RI Needs Special Body to Tackle Rising Palm Oil Challenges

The Indonesian Palm Oil  Board (DMSI) has called for the establishment of a special authority to  tackle various issues hampering the domestic palm oil industry.The board’s chairman, Derom Bangun, said the rising challenges for the  industry ranged from trade restrictions based on environmental and health concerns, to tighter competition with rival vegetable oils, all of which  required more concerted efforts to be managed.

Palm oil, used in many products from cooking oil to cosmetics, is intensively  scrutinized due to its high saturated fat content, which is detrimental to  health, as well as deforestation and bad environmental practices seen in  plantations across the country. It also used to be the cheapest edible oil,  but high demand has pushed up its price, narrowing the gap with other oils  like soybean and rapeseed.

In Europe, the third biggest export market for Indonesian palm oil, for  example, there had been a strong campaign to reduce its consumption, Derom  said.The anti-palm oil sentiment is already evident, especially in France where  some food manufacturers already put a “no palm oil” label on their products.Palm oil has recently lost its market share in India, Indonesia’s biggest  buyer, as the price gap with soybean oil shrank to an average US$84 each ton  this year from $244 in 2013, according to data compiled by Bloomberg.“We need a stronger institutional capacity to address these challenges.  Advocacy and promotions need a special budget, but in fact, our ministries do  notF allocate funds to do these things,” Derom said in a recent media  briefing.

Although Indonesia’s palm oil production was higher than the neighboring  Malaysia, its capacity for research and the development of human resources  working in the industry lagged far behind, he added.Malaysia, the world’s second biggest palm oil producer after Indonesia, has,  since the 1970s, collected funds of MYR 11 ($3.27) per ton of crude palm oil  (CPO) produced by plantations. The funds have been used to finance a wide  array of activities pertaining to research, development and promotion of the  industry through the Palm Oil Research Institute of Malaysia (PORIM) and the  Palm Oil Registration and Licensing Authority (PORLA), which have been merged  into the Malaysian Palm Oil Board.The body contributes to expand the use of palm oil and promote the  marketability of the commodity both domestically and overseas, including  publishing scholarly articles on palm oil in international journals, all of  which Indonesia is yet to do.Derom said that the lack of institutional capability on the Indonesian side  had also discouraged the country from cooperating more closely with Malaysia  to face the barriers both had in the international trade arena. “We really hope to catch up with Malaysia in terms of research, promotion and  human resource development,” he said.

At present, the government’s progressive export taxes on CPO and its  derivatives help retain the raw material for local refiners.However, many planters complain because the funds are not channeled to assist  the further development of the industry.

Palm oil is the second top contributor to total exports in Southeast Asia’s  largest economy, after coal. It contributed $19.22 billion, or 10.53 percent,  to the country’s total exports of $182.57 billion last year.