Indonesia to reduce palm oil export at 50% of output by 2015

11 February 2010 07:50  [Source: ICIS news]

By Serena Seng

SINGAPORE (ICIS News)--The Indonesian government plans to reduce crude oil palm exports at 50% of total output by 2015 and at 30% by 2020 to boost downstream sectors including food, oleochemicals and biodiesel processing industries, market sources said on Thursday.

Domestic output of crude palm oil could reach 40m tonnes by 2020, sources added.

In 2009, Indonesia’s total output capacity was 20.3m tonnes of which 60% was exported raking in $10bn (€7.3bn) for the industry last year, an Indonesian trader said.

The Indonesian government hopes to enhance job creation and attract capital for investment by developing the downstream processing industry, sources said.

The government would provide incentives in the form of lower interest rates and lower taxes, sources added.

A trader said strong funding and support from the financial sector was also necessary to ensure the success of the plan.

However, some palm oil producers said markets for oleochemicals and cooking oil were very small and expanding the downstream processing industry would create only fewer jobs compared to investments in the upstream palm oil cultivation industry.

Market sources said a crude palm oil refinery with a capacity of 400,000 tonnes/year required only 75 workers while more than 20,000 workers were needed to produce the same amount of crude palm oil.

Market participants said expansion of the downstream industry was the only way to develop the country’s biodiesel industry and fulfil growing energy demand.

However, only one of the 12 biodiesel plant in the country was operating despite government plans to set up palm oil industry clusters in Riau, North Sumatra and East Kalimantan, a source close to Indonesia Palm Oil Association (Gapki) said.

($1 = €0.73)

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By: Serena Seng

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