Indonesia will impose ‘strict sanctions’ on those violating palm oil export ban, says trade minister
JAKARTA: Indonesian Trade Minister Muhammad Lutfi has threatened exporters with strict sanctions if they violate an export ban on crude and refined palm oil products, as the country strives to address a cooking oil shortage.
“Offending exporters will be given strict sanctions according to existing rules and regulations. I will make sure that the government along with the police force and other law enforcement bodies will monitor the implementation of this policy,” the minister told a press conference on Thursday (Apr 28).
“The government’s priority at the moment is to ensure the availability of cooking oil at an affordable price to all people of Indonesia. I hope we all can understand the urgency of this policy and work together for the good of the people of Indonesia.”
From Thursday, Indonesia imposed an export ban on crude and refined palm oil products.
The policy came after months of cooking oil shortage affecting millions of Indonesians. The scarcity has led prices of the commodity to balloon by more than 70 per cent which in turn affects prices of food.
The move also came ahead of the Muslim holiday, Idul Fitri next week, when demand for cooking oil and other goods tends to increase.
“This policy ensures all CPO (crude palm oil) products to be dedicated entirely to ensure the availability of cooking oil at a price of 14,000 rupiah (US$0.97) per litre, particularly at traditional markets and for SMEs,” Coordinating Minister for Economic Affairs, Airlangga Hartarto said on Wednesday as he announced the scope of the export ban.
The Wednesday announcement contradicted earlier reports citing government officials that the export ban would be limited to refined, bleached and deodorised (RBD) palm olein and not CPO. RBD palm olein which has been processed is a key ingredient in cooking oil and is used in anything from snacks to ice cream.
The export ban will last until the price of cooking oil in the country is below 14,000 rupiah per litre, said the coordinating minister. Currently, the retail price is around 24,000 rupiah per litre.
Indonesia is the world’s biggest palm oil producer, supplying around 56 per cent of global demand for palm oil products, which are used in anything from cooking oil, chocolates to cosmetics.
Manufacturers around the world have been scrambling to find alternatives ever since Indonesian President Joko Widodo announced the plan to stop the country’s palm oil export on Apr 22.
The announcement has caused prices for the commodity to soar even further, even before it was announced on Apr 27 that the ban would include virtually all palm oil products.
On Thursday, shares of some of Indonesia's leading palm oil plantation companies and the rupiah currency fell.
Indonesia, the world's biggest palm oil producer, has banned the export of all palm oil products. One analyst CNA spoke to says this will have a "very messy repercussion" on prices. The ban comes as the world faces a severe shortage of edible oil as alternatives are hindered by labour shortages, the war in Ukraine and weather conditions.
EXPORT BAN IS TEMPORARY IN NATURE: FOREIGN MINISTRY
Experts have earlier warned of a potential backlash from countries that have been dependent on palm oil products from Indonesia, saying that it could tarnish Indonesia’s reputation as a reliable palm oil producer.
Mr Teuku Faizasyah, spokesman for the Indonesian Ministry for Foreign Affairs however downplayed the possibility of retaliation by trade partners.
“The export ban is temporary in nature and we hope that there would not be any issues raised at international forums. We are monitoring the development related to the policy taken by the (Indonesian) government,” he said during a separate press conference on Thursday.
Indonesia produced 51.3 million tonnes of crude and processed palm oil in 2021. Out of this, only 17.1 million tonnes is consumed domestically.
The ban could create an oversupply domestically and experts have warned that it might be harder for palm oil plantation owners and farmers to move their products.
News of the export ban has caused prices of freshly picked palm oil fruits to slump by between 30 and 50 per cent, according to the Indonesian Farmers Union (SPI) and could falter further as now that the ban is in place.