Export Duty to be Utilized for CPO Subsidy
Monday, 18 June, 2007 | 18:27 WIB

Tempo Interactive, Jakarta:The proceeds from increasing export duty on crude palm oil (CPU) products and by-products being raised to between 6.5 and 10 percent must be given back in the form of subsidies for cooking oil processing factory.

This way, said Fadhil Hasan an economic observer from the Institute for Development of Economics and Finance, the export duty increase will be effective in lowering cooking oil prices.

In addition, according to him, a policy combination is needed to maintain CPO price stability.

This means, in addition to increasing export duty, the domestic market obligation (DMO) policy needs to be continued.

“Just increasing export duty isn't enough,” Fadhil told Tempo in Jakarta, Sunday (17/6).

“Without subsidies for processing factories, it will be difficult for cooking oil prices to go down.”

Moreover, he also said that there was a tendency for CPO price in the world marketplace to continue to increase.

This situation makes the export duty increase to 6.5 percent not that significant for CPO exporters.

“This means they may still prioritize exports rather than the domestic market,” said Fadhil.

According to him, the government's policy regarding CPO and cooking oil must be well thought out.

This is because, amidst the high CPO demand and increasing CPO prices, “Competitive power may go down or our CPO market be taken over by another country.

Prima Lembana, Corporate Communication and Public Relations Manager for the Sinar Mas Group, stated in a press release that the government must review the decision to increase CPO export duty if it is ineffective in decreasing cooking oil prices.

He also believes that if the DMO policy, included in Decree No. 18/2004, can be implemented properly, the jump in domestic cooking oil prices can be overcome.

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