Import of Indonesia’s move to restrict palm oil exports


INDONESIA, the world’s largest producer and exporter of palm oil, recently announced its intention to restrict exports of the commodity.

This decision certainly shocked the global market, but I think Indonesia has just grown so tired of the constant criticisms, mostly baseless, levelled against palm oil that it took this drastic action.

The repercussions will be devastating, especially for the many die-hard importers of palm oil. Over the years, many countries have benefited from importing palm oil to satisfy not just their edible oil needs but also as an important economic input for their food and oleochemical industries.

Palm oil exporting countries, particularly Indonesia and Malaysia, which together account for 90% of exports, have been tormented by anti-palm oil NGOs and lobbyists for far too long.

If these groups do not appreciate the important role palm oil plays in the global edible oils business, then we might as well take it out of the world’s supply.

Indonesia has the capacity to do just that, thanks to its massive population, which is now approaching 300 million.

There is enough domestic demand, especially when Indonesians also use palm oil in their biodiesel mix.

With the current high price of petroleum, Indonesia would have done the maths to reach that decision, and this at a time when the price of palm oil in the global market is also going northwards.

Perhaps the idea is also to teach the critics of palm oil a lesson. It is common knowledge that palm oil has been unfairly criticised for years now.

It has been derided as unhealthy in food manufacturing, and its cultivation has been described as damaging to the environment and exploitative of human labour.

And new claims are still being added to the list. There is no mention of the fact that palm oil, because of the vast quantities produced, has helped to cushion the price of edible oils in the global market.

As the world’s population continues to rise, the need for more edible oils would grow in tandem.

And as the buying power of the population improves, the per capita consumption of edible oils would also increase.

It is estimated that the global demand for edible oils is increasing on the average of about 3% annually. Take palm oil out of the equation, and there will be struggle to meet the demand.

We have seen chaos happen when communities were denied access to affordable cooking oil.

In fact, the decision by the Indonesian government to impose the near complete ban on palm oil exports was partly due to demonstrations by local students who were upset over a 40% increase in the domestic price of cooking oil!

Indonesia’s tight restrictions on palm oil exports has also come at the worst possible time for India, which is currently the world’s leading importer of the commodity. India was already facing a cooking oil supply shortage due to the ongoing war in Ukraine, from which it imports most of its sunflower oil.

In early March, a more than 20% jump in edible oil prices in less than a month and fake viral messages regarding shortages on social media triggered panic buying in India. It has been reported that Indians are now stocking up vegetable oil.

The reality is that most countries are net importers of edible oils. The only net exporters are Malaysia, Indonesia, Argentina and perhaps Brazil.

China is another country that imports large amounts of palm oil. Among the developed economies, the EU is the largest importer. It is therefore unfortunate that the EU appears to have the most grudges against palm oil, especially on issues related to the environment.

Whatever it is, the confrontational stance they have taken is not the best way to resolve the issue. Palm oil is such an important commodity for the world that taking it for granted will do more harm than good.

PROFESSOR DATUK DR AHMAD IBRAHIM

Tan Sri Omar Centre for STI Policy

UCSI University

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Subscribe now to our Premium Plan for an ad-free and unlimited reading experience!

letters , palm oil , commodity

   

Next In Letters

Windows into our hearts
There’s a climate crisis, why are we felling trees?
Don’t keep wildlife if their needs aren’t met
How to make ‘brain gain’ programs work
Build a better world one city at a time
For the good of the civil service
Missing security from SOP
Emergency lane is there for a purpose
Shareholders call for resolution to FGV privatisation
Keeping the flu at bay

Others Also Read