Jakarta regrets KL decision to suspend palm oil imports

Economy October 12, 2015 01:00

By THE JAKARTA POST
ASIA NEWS NE

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THE INDONESIAN government expressed its regret on Thursday over a Malaysian palm oil group's decision to temporarily halt imports of palm oil from Indonesia, saying the move was against the spirit of free trade.



Gusmardi Bustami, who is chairman of an Indonesian trade policy forum and a former senior official at the Trade Ministry, said that the measure imposed by the Malaysian Palm Oil Board (MPOB) was not in line with the spirit of the Asean Free Trade Area and the World Trade Organization.
“It is also suspected that Malaysia is trying to prevent its processed goods made of imported Indonesian CPO from being banned from entering into various export destinations due to speculations that the CPO producers might be involved in forest fires [in Indonesia],” he told the Post on Thursday.
The plan to halt palm oil imports from Indonesia was contained in a circular issued by the MPOB late last month. The group said that the decision was made because of oversupply, but it did not state how long the imports would be suspended.
“In light of that [the oversupply condition], the MPOB decided to temporarily suspend importing palm oil until the domestic supply gets back to a manageable level,” according to a statement in the circular obtained by The Jakarta Post on Thursday.
The circular, which is signed by MPOB director-general Choo Yuen May, also states that Malaysia’s palm oil volume is at a level where it cannot be stored at its domestic storage facilities.
Indonesian Trade Ministry officials were not available for comment when the Post asked for clarification.
Gusmardi said that the measure would affect Indonesia’s palm oil producers, who are currently under pressure due to a sluggish market.
Indonesia’s palm oil exports to Malaysia, both raw and processed, hit US$566.197 million, with a total export volume of 730,902 tonnes last year, according to the Agriculture Ministry’s data.
During the January-July period of this year alone, the export value hit $595.53 million or around 42 per cent of Indonesia’s total palm oil export value during the period.
Mahmud Syaltout, an international trade law and policy expert with the University of Indonesia, said that the oversupply condition acted as a common reason for many importers to halt their import activities, but it raised questions when a government agency actively intervened to halt imports.
“In a liberal multilateral trade system, the condition should be left to the market mechanism,” he said.
According to Mahmud, the Indonesian government should request clarification from the Malaysian government.
However, Indonesian Palm Oil Producers Association executive director Fadhil Hasan said that the measure imposed by the MPOB would not threaten Indonesia’s exports, as it would be temporary – until Malaysia’s palm oil stocks reached manageable levels.
“In addition, CPO exports to Malaysia are not as big as those to China, India or even Pakistan,” he said.
Fadhil also said that most Malaysian importers imported CPO from Malaysian palm oil companies operating in Indonesia, arguing that the measure would just harm their own companies.
Indonesia and Malaysia, the world’s top CPO producers, contribute about 70 per cent of total world production.