The value of Indonesia`s palm oil exports to Pakistan had once been US$550 million per annum, though it fell by nearly 75 percent to below US$100 after Malaysia, the world`s second largest producer, concluded a PTA with Pakistan.
With the PTA, Malaysia`s palm oil exports to Pakistan enjoyed import duty tariff reductions that have boosted exports to that country, while Indonesia`s CPO faced high import duties, causing the Indonesian commodity to face difficulties in competing.
"I hope Indonesia will regain the value of its past exports of about US$500 million. This means that we will be able to increase our total exports to Pakistan to US$1.5 billion - 1.6 billion.
Indonesia`s total exports to Pakistan now account for about US$1 billion," Trade and Industry Minister Gita Wirjawan was quoted as saying by detikFinance following the signing of the PTA on Friday last week.
The success by the trade minister in concluding the long-awaited PTA was hailed by the House of Representatives (DPD)`s Commission VI on trade and industry affairs.
In a hearing on Tuesday with Minister Gita Wirjawan, who is also chairman of the Capital Investment Coordinating Board (BKPM), Commission VI Chairman Erik Satrya Wardhana expressed his appreciation over the signing of the PTA.
He said that Indonesia had proposed the PTA three years ago during the era of the previous trade minister. He noted that due to the delay in signing the PTA, Indonesia lost about US$700 million per year for three years.
Indonesia, whose annual CPO production is estimated at 23 million tons, lobbied Pakistan for the past three years. The PTA negotiations between Indonesia and Pakistan were then delayed because there was a change of government in Pakistan.
Pakistan was prepared to cut its import duty on Indonesian CPO and its downstream products by 10 percent within the framework of the PTA. At the same time, Indonesia was ready to lower its import duty on Pakistan`s `kino` oranges.
Indonesian exporters, whose CPO exports to Pakistan could reach US$400 million per annum, badly need the agreement. So far, the Indonesian palm oil cannot compete in Pakistan with Malaysia, which has previously been granted an import duty reduction based on a PTA scheme.
According to head of Research and Development of the Ministry of Agriculture, Gatot Irianto, Indonesia`s CPO and other palm oil-based product exports to Pakistan were subjected to a Rs9,100 import duty per ton while those of Malaysia, the world`s second largest palm oil producer, received a 10 percent cut or a discount of about US$16 per ton, making the Indonesian palm oil less competitive.
"So, if Malaysia gets a 10 percent discount, it means that it can sell its CPO at a price which is Rs91 lower than Indonesian CPO. The price difference is equal to US$16," he added.
As a result of the different treatment, the volume of Indonesian palm oil exports to Pakistan dropped by 75 percent.
Yet, Indonesia and Pakistan finally agreed to conclude the PTA agreement, which included a reduction of import duties on Indonesia`s palm oil exports to Pakistan.
According to Minister Gita Wirjawan, the agreement will benefit both countries. Indonesia`s CPO will be imported by Pakistan. In the meantime, Pakistan`s `kino` oranges will have easy access to Indonesia`s domestic market.
Therefore, Commission VI of the House of Representatives hailed the agreement, saying it will raise Indonesia`s palm oil exports to Pakistan. Further, observers believe that the access of Pakistan oranges to the Indonesian market will not disturb the domestic market for local oranges.
"We do not need to worry about the entry of `kino` oranges from Pakistan because it will not take over the market share of local oranges. It will compete with other imported oranges, namely the `mandarin` orange," Commission VI Chairman Erik Satrya Wardhana said.
He added that with the PTA, Indonesia`s palm oil would be able to compete with the same commodity from Malaysia.
"With the signing of the PTA, Indonesia`s CPO will get the same treatment as that of Malaysia regarding import duties in Pakistan. This will again drive up Indonesia`s palm oil exports to Pakistan from the present level of about US$60 million to US$800 million per annum," Erik said.
Of note, Indonesia`s CPO production has continued to increase of late. The Indonesian Palm Oil Producers Association (Gapki) predicts Indonesia`s palm oil production in 2012 will reach 25 million tons.
Gapki executive director Fadhil Hasan said last week that 2012 production projections represent an increase of 5.4 percent, or 1.5 million tons, from the previous year`s production recorded at 23.5 million tons.
"The national palm oil industry will grow this year in terms of production, plantation area, exports and price," he said when presenting the 2012 palm oil industry outlook.
The total area of oil palm plantations in 2012 is expected to reach 8.2 million hectares, while exports were projected to reach 17.5 million to 18 million tons.
In 2011, CPO production was recorded at 23.5 million tons, with some 16.6 million tons being exported. Palm oil production in 2010, meanwhile, was recorded at about 22 million tons, with only 15.6 million tons being exported.(*)
A014/INE
Reporter: Andi Abdussalam
Editor: Jafar M Sidik
Copyright © ANTARA 2012
