Palm oil prospect

Palm oil prospect can be evaluated from its strength and opportunity. The expansion of its agribusiness is one of the steps required as plantation sub-sector development activities in order to revitalize the agricultural sector. The growth of various subsystems that is very rapidly in this agribusiness since the late 1970s is the evidence for the rapid movement of this industry. World's palm oil demand has increased in the last two decades, first for use in food, consumer products, and more recently as the biofuel raw materials. Malaysia and Indonesia account for approximately 87 percent of world production.

This commodity with its various uses for both food and non food industries, show the development which is not only associated with the growth of vegetable oil in Indonesia and the world, but also related to the growth of other sources, such as soy, rape seed and sunflower. In terms of competitiveness, palm oil (PO) has a good competitiveness compared to others, because: (1) its productivity per hectare is quite high, (2) it is an annual plant which well adapt to various agro-climate change, and being reviewed from its nutritional aspects, it has not been proven to cause increased cholesterol levels, and even contain beta carotene as a source of pro-vitamin A.
CPO (Crude Palm Oil) is a major commodity of plantation sector in Indonesia which is the second largest producer after Malaysia. Various advances have been gained in development of its plantations and a variety of benefits has to be realized as a result of this agribusiness actors efforts. Support from various parties such as banking, research and other economic infrastructure support by the various agencies involved in this sector is very important role. Its tree which is an annual plant may play a role in the absorption greenhouse gases or other environmental services such as biodiversity conservation or eco-tourism.
Palm oil prospect in Indonesia gave a very positive impact in national establishment, since PO is one source of foreign exchange from non-oil sector which is quite important. World vegetable oil consumption always exceeds its production so that the tendency of the world vegetable oil prices will always go up. From World Oil: production and consumption of edible oils during the period 2008-2012 is estimated to 132 million tonnes, while production is only 108 million tons so it needs a new supply of 24 million tons.
Palm oil has better prospects than others in the future due to several factors, among others:
1. Palm oil productivity is quite high compared to others.
2. For annual crops, PO is easier to adapt to its environment compared to others such as soybeans and sunflowers.
3. Judging from the healthcare, PO has the advantages when compared with others because they contain beta-carotene as pro-vitamin A and vitamin E
4. PO can also be used as raw materials for oleochemical industry which has the advantages compared to products made from petroleum. Palm oil is a source of raw materials that can be renewed (renewable), while petroleum is expected to be depleted within the next few years.
5. Oleochemical products are made from PO is safer, because its edible nature of and it is friendly to the environment and is easily broken down.
The increasing demand for vegetable oils is in line with population growth and economic growth. Therefore, plants with higher productivity of oil will meet the expectations of market demand in the future. PO productivity is up to 4 tons / ha / year exceeds the productivity of soybeans which is only 0.4 tons / ha / year and 0.57 tons of rapeseed oil / ha / year. In addition, Konferensi Minyak Sawit Indonesia VII (7th Indonesian Palm Oil Conference) held in Bali by GAPKI can provide a clearer picture about palm oil prospect.

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Palm Oil Industry Development Strategy

Palm oil industry development strategy in Indonesia need to be formulated carefully, considering that it is a country with the largest world supplier of CPO. Their production in 2009 reached 18.6 million tons. Business prospects this commodity in this country would be good if all aspects were well managed by the government and must be fully supported by the palm oil (PO) industry. There are seven obstacles to the development of Indonesia's PO industry. Of the seven barriers can be concluded into four main things that should be considered by all parties.
Infrastructure development strategy
One of them is the absence of an international port as a main distribution point for palm oil from Indonesia. Then the suggestion offered is to start building an international port in the strategic areas of PO business (clusters) such as in Kalimantan (Borneo), Riau, and We Island at the northern part of Sumatra. The ports can be placed in the Straits of Malacca to be related to the European market, while to seize the Asia market, it can be built in the Natuna Sea or Borneo.
Environment Strategy
The existence of a moratorium on natural and peat lands are directly delivered by the president as a result of an agreement on inter-country meeting in Oslo, was worrying because it is probably narrow the possible field for the plantation. But after further review, the moratorium is for the common good. Business actors also recognize the support of a moratorium, but the government is expected to be fair in all the sectors of interest, and wise.
Development strategy of palm oil downstream industry
There is a desire of the investor to hasten the formation of a specialized agency that houses the business. High commitment is needed from government embodied in the form of, among others, a clear blueprint on the development of PO industry, policies that helps the development of the industry from upstream to downstream, and development activities are coordinated and integrated among relevant agencies, as well as the creation of more conducive investment climate to create more interest in the PO industry. Promotion institution is required specifically to promote the Indonesian palm oil products to the export destination countries to improve market access for that products in the international market.
Regulatory Improvement Strategy
These include the taxation system. Ideally the government establishes a warm climate to make a breakthrough policy. The fact, the government set higher taxes for the PO business, so the investors preferred to directly build a cooking oil factory in export destination countries. It is suggested that this tax can be minimized and better optimized if the tax paid to be returned again on the path of palm oil business, among others, to build the infrastructure, and returned in the form of incentive for farmers, so it will push the productivity up.
In addition to the four things that should be observed above, there is one additional strategy which is said by the Indonesia minister of agriculture, Mr.Suswono, that the key to overcoming the problem of low productivity per hectare, is research. Research needs to be held and allocated sufficient funds to do research because it is proven in the country of Malaysia which have less land for plantation, but their palm fruit can be produced twice as much as Indonesia in one hectare. Malaysia which is one of world's PO producer, has the Malaysian Palm Oil Board, which is a fusion of the two institutions: research and licensing institutions.
In addition, the 7th Indonesian Palm Oil Conference held by GAPKI expected to provide deal solutions for various issues and development strategies for palm oil industry.

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Threats to palm oil business

Threats to palm oil business came through the anti-palm oil campaign that continues to this day. Even the pressure given to that industry may be growing stronger in the future. The campaign theme is still associated with the issue of climate change and environmental degradation. The series of such campaigns will be more systematic, which not only carried out by NGOs alone but by certain consumer groups and some countries in the European Union, through the threat of new standards enforcement in the palm oil trade and apply the rules in the form of non-tariff barrier.
According to the results of the ICBS (2000) that the American Soybean Association (ASA) conducted a policy of unfair trade (not fair) with a campaign that the CCO (crude coconut oil) and CPO contain saturated fatty acids and high cholesterol which are not good for health. This course will build a negative brand image as well as threats to business, especially palm oil from Indonesia. It because soybean oil produced by American countries is more expensive than PO and is unable to compete with PO. Soybean oil export share even have started to be taken over by the CPO. Its production costs only U.S. $ 180/ton, while soybean oil U.S. $ 315/ton and rapeseed oil U.S. $ 750/ton. Seeing this condition, ASA led by the USA started campaign negative issues against the CPO in the hope customers will come back to consume soybean oil.
Therefore, to counteract these issues, the Indonesian government is seemed to approach through trade lobbying. Fight against such threats through scientific way such as research to find objective data in supporting the CPO trade and then the results are published on an international scale.
By considering the increase in world vegetable oil demand and the expansion of all the world vegetable oil production, palm oil business should not stop the expansion if they do not want to lose market opportunities and lose momentum of building a national economy.
Therefore, the government should create a good climate to making a breakthrough policy as an effort to overcome the threats facing the business of palm oil.

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Indonesia palm oil prospect

In order to study Indonesia palm oil prospect, it is needs to estimate the market opportunities (increased consumption) in the world market. Based on the previous estimation, the consumption level until 2025 is expected to range between 41.45 - 44.45 million tons. On the other hand, world CPO production in 2004 was 25.67 million tons. Thus, the chance to increase production until 2025 is ranged from 15.78 - 18.78 million tons.
With a fairly open market opportunity both in terms of world exports or consumption, CPO producing countries will try to exploit these market prospect. Malaysia and Indonesia is to lead this competition. As expected, Malaysia as the main producer is expected to take these opportunities with increased production at a rate of 2.8% -1.5% per year. Indonesia is predicted to increase production at a rate between 3.0% -7.6% per year.
There are several arguments told that with the support of consistent and effective policy, associated with the Indonesia palm oil prospect, this country is expected to capitalize on most of these market opportunities. The main factor is the availability of land that is still quite large. The availability of land suitable for palm plantation in Indonesia reaches about 2.9 million ha. On the other hand, Malaysia faced difficulties because of the very limited land for expansion. Other countries such as Thailand, etc. are also not predicted as the real competitor because of their limited land, and its policy which not putting palm oil as a commodity. Nigeria palm oil output is estimated to be only sufficient to meet their domestic needs.
With this argument, Malaysia is predicted to take the opportunities by 20% (3.16 - 3.76 million tons) and approximately 40% (6.31 to 7.51 million) will be utilized by other states. Indonesia is estimated to take the greatest prospect to utilize about 40% or about 6.31 to 7.51 million. This means that with the assumption that productivity is about 3.5 tons of CPO / ha, they have a chance to expand between 1.80 - 2.15 million ha. If the expansion carried out between the years 2005-2025, then every year they should expand about 120 -140 thousand hectares to support their palm oil prospect.

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Palm oil downstream industry development

Agriculture expert from Bogor Agricultural University (IPB), Prof Erliza Hambali told through the development of the palm oil downstream industry, it could be one of Indonesia's biggest foreign exchange producer. According to Prof. Erliza Hambali, the industry can be relied upon as a driver of national economy and are able to produce large amounts of foreign exchange. Referring to the data issued by the chamber, protection of national income in 2010 of crude palm oil (CPO) reached U.S. $ 14 billion.
Prof. Erliza argues, the income from CPO at U.S. $ 14 billion can be increased through the development of palm oil downstream industry (IHKS). With such development, value-added product in Indonesia can be utilized as much as possible both to improve people's welfare state and foreign exchange.
He said that, until now Indonesia is the country's largest CPO producer in the world. This reputation has been borne by Indonesia since 2006. According to him, the advantages of Indonesia at the sub-sector needs to be kept on hold and was developed to improve the welfare of the community.
He believed the development of the palm oil downstream industry may be the important key in the national economy forward, foreign exchange, job creation, increase added value for CPO and improve national food security and energy.

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World's palm oil producers

Indonesia is now the world's largest palm oil producer beat Malaysia, Bangkok, Thailand, and several other agricultural countries. In the last 5 years, the development of palm plantations in that country reached 5 million hectares of the reserve potential of 19.7 million hectares, or much broader than with Malaysia remaining 4.6 million hectares. Previously, Malaysia known as the largest producer but now their land had limited and was replaced by Indonesia. A rapid development of palm oil industries in this country,is supported by land and climatic conditions which is suitable for plant growth.
Meanwhile, the development of downstream businesses is continued to be developed. CPO is generally processed into refined oil, in the form of cooking oil (olein) and other products such as cocoa butter substitute (CBS), industrial margarine, and so on. The development of its chemical industry is also very heavily developed. The oleochemical industry today has been developed by some of the world's palm oil producer. In fact, in addition to an existed plant in Tanjung Morawa, today, one of the companies has nearly completed the world's largest oleochemical industry, which is located in Kuala Tanjung, North Sumatra. Construction of the plant has attracted one of the largest consumer goods manufacturers in the world, to order their products over the next 15 years.
Indonesian Palm Oil Association (Gapki) said Indonesia's CPO production in 2005 reached 15.2 million tons. From that volume, $ 4 million tons is consumed for domestic purposes and the remainder, 11.2 million tons, for export. This quantity can be compared with the export data from the Indonesia Bank data that said during 2005, it reached U.S. $ 4,707 million. If the price per tonne of CPO reached U.S. $ 400, then the number is very similar to the export volume issued by Gapki, which is about 11.2 million tons.
Then by the production volume of 15.2 million tons, whether this country has become the biggest producer or not? For that purpose, you may look for the production data from Bank Negara Malaysia, or the Malaysian Central Bank, which is seen producing highly reliable data. The result is the production from Malaysia in 2005 only 14 million tons. This means that Indonesia was already the world's largest palm oil producer. These facts speak for themselves eventually.

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Tax change effect on palm oil business

Indonesia change its policy of export tax provision of palm oil derived products obtain business reaction from buyer country such as India. The Hindustan country is planning to raise import tariffs of those commodities that will go into their country.
Anticipating the release of the policy, the traders in the country of Hindustan is buying more palm oil derivative products such as RBD olein from Indonesia. A total of 50,000 tons of that olein has been bought by the importer from India. The sources from Indonesia traders and India said the purchase was also a part to anticipate the demand for festivals or holidays in India. The edible oil processing industry in India is driving the government to raise import tariffs of those commodities from 7.7% to 16.5%. This is to protect the their industry interests which is now experiencing idle.
Secretary General of Indonesian Palm Oil Association (Gapki) Joko Supriyono said not know about that action from India. But clearly the current government of India will raise the its import tariff. He explained the presence of Minister of Finance Regulation No. 128/PMK.011/2011 on Regulation Amendment of the Minister of Finance Number 67/PMK.011/2010, it change the set of export tax on palm oil business is more expensive 0.5% to 4.5% from the previous.
"With India raise Indonesia CPO import tariffs became increasingly uncompetitive as it is subjected to the tax both in the producer country and also the destination country," he said.
Joko said India and Indonesia have the same interest-related to the CPO trade between the two countries. But with the government policy to change the rules so Indonesia palm oil products is more uncompetitive.
"Yes, it is strange (situation), if the state imposed a policy of import tariffs, then it is normal, but Indonesia also imposed a policy of export tariff," he said.
In addition to the change in export tax in accordance with the Minister of Finance Regulation No. PMK 128/PMK.011/2011, the Indonesia government has also added a total of 14 palm oil derived commodities(downstream products) are subject to tax exports. Previously those items, include crude palm oil (CPO), which is subjected to exports tax only amounted to 15. Thus there are 29 oil derivative products are subject to tax exports.
It is set in the Minister of Trade Regulation (Permendag) No. 26/M-DAG/PER/9/2011 which is officially assigned at September 14th 2011. HPE as many as 14 palm oil derivative products are subjected to export tax that starting from September 14th 2011 until September 30th , 2011.

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