Indonesian government considering reducing palm oil export taxes to counter competition with Malaysia, which set its tariff for crude variety at zero in January to help clear record stockpiles

JAKARTA, Indonesia , January 11, 2013 () – Indonesia, the world’s largest palm oil producer, is considering reducing export taxes to boost competition with Malaysia, which set its tariff for the crude variety at zero this month to help clear record stockpiles.

“Ideally it should be at zero too,” Trade Minister Gita Wirjawan told reporters in Jakarta today. The possible reduction “can be at any level, as long as it can help maintain the downstream-industry development and our competitiveness,” he said, referring to processors and refiners.

Enhanced competition from Indonesia for sales of the most- used cooking oil may erode Malaysian exports, deepening a bear market in crude palm oil in Kuala Lumpur while benefiting importers such as India and China. Malaysia’s reserves gained to the highest ever last month, data showed yesterday, and surveyors said exports fell in the first 10 days of January. The two countries account for 87 percent of global shipments.

“Any price reduction will definitely be beneficial for an importing country like India,” said B.V. Mehta, executive director of the Solvent Extractors’ Association of India. “We need to see the difference between crude and refined palm oil if any tax reduction takes place. India would prefer to have a lower duty on crude palm oil.”

The ministry has held talks the industry minister on the tax issue, Wirjawan said. The Indonesian Palm Oil Association, known as Gapki, has asked the government to cut the tax to avoid losing market share in countries such as India that typically buy more crude oil, Secretary-General Joko Supriyono said Jan. 8.


The Malaysian government said in October it would cut its export tax to 4.5 percent to 8.5 percent, from 23 percent, from Jan. 1, to help reduce the reserves. The tariff this month was set at zero as the base price was below the 2,250 ringgit ($745) threshold that triggers the 4.5 percent rate. Indonesia cut taxes in 2011, making local crude palm cheaper than in Malaysia. The Indonesian rate is set at 7.5 percent this month.

Palm oil on the Malaysia Derivatives Exchange, the regional benchmark, declined as much as 2.3 percent to 2,332 ringgit a ton, the cheapest since Dec. 21, and traded at 2,364 ringgit at 5:28 p.m. in Kuala Lumpur. Most-active prices have dropped 27 percent over the past year.


Shipments of palm and lauric oils from Indonesia surged 39 percent to 1.98 million tons in November from a month ago, according to data from Gapki today. The November figure is the highest since at least January 2008, the earliest data available from the growers and refiners group. It was also higher than the 1.6 million tons estimated in a Bloomberg survey.

Exports of palm oil and its by-products represented about 92 percent of total shipments, or 1.83 million tons, according to the data. Shipments in the first eleven months of 2012 rose 3.2 percent to 16.3 million tons, the data showed.

Shipments from Indonesia may rise to a record 20 million tons this year, from an estimated 18.2 million tons last year, Gapki said on Jan. 8. Output may expand 5.7 percent to 28 million tons, it said then.

Reserves in Malaysia expanded 2.4 percent to an all-time high of 2.63 million tons last month, according to the figures from the country’s palm oil board yesterday. That exceeded the median estimate for a decline in holdings to 2.53 million tons, according to a separate Bloomberg survey.

--With assistance from Swansy Afonso in Mumbai. Editors: Jake Lloyd-Smith, Thomas Kutty Abraham

To contact the reporters on this story: Yoga Rusmana in Jakarta at; Eko Listiyorini in Jakarta at

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

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