Friday, November 11, 2011

Indonesia Palm Oil Industry Barriers

Secretary General of the Indonesian Palm Oil Association (Gapki), Joko Supriyono, explains that there are six barriers to palm oil industry in Indonesia that lead to expanding difficulties or competitiveness declining if they are not removed.
a. Unclear policies for the land that will be used for development of new plantation as the result of imperfections of national spatial issues and the Provincial Spatial Plan (RTRWP). In addition, there are legal uncertainty of the legal status of the land. These conditions make concessionaires and investors choose to wait and see which of course will affect the rate of plantations expansion.
b. The second barrier: a moratorium policy on primary forests and peatlands can actually complicate the resolution of land issues that have previously been faced with the RTRWP problem.
The president instruction concerning the moratorium is considered to collide with other regulations such as the Law Number 41 (1999) regarding Forestry. On this basis, the policy of a moratorium be counterproductive to the development of palm oil industry.
Although the government provides the degraded land area of 35.2 million ha but its status still in doubt because this areas includes forest areas.
c. The third of Indonesia palm oil industry barriers, high CPO export tax which is progressive is proven not effective to suppress the volume of exports of CPO and have not been able to encourage the development of downstream industry in this country.
Instead, the tax is believed to be unfair to producers of raw materials either state or private estates and smallholders because they do not enjoy increased margins that should be obtained from the high price of CPO in the world today. So it is not appropriate if the tax is planned as the main instrument as the downstream industry actually need more appropriate incentives and attractive.
d. Fourth barrier, the development of palm plantations that led to Eastern Indonesia is less supported by adequate infrastructure such as ports. Supposedly there is an export port in Kalimantan to facilitate CPO sales abroad. In consideration, the total production of crude palm oil (CPO) from Kalimantan and Sulawesi has reached 30 percent of national production. It is also expected soon realized the development of industrial clusters to encourage the growth of the downstream industry.
e. Fifth barrier, the CPO business was harmed by the application of tax rules regarding VAT on primary products of fresh palm bunch (TBS/ Tandan Buah Segar). Because the VAT of TBS is waived so that TBS for input tax on production factors goods couldn’t be credited and become an additional burden. As a result, it leads to double taxation to the integrated companies (production-processing).
f. Sixth, the government should make climate change mitigation program with its own forces without involving foreign aid to overcome Indonesia palm oil industry barrier. The involvement of foreign funds will only make this country more dependent on other countries, while foreign aid is not necessarily give a direct impact on employment and poverty reduction.

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