Indonesia ban on crude, RBD palm oil exports disruptive, say traders

Indonesia’s “temporary” export ban on crude and RBD palm oil is a disruptive move that, in the opinion of traders in Singapore, will not benefit the communities in the republic in the long run.

“Yes, adequate domestic supplies ought to be assured since it is an essential food item but banning all exports is like using a frying pan to hammer a nail,” traders told BusinessLine on condition of anonymity.

Retaliatory moves?

There are other solutions to tamping down local market prices. Imagine how import-dependent nations such as India and China could react? Wouldn’t they resort to retaliatory moves? Inviting disputes of this nature and scale is entirely gratuitous. Indonesia’s risk rating may have gone up a notch, the sources said.

“Is there something else driving this decision? One hasn’t a clue of what that could be,” they quipped. Meanwhile, President Joko Widodo said in Jakarta that the decision to ban the exports of cooking oil and raw materials has been taken after closely observing the demand-supply dynamics in the country.

Earlier this year, Widodo’s government suddenly halted coal exports, saying miners had to meet domestic demand and improve supply to power plants.

President defends move

“I want to underscore that, for the Government, the basic needs of the people is the priority. We are the world’s largest palm oil producer but, ironically, we actually find it difficult to get cooking oil. I call on the palm oil players to look at this problem closely. As President, I cannot let this problem to persist. We have been short on supply and we tried various policies, but they have not been effective,” Widodo said.

The ban applies to exports from all parts of Indonesia, including the bonded zones. The ban does have negative impacts, the President admitted. It has the potential to lessen production. Farmer’s harvest may not be absorbed. However, the policy aim is to increase domestic supply until the supply is adequate.

Domestic needs, first

“I would like the palm oil industry to be aware of the need to meet domestic needs. Prioritise the domestic needs first, meet the people’s needs first. In fact, if we look at the production capacity, domestic needs can easily be met. The volume of raw material for cooking oil that we produce and export is much greater than the domestic needs. There is still a very large capacity remaining. If we have the intention to prioritise the people’s needs, domestic needs can easily be met,” the President said.

“This is the basic logic that entailed a review of the policy. Once domestic needs have been met, I will lift the export ban. Because I know the country needs taxes, the country needs foreign exchange, the country needs a trade balance surplus. But meeting the people’s basic needs is of greater importance.”

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