POINTERS: Indonesia's Palm Oil Industry - Insight into Indonesia's Export Tax Policies, Palm Oil Fund and Its Impacts

By: Mr. Togar Sitanggang

Mr Togar Sitanggang is the Vice Chairman of Indonesian Palm Oil Association/ GAPKI Since April 2018, Previously He served as Secretary General from April 2015 to April 2018. Currently, Mr Sitanggang works for PT Musim Mas as General Manager base in Jakarta. He has been in palm oil industries for almost 30 years with national and multinational companies including PT SMART Tbk, Cargill, Bunge, ED & F Man, Darmex in many positions ranging from research, logistics, trading and now corporate affairs. Mr Sitanggang is also active in palm oil related associations in Indonesia such as APROBI (Association of Biofuels Producers Indonesia), APOLIN (Association of Oleochemicals Manufacturer) and DMSI (Dewan Minyak Sawit Indonesia – Indonesia Palm Oil Board). Mr. Togar Sitanggang, was born in North Sumatera in 1966, graduated from University of Southern California, Los Angeles, USA, in Computer Science degree and obtained his Master Degree from North Sumatra University in Medan.

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From four seeds brought to Indonesia in 1848, Indonesia is now the leading producer of Palm Oil in the world with major development of oil palm plantation started in 1980s. Since then palm oil production increases year by year and stand at approximately 32 million mt this year, the largest producer of palm oil in the world. The “spirit” of export tax has started in 1994. The purpose of export tax is to make sure local demand secured and prices of cooking oil does not go too high. This reached peak in Jan-April 1998 when government ban export palm oil due to scarcity in local cooking oil. However, as the production increases the need to secure local demand was no longer the main objective of the export tax but more as an instrument to control local prices. And in 2011 the export tax main objective shifted to support the downstream industries where export tax for refined or products are “cheaper” compare to Crude Palm Oil. The change drove the downstream industries development in many ways including increase of refined capacity and development of further downstream such as Oleochemicals and Biodiesels.

Portion of Indonesia export also shifted from Crude base to Product base and currently stand at 25% Crude and 75% products. Latest development of export tax was the introduction of Palm Oil Levy in July 2015 and the change of export tax from ad valorem base to specific base. Latest Indonesia export tax tariffs are in specific values, not by calculation. The Levy collection is to support development of palm oil industries in Indonesia including replanting program, research, biodiesel, etc. Biodiesel is to support the Government Program on Mandatory used of Biofuels and in the way to create new demand for palm oil in Indonesia and the world. The levy program so far has shown good impact to the market where at least it created new demand and hence hold the price to further declined. There are also concerns about the sustainability of the program since price different between Crude Oil and Palm Oil still very high and the fund would not be sufficient to support the programs. To answer this, multi stakeholders are now in discussion on finding ways to make sure the fund is enough until end of 2016 and further to 2017 and the future. This paper will explain in detail the impacts of Indonesian palm oil export tax and fund on the industry.

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Questions & Answers (1) :

Zulhilmi Sidek

7 years ago

Thank you for your presentation, Mr Togar. Appreciate if you can share the mechanism that make Indonesia\'s planters continously able to generate competitive CPO price in the palm oil industry in Indonesia.

Togar Sitanggang:
The price of local CPO is very depended on FOB price. Calculated back to ex-mill level including deducting levy. The same mechanism also apply at mill level to buy FFB from farmers. The competitiveness would come from ability of traders to get discount down the supply chain.
7 years ago