Never Ending Face Problem of Indonesia’s Palm Oil

This is my English version of my article “Bagi Industri Sawit, Badai Belum Berlalu” that published in Watyutink Media Online.

After the winning of Indonesia’s lawsuit against EU policy in the imposition of Anti Dumping Import Duty on Indonesian biodiesel products in World Trade Organization (WTO), there are still obstacles to our palm oil.

The Anti Dumping Import Duty policy was applied by to Indonesia’s palm oil (biodiesel) about 8.8 percent-23.3 percent started from 2013. As a result, Indonesia’s exports of biodiesel to the EU decreased by 42, 84 percent, from 649 million dollars to 150 million dollars in 2016. The value of biodiesel exports fell the most in 2015, amounting?? to only 68 million US dollars.

Although you can breathe for a while, at least three hurdles will confront palm oil. First, the EU plans to abolish the use of Biodiesel by 2030. Gradually per 2021, Indonesia’s biodiesel is not intended to enter the European Union because palm oil management is related to environmental ethics that is still questioned by the European Union. Secondly, the import duty of the United States Department of Commerce (USDOC) stipulated the amount of anti-dumping duties on Indonesian and Argentine biodiesel products on February 21, 2018, and the third of palm oil import duties in India after being imposed on November 2017.

Although the EU has not the highest share of the palm oil market, the position of palm oil in the EU is strategic. For the European Union, Indonesia’s palm oil ranks first in total EU palm oil imports. In 2016, European Union palm oil imports reached 4.08 billion Euros (Eurostat, 2016). Imports from Indonesia are the largest with a magnitude of 1.95 billion Euros (47.79 percent). Malaysia became the second origin country of palm oil in the European Union. Imports of European Union of palm products from Malaysia by 2016 reached 1.19 billion euros (28.19 percent). The rest came from other countries which import amount of 0.98 billion Euro (24.02 percent).

The most significant share of Indonesia’s palm oil exports, in volume, is India and China. In 2016, Indonesia’s palm oil was exported to India reached 5.4 million tons. Exports to China amounted to 3.1 million tons. In third place to Pakistan and forth to Spain reached respectively 2.1 million tons and 1.1 million tons.

In principle, maintaining the export market share is essential. Whatever the percentage. Especially if within the region the product of Indonesia is number one. That is why after got the win of Indonesia’s lawsuit against the EU, Indonesia cannot face off other problem. There is a nontariff entry barrier to the EU which is still a primary Indonesian job: a sustainable palm oil issue.

However, palm oil management should be environmentally sound and inclusive. On the one hand, the government needs to lobby related to the indicators contained in the ISPO (Indonesia Sustainable Palm Oil) recognized by the Roundtable on Sustainable Palm Oil (RSPO) which is the requirement of environmental certification of the entry of oil palm to the European Union.

Although all of Indonesia’s palm oil is RSPO certified, there is one more long-term challenge, the EU plans to eliminate the use of biodiesel by 2030. This plan will undoubtedly threaten Indonesia’s palm oil exports in the future. The government must find an alternative way out of the program.

There are at least two primary things to do, first to develop domestic biodiesel market. Developing on local biodiesel market is in line to the government’s efforts to reduce fossil energy dependence on energy use in Indonesia. Second, looking for new market alternatives. The countries of Eastern Europe, South Asia, and South America are areas that can become Indonesia new palm oil market.

 

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