. Exports of CPO and its derivatives can reach around 10 percent of Indonesia's total exports. With the export ban, our GDP will fall. Thus, the process of economic recovery from the impact of COVID will be disrupted", Arianto said in a statement in Jakarta, Friday, April 29.

The policy, he continued, would result in a flood of domestic palm oil stocks. As a result, the price of fresh fruit bunches will fall freely and this will be detrimental to oil palm farmers.

He also emphasized the impact of this policy on the global economy because Indonesia is a major exporter of CPO. The reduced supply of CPO will lead to an increase in global CPO prices, which has already happened. Furthermore, this will create the potential for complaints to the World Trade Agency or the WTO and even retaliation by trading partners.

“In the end, he gave a bad impression of Indonesia's behavior in international relations. In fact, the Indonesian Presidency at the G20 is a strategic opportunity to promote global economic recovery", he added, quoted by Antara.

The Australian National University (ANU) economist advised the government to evaluate this policy. According to him, if the aim is to control cooking oil prices, a policy that might be more effective is an export tax for RBD palm olein.

He said that imposing an export tax is better than a Domestic Market Obligation (DMO), especially a total ban on exports because it generates income for the state. Meanwhile, DMO is difficult to monitor, as happened some time ago. However, if you really have to implement DMO, you need transparency and strict supervision.

He added that the government also needs to consider all aspects carefully in issuing policies.

The confusion about CPO policies is considered to reduce public confidence in the government's ability to make public decisions. The confusion also creates uncertainty that has an impact on perceptions of the investment climate in Indonesia.