Indonesia discussing changes to its export tax structure to counter competition from Malaysia, government officials say; Malaysia to cut tariffs starting Jan. 1 to boost shipments and pare record inventories

JAKARTA, Indonesia and KUALA LUMPUR, Malaysia , November 30, 2012 () – Indonesia, the world’s largest palm oil producer, is discussing changes to its export tax structure to counter competition from Malaysia which will cut tariffs from Jan. 1 to boost shipments and pare record inventories.

“We will decide soon to provide certainty in 2013,” Agriculture Minister Suswono told reporters at an industry conference in Bali, Indonesia today. The tax changes will be aimed at reducing stockpiles that are near Indonesia’s maximum storage capacity, he said.

Malaysia, the second-largest producer, will cut the tax on exports of the crude variety and abolish a duty-free shipments quota from Jan. 1, moves that will increase competition with Indonesia. The changes were announced on Oct. 12 after inventories in Malaysia surged to a record and futures slumped to a three-year low. Indonesia last year lowered its taxes, making local crude palm oil cheaper than in Malaysia, cutting costs for refiners.

“We want the taxes to be similar if not exactly the same as Malaysia,” Joko Supriyono, secretary-general of the Indonesian Palm Oil Association, said in an interview. Duties could range between 3 percent to a maximum 8 percent, he said. The association has submitted a proposal to the Finance Ministry regarding the tax structure, he said.

Malaysia’s new tax rates will range from 4.5 percent to 8.5 percent, rising as prices climb from 2,250 ringgit ($738) a ton to 3,600 ringgit. The existing levy is 23 percent.

Indonesia cut the maximum duty on refined, bleached and deodorized, or RBD, palm oil to 10 percent from 23 percent last year. The rate for RBD palm olein was cut to 13 percent from 25 percent, while the highest tax for crude oil was set at 22.5 percent. The tax on crude palm oil is 9 percent this month.

Palm oil has tumbled 25 percent this year, set for a second straight annual loss, after stockpiles surged in Indonesia and Malaysia. The contract for February delivery lost as much as 1.1 percent to 2,367 ringgit a ton on the Malaysia Derivatives Exchange today, the lowest price since Nov. 14.

--Editors: Thomas Kutty Abraham, Jake Lloyd-Smith

To contact the reporters on this story: Yoga Rusmana in Jakarta at; Ranjeetha Pakiam in Kuala Lumpur at

To contact the editor responsible for this story: James Poole at

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