The indonesian governments temporary export restriction on crude palm oil (cpo) in 2022 and its impacts on the global market, with implications for vietnam as an importer

GROUP 15

TOPIC: the indonesian
government's
temporary
export
restriction on crude
palm oil (cpo) in 2022
and its impacts on the
global market, with
implications
for
vietnam
as
an
importer.
INTERNATIONAL TRADE POLICY TMAE301.2


Table of Contents
ABSTRACT.....................................................................................................................................2
INTRODUCTION...........................................................................................................................3
Literature review...................................................................................................................................3
Methodology: The research method uses descriptive qualitative......................................................3
Information collection method..............................................................................................................................3
Information processing method: combination of quantitative and qualitative......................................................3

Objectives...............................................................................................................................................4
Scope of Research:................................................................................................................................4

OVERVIEW....................................................................................................................................5

1.1. A guide to CPO export (2018-2022)..............................................................................................5
1.1.1. Definition and value of Crude Palm Oil......................................................................................................5
1.1.2. Features of CPO products...........................................................................................................................6

1.2. CPO's products export contribution to the world's economy (2018-2022)................................6
1.2.2. Exporters and consumers of CPO's products..............................................................................................9
1.2.2.1. Exporters of CPO’s products in the world...............................................................................................9
1.2.2.2. Consumers of Indonesian CPO’s products in the world........................................................................10

Indonesia as CPO's products exporter before the restriction.....................................................11
2.1. Production of Palm oil in Indonesia (2018-2022).......................................................................11
2.2. Export Duties of Indonesian CPO's products (2018-2022)........................................................12

The Indonesian Government's export restriction on Crude Palm Oil (CPO) in 2022...............15
3.1. The issuance of Ministry of Trade Regulation No. 8 of 2022 on 1 February 2022 and MOT
Regulation No. 11 of 2022....................................................................................................................15
3.2. Purposes of the temporary restriction........................................................................................15
3.3. The outcome of the temporary export bans................................................................................16
3.4. Changes from the government towards the outcomes...............................................................16

Current situation and expected developments.............................................................................18
4.1. Current situation of Indonesia in the global market.................................................................18
4.2. Expected development..................................................................................................................18

Implications for VN as an importer.............................................................................................20
5.1. Reactions to the temporary restriction.......................................................................................20
5.2. Overall impacts on trade market................................................................................................20
5.3. Draw lessons for policy................................................................................................................21

CONCLUSION.............................................................................................................................22

REFERENCES.............................................................................................................................23
1


ABSTRACT
Literature has demonstrated that trade liberalization generally improved societal wellbeing and overall economic well-being. The "natural" functioning of comparative
advantage was said to open up markets and encourage export through trade liberalization.
Past research demonstrated evidence of "domestic price disciplining" and the elimination
of excess profits of domestic businesses with market power functioning in oligopolistic
marketplaces when domestic markets were exposed to international competition. The
removal of inefficiencies through increased competition led to a rise in production
(Verdoorn's Law). It was also recognized, though, that in some instances, "unmanaged"
liberalization may lead to sizable foreign companies establishing themselves as
oligopolies or even monopolies in the recently liberalized market. Due to their market
dominance, these companies may operate contrary to the rules of a free and open market,
such as by engaging in anticompetitive behavior.
The main form of palm oil is produced, known as crude palm oil (CPO). Palm oil is the
world’s most widely used vegetable cooking oil. Indonesia and Malaysia produce 57%
and 27% of palm oil available in the global market, respectively (Ritchie & Roser, 2021).
Cooking oil prices in Indonesia are directly impacted by international CPO prices
because it is a commodity that is traded globally. Due to the rising demand for biofuel as
a result of the global economic recovery and the diminishing productivity of oil palm
plantations in Indonesia and Malaysia, global CPO prices dramatically climbed during
2021 and into 2022 (Nafisah & Amanta, 2022). As a result, and in spite of its
fundamental need, inexpensive cooking oil was hard to come by.
Indonesia is a significant and promising partner for Vietnam, and it cherishes Vietnam's
status and role as one of the ASEAN nations with the greatest impact. Numerous
cooperation agreements and accords in numerous sectors have been negotiated between
Vietnam and Indonesia. There are other mechanisms for bilateral collaboration in place
as well. By examining the topic, "The Indonesian Government's temporary export

restriction on Crude Palm Oil (CPO) in 2022 and its impacts on the global market, with
implications for Vietnam as an importer”, we would have chance to understanding
thoroughly the impacts of export-ban policy and domestic application of Indonesia
Government towards optimization on the basis of the current system of CPO’s products
situation and export sector in the world and in Indonesia and estimation of future
development in the industry.
Despite our best efforts at research and analysis on the subject, we are only able to
analyze and evaluate on a very basic level due to time constraints and limited knowledge.
With limited information, there will be several flaws; the writers hope to receive
feedback from Mrs. Vũ Thị Huyền Phương for further improvement.
Our sincere appreciation.


INTRODUCTION
Literature review
- The WTO agreements: They cover a wide range of topics, including: agriculture,
textiles and apparel, finance, telecommunications, government acquisitions, industrial
standards and product safety, laws governing food safety, intellectual property, and much
more. But there are a few straightforward, essential ideas that appear in all of these
publications. The multilateral trading system is built on these tenets. (Hoekman, B.M.,
Mattoo, A. and English, P. (2002))
- Comparative advantage: theory, empirical measures and case studies: theory, analytical
tool and case studies of comparative advantage (Tri WIDODO, 2009).
- Trade Agreement between the Government of the Republic of Indonesia and the
Government of the Socialist Republic of Vietnam: The social character of labor, the
advancement of civilized human-human connections, and the lengthy history of growth
and origin all contribute to the inevitable process of international integration. People who
wish to flourish in society must be closely connected to one another. A nation that wishes
to develop must collaborate with other nations on a global scale. (Trade Agreement
between Indonesia and Vietnam (1995))

Methodology: The research method uses descriptive qualitative.
Information collection method
- Introspection and bonded approach: personal consultation of experts, articles…
- Individual and comparative approach: year-by-year data and transportation index
comparisons, table ranking order, policies over the years
- Historical and Logical Approach: Reviewing past metrics, the impact of events on the
data.
- Sources of data: The Central Statistics Agency [BPS], the Indonesian Ministry of
Industry, the United Nations Commodity Trade Statistics, academic papers on the
competitiveness and oil palm development strategy, and CPO export and import data
[code HS 151110] are the sources of the statistical data used in this study.
Information processing method: combination of quantitative and qualitative


- Quantitative: gather information from statistical documents on web pages. Refer to
econometric models in previous studies, review charts, tables, and graphs, and then make
preliminary judgments about the information gathered.
- Qualitative: Visually visualize the relationship between elements in the structure of
things, generalize the relationships of things.
Objectives:
One of the plantation products that plays a significant economic role in Indonesia is palm
oil, which is also exported as a currency-earning product for oil and gas. Crude Palm Oil
(CPO), the primary product of palm oil, is produced. In accordance with the rising
demand for CPO in export destination nations for both biodiesel and food raw materials,
CPO's export volumes as a key product continue to rise. However, the mix of exports
changed from CPO to goods derived from palm, specifically RBD palm olein and PFAD,
in 2009 when the customs regulation went into effect.
Scope of Research:
In general, the Study is conducted for the purpose of proposing and determining the

impacts of export-ban policy and domestic application of Indonesia Government towards
optimization on the basis of the current situation of CPO production and export sector in
the world and in Indonesia and estimation of future development in the industry.


OVERVIEW
1.1. A guide to CPO export (2018-2022)
1.1.1. Definition and value of Crude Palm Oil
Oil from the core of oil palm fruit is used to make palm oil, an edible oil. Red is the color
of the pulp. The high inactive vitamin A content is the reason why crude palm oil has a
hue that is naturally reminiscent of pulp. It is distinct from coconut oil or kernel oil. It is
frequently combined with or blended with coconut oil to create a highly saturated
vegetable fat that is also used in cooking.
CPO is mostly utilized in South-East Asia, West Africa, and some regions of Brazil for
cooking purposes. Due to its inexpensive price, commercial kitchens use it. Because of
the high level of saturated fats, it is less healthful than its competitors. Nigeria, Colombia,
Indonesia, and Malaysia are the top four CPO producers. They are significant palm oil
exporters. Malaysia produces around a quarter of the world's palm oil, with Indonesia
producing more than half. Between 75 and 85% of the world's supply comes from
Indonesia and Malaysia combined, although 42 other nations also produce palm oil,
notably Thailand, Colombia (which has dramatically increased production since the end
of the internal war), and Nigeria. Mumbai is one of the main commercial hubs in India,
and is a net importer of crude palm oil. [NCDEX (2022)]Additionally, it is used to create
biodiesel, and glycerin is one of its byproducts. Furthermore, because crude palm oil is a
processed good, demand and supply are constant year-round.
Parameters for performance review of commodity - NCDEX (2022)
It is common for palm oil to be exported; in 2019, an estimated 65% of total palm oil
production was exported. However, as seen by the accompanying graph, that percentage
has somewhat decreased recently.
The palm oil market is anticipated to reach a value of USD 67.3 billion in 2022 and to

grow at a CAGR of 5.1% from 2023 to 2030. The market's exponential expansion is
being driven by demand from the food, beverage, biofuel, energy, personal care, and
cosmetics industries. Major manufacturers are located in the area because raw materials
are readily available there. The market is intensely competitive and broad in scope as a
result of the presence of multiple all-scale companies who fight for market share through
high production, excellent distribution networks, high-quality products, and a variety of
competitive methods.[ Baliño, S. et al. (2020)]
The market for palm oil was estimated to be worth USD 67.3 billion in 2022, and from
2023 to 2030, it is expected to increase at a CAGR of 5.1%. Demand from the food,
beverage, biofuel, energy, personal care, and cosmetics industries is driving the market's
exponential growth. Due to the region's easy access to raw materials, major


manufacturers are concentrated there. Due to the presence of several all-scale players
who compete for market share through high production, superior distribution networks,
high-quality products, and a variety of competitive strategies, the market is both fiercely
competitive and wide-ranging in scope. [(2023) Grand View Research.]
1.1.2. Features of CPO products
1.1.2.1. Prices of CPO products
In the world, more than 17 different oils and fats are produced and sold. For these oils
and fats, a broad variety in price is not unusual. The variances rely on market
arrangements and the unique characteristics of various economic sectors. There seem to
be considerable pricing variations even among oils of the same sort that are
manufactured.
1.1.2.2. CPO's products export duty development
Some of these items can be exported duty-free, however, some nations charge for
exports. Similar to that, several nations that import similar goods have put levies on them.
In the case of vegetable oils, imports of unprocessed oils are subject to just modest
charges, but imports of oils that have undergone further processing are subject to
significantly higher tariffs. Some exporting nations place higher tariffs on crude

vegetable oil exports and lower duties on processed oil exports.
Similar oil-producing nations compete with one another for markets. Tariffs and pricing
are two ways that competition may manifest. The government of a nation may impose
tariffs or charges on items exported from that nation in order to raise money or to
safeguard the domestic economy. On the other hand, by taxing solely the foreign good,
importing nations put tariffs on imports to benefit home manufacturers who are subject to
import competition. The more expensive it is for customers to purchase foreign goods,
the more they will turn to domestic providers, who will gain from the increased demand
and higher prices brought on by the levy.

1.2. CPO's products export contribution to the world's economy (2018-2022)
1.2.1. Market share of the products
The bulk of Indonesia’s palm oil was made up of crude palm oil and refined palm oil,
with crude palm oil (CPO) exports reaching around 25.9 million metric tons in 2020. In
that year, the export value of this commodity was about 17.3 billion U.S. dollars.
(According to Statista)


The main export market for Indonesian CPO was India, which made up more than 60
percent of the total CPO exports in 2020. India was in turn the world’s largest importer of
palm oil in that year. In 2019, India introduced higher import duties on palm oil, leading
to a decline in demand from this market. However, Indonesian palm oil exports were
buffeted by increased demand from China, which sought alternative vegetable oil
supplies due to restrictions caused by the trade war with the U.S. (According to Statista)

According to Figure 1, with the exception of 2020, Indonesian CPO dominated the value
of CPO exports on the international market from 2000 to 2019. This demonstrates that
Malaysia, one of the major exporters, is more focused on refined palm oil. Processing
Indonesian CPO still lags well behind Malaysia. Only 59.66% of CPO can be converted
into derivative products in Indonesia, and only 40.34% can be exported. The COVID-19

outbreak, the lockdown, and the fall in economic growth in Indonesia and several other
nations, particularly those that are the primary palm oil export destinations, all
contributed to the decline in demand for Indonesian CPO in 2020. In this regard, Li and
Gan (2014) predict that Malaysian CPO exports and other CPO producing countries in
the world are expected to continue to increase until 2023, although domestic consumption
will increase due to population growth and the need for CPO derivative products.


The results of the market share index analysis show that the share of Indonesia’s CPO
exports in the European Union market ranges from 5% to 25.12%, higher than other CPO
importing countries in Italy, Spain, and Germany. The high percentage of CPO exports
shows that Indonesia is a major exporting country in the EU market to meet the EU
industry’s vegetable oil needs (Figure 2). This data shows that there has been a decline in
demand for CPO exports since 2012 after a negative campaign with the label “Palm Oil
free” and propaganda to switch to local vegetable oils, namely sunflower oil, soybean oil,
and rapeseed to reduce GHG emissions, reduce trade problems. -off fuel-food,
minimizing embodied deforestation. However, in reality, the European Union has not
been able to meet the demand for vegetable oil from local oil and still needs CPO exports.
In 2022, the Indonesian government issued the first temporary CPO export ban on April
28, 2022 due to scarce domestic cooking oil supplies that caused an average 43% price
hike of the commodity price domestically. Because of the export ban, CPO producers and
manufacturers experienced over-capacity in inventories and that caused them to refrain
from buying FFB from smallholders. This outcome led to the revocation of the palm oil
export ban on May 23, 2022. Since the export ban was revoked, domestic palm oil
stakeholders have been pressuring the government to boost the smallholders’ FFB selling
price and accelerate CPO export activities. To resolve the issues, the government
introduced a policy that waived the CPO export tax in July 2022 and that boosted the
FFB selling price by USD 0.13/kg by August 2022. It almost reached the government’s
target of USD 0.135/kg, but still far from the April selling price of USD 0.2/kg. Because
of this, the wave was extended to October 31st, 2022, to maintain export momentum.

At the same time, the global CPO price has been declining since June 2022. The global
demand for Indonesia’s CPO, especially from China, has declined, while Malaysia
experienced its CPO peak production season in June. The CPO price declined further in


August 2022. The Trade and Finance Ministries were urged to re-adjust their CPO export
strategies to compensate for the decreasing CPO export duty caused by the CPO price
drop.

CIF Rotterdam Price Index for CPO. Source: GAPKI

1.2.2. Exporters and consumers of CPO's products
1.2.2.1. Exporters of CPO’s products in the world
The demand for palm oil is high in every country because it is used in food, cosmetics,
and biofuel. Indonesia continues to dominate the market for exporting palm oil to other
countries. There are a limited number of major palm oil producers worldwide. 83.9% of
the total value of palm oil exported in 2021 was accounted for by the two largest
exporters, Indonesia and Malaysia. With shipments valued at $42.4 billion, or 87.1% of
the global total, Asian countries saw the highest dollar sales from exported palm oil
during 2021. At 5.2%, European exporters came in second, and 4.2% of palm oil
shipments worldwide came from Latin American nations, excluding Mexico but
including the Caribbean.
Tinier percentages came from Oceanian countries (1.7) led by Papua New Guinea and the
Solomon Islands, Africa (1.6%) and North America (0.3%).
1.
2.
3.
4.
5.
6.

Indonesia: US$26.7 billion (54.7% of palm oil exports)
Malaysia: $14.2 billion (29.2%)
Netherlands: $1.2 billion (2.5%)
Papua New Guinea: $783.9 million (1.6%)
Thailand: $713.5 million (1.5%)
Guatemala: $709.6 million (1.5%)


7. Colombia: $468.7 million (1%)


8. Germany: $363.9 million (0.7%)
9. Nepal: $236.4 million (0.5%)
10. Honduras: $236 million (0.5%)
11. Estonia: $222.6 million (0.5%)
12. Costa Rica: $217.7 million (0.4%)
13. Turkey: $209.8 million (0.4%)
14. Italy: $193.8 million (0.4%)
15. Djibouti: $182 million (0.4%)
By value, the listed 15 countries shipped 95.7% of global palm oil exports in 2021.
Among the top exporters, the fastest-growing palm oil exporters since 2020 were: Nepal
(up 419.9%), Thailand (up 353.5%), Djibouti (up 278.6%) and Turkey (up 75.2%).
1.2.2.2. Consumers of Indonesian CPO’s products in the world
Ten destination countries of Indonesian palm oil exports are China, India, USA, Pakistan,
Malaysia, Netherlands, Bangladesh, Russia and Italy. The USA rating as palm oil
importer rose from fifth in 2020 to third in 2022.
In 2021, Indonesia exported N/A in Palm Oil, making it the 1st largest exporter of Palm
Oil in the world. In the same year, palm oil was Indonesia's second-most popular export,
behind coffee. China ($4.22B), India ($3.45B), Pakistan ($2.84B), the United States

($1.38B), and Bangladesh ($1.36B) are Indonesia's top export markets for palm oil.
Between 2020 and 2021, China ($1.76 billion), Pakistan ($1.22 billion), and the United
States ($791 million) exhibited the strongest export growth for Indonesian palm oil.


Indonesia as CPO's products exporter before the restriction
2.1. Production of Palm oil in Indonesia (2018-2022)
2018 may be remembered as the year when Indonesia’s national palm oil output soared
high above world demand levels, leading to strong pressure on the prices of the
commodity for most of the year. The Indonesian Palm Oil Producers Association
(GAPKI) said that Indonesia’s palm oil production in 2018 rose by 23 percent over
production in the previous year, reaching 22.32 million tons. Indonesia Palm Oil
Production 2018 2019 is 40.5 million tons. It is Prediction that Palm Oil Production of
Indonesia will Climb to 48 million tons by 2025. At June 2019, Indonesia had produced
just under eight million metric tons of certified sustainable palm oil.
The combination of good price in early 2020 that had enabled growers to fertilize and
restore their oil palm plantations and favorable weather condition had increased the
production of CPO at the average of 3,917 thousand tons during the period July December 2020.
The year 2021 stands as a recovery year from Covid-19 pandemic as demand for palm oil
saw a rising tendency, but production was relatively stagnant due to various factors, such
as weather, limited supply of fertilizer and manpower shortage. For Indonesia, the
production of crude palm oil (CPO) in 2021 reached 46.888 million tons or 0.31% lower
than that of 2020 at 47.034 million tons.
The year 2022 in Indonesia was marked by unusual incidents which include extreme wet
weather, surging cases of Covid-19 in February, the outbreak of Russia - Ukraine war in
February, very high prices of vegetable oils that include palm oil, very high prices of oil,
government’s palm oil export ban during 28 April - 23 May, high prices of fertilizers and
very low realization of replanting program for smallholders (PSR).
All of the unusual incidents had significantly affected the palm oil industry in Indonesia
in terms of production, consumption, and exports.

Extreme wet weather had impacted the activities of pollinating insects and harvest.
Fertilizers that are expensive and hard to find had affected the activities to maintain the
plants, while the export ban had caused the farmers to stop harvesting their fresh fruit
bunches (FFB) during the export ban and several months after the ban as the stock was
still very high.
The failure of PSR program to realize target and the only small increase of plantation
acreage at 600,000 hectares during the last 5 years due to moratorium of oil palm
plantation licenses had made the growers to lose hope of increasing production
through the new


planting. The very high prices of palm oil have also caused the smallholders to delay their
planting program, causing the acreage of old plantations with lower productivity was still
in larger portion.
Such condition had contributed to the stagnation of CPO production in 2022 at 46.729
million tons, which was slightly lower than that in 2021 at 46.888 million tons and it was
the fourth consecutive year that saw stagnant growth of palm oil production. Local
consumption in 2022 reached 20.968 million tons, which was higher than that in 2021 at
18.422 million tons.
With the realization of production, local consumption and exports mentioned above, then
the local stock of palm oil is estimated to reach 3.658 million tons. Based on the growth
rate of production and consumption, all those problems hindering the production increase
should be tackled soon.
The condition that has affected the palm oil industry during 2022 is predicted to continue
affecting the performance of palm oil industry in 2023. Production is projected to remain
stagnant.
2.2. Export Duties of Indonesian CPO's products (2018-2022)
In November 2022, the Minister of Trade of Indonesia increased the export duty and
plantation fund tariff on the export of crude palm oil (CPO) after the reference value of
the CPO market was set at USD 826,58/MT.

The export tax imposed on palm oil products consists of two, namely Export Duty and
Export Levy. Although both of them are export tax instruments but they have difference.
The export duty become state revenue, while the export levy used to funding the
development of national palm oil industry, in accordance with mandate of Law 39/2014
concerning of Plantation and development of palm oil-based biofuel.
At the end of 2020, Indonesian government issued a new policy related to changes of export
levy tariffs for palm oil and its derivative products as stipulated in Minister of Finance
Regulation No. 57/PMK.05/2020 (PMK 191/2020) concerning Service Rates of the
Public Service Agency and the Palm Oil Fund Management Agency.
In this regulation, the amount of export levy is a progressive rate based on the threshold
price or reference CPO price was set by Ministry of Trade. Not only CPO, export of palm
oil derivatives products are also subject to levy, but the rates are lower than CPO’s levy.
On 30 November 2022, the Minister of Trade of Indonesia issued Regulation
No.1533/2022, extending the export duty on crude palm oil (CPO) at 18 USD/MT after


setting the reference value of the CPO market at USD 824,32/MT. The regulation entered
into force from 1 December to 15 December 2022.
On the same date, the Minister of Trade of Indonesia issued Regulation No.1533/2022,
extending the plantation fund tariffs for the export of crude palm oil (CPO) at 85
USD/tonnes after setting the reference value of the CPO market at USD 824,32/MT. The
regulation entered into force from 1 December to 15 December 2022.
In 2020, Indonesia Government has issued a issued a new policy of export levy for palm
oil and its derivative products as stipulated in PMK 57/2020, which took effectively from
June 1. If we compare with PMK 152/2018, CPO export levy in PMK 57/2020 has
increased by USD 5 per ton and flat rate. It means regardless of whether the CPO’s price
is low or high, the same amount of export levy will be charged at USD 55 per ton.
The background of the adjustment of the palm oil export levy in PMK 191/2020 are the
trend of increasing CPO prices and the sustainability of programs in development
national palm oil industry. Especially during the pandemic, the gap between the fossil diesel’s

prices and FAME’s prices continues to widen, which has an impact on the greater of
biodiesel incentive that must be provided by BPDPKS, on the other hand the Indonesian
Government continues to be fully committed to achieving the renewable energy mix
through the B30 program.
Not only that, other palm oil industry development programs such as replanting of
smallholder farmers plantation (PSR), research innovation, development of smallholder
human resources, and implementation of palm oil campaigns, promotions and advocacy
both in domestic and international, also require sustainable supporting funding that comes
from export levy.
In conclusion, in line with trend of increasing CPO prices and the sustainability of
programs in development national palm oil industry, such as biodiesel mandatory (B30)
and replanting (PSR), these programs require sustainable supporting funding that comes
from export levy. Therefore, Indonesian Goverment made an adjustment of the palm oil’s
product export levy rates set out in PMK 191/2020.
In this regulation, the amount of the CPO’s levy tariff is progressive at a certain price
threshold by following the reference price set by the Ministry of Trade. The export levy
rates range from USD 55 per ton – UD 995 per ton, or an increase of USD 5 per tonne
every increase in the reference price of CPO by 25 per ton.
The impact of the export levy policy (indirect levy) will also be passed through to all
industry players, both upstream and downstream along the palm oil supply chain. The
results analysis shows that the implementation of CPO’s export levy (PMK 191/2020) is
causing losses for FFB and CPO producers. On the other hand, the integrator of oil palm


plantation company – CPO/RPO (CPO mill) – the downstream industry and downstream
industry players actually enjoy the benefits (gain). However, in total it can be ascertained
that the losses suffered by the FFB and CPO producers is greater than the profits enjoyed
by the integrator industry and the downstream industry.
The players who lost due to the implementation of the new export levy tariff, namely
CPO and FFB producers, especially smallholder farmers must be compensated. The

compensation is the optimilization of allocation of palm oil funds came from export
levies for development of smallholder farmers through programs such as replanting,
human resource development, research innovation, promotion (positive campaigns),
provision of plantation infrastructure and development of the institutional oil palm
farmers in the area equipped with IVO (Industrial Vegetable Oil) mill.


The Indonesian Government's export restriction on Crude Palm Oil
(CPO) in 2022
3.1. The issuance of Ministry of Trade Regulation No. 8 of 2022 on 1
February 2022 and MOT Regulation No. 11 of 2022.
It made an effort to manage and oversee the distribution of subsidized bulk cooking oil
through MOI Regulation No. 8/2022 on the Provision of Bulk Cooking Oil for
Community Needs, Micro Enterprises, and Small Businesses within the Financing
Framework by the Indonesian Palm Oil Plantation Fund Management Agency (Badan
Pengelola Dana Perkebunan Kelapa Sawit or BPDPKS).To distribute bulk cooking oil at
the MRP price and to be eligible for a subsidy to cover the price differential between the
market price and the MRP, all producers of bulk cooking oil were required to register in
SIINas3. While subsidized cooking oil did reach the market, there were very few
amounts available. Customers had to wait in lengthy lines to get cooking oil at the
inexpensive price promised by the government because it was rarely seen in most modern
and traditional marketplaces (GAPKI, 2022).
The MOT No. 11/2022 began implementing Domestic Market Obligation (DMO) and
Domestic Price Obligation (DPO) rules in the first quarter of 2022 to guarantee that bulk
cooking oil was accessible at the MRP price. The DMO policy mandated that the inputs
for cooking oil, crude palm oil (CPO) and refined, bleached, and deodorized palm olein
(RBD), be supplied in the domestic market at a rate of 30% of their export volume.
Additionally, it mandated that exporters and manufacturers sign up for SIMIRAH (the
Bulk Cooking Oil Information System)2. In order to guarantee reasonable prices, the
DPO set the domestic selling price of CPO and RBD palm olein.

3.2. Purposes of the temporary restriction
The Temporary Export Prohibition Policy for CPO and Palm Cooking Oil Raw Materials
has been re-enacted by the government. On May 23, 2022, the government reinstated the
DMO-DPO policy after revoking the export embargo policy. The implementation of this
strategy is intended to keep domestic palm cooking oil stable.
The regulation of the Indonesian palm oil sector in the post-coconut oil periods has long
aimed to maintain a balance between domestic and export interests. The trade governance
framework for the palm oil sector has evolved since the 1970s in response to changes and
new problems.


3.3. The outcome of the temporary export bans
Due to the price of fresh fruit bunches (FFB) falling from IDR 4,800 to IDR 1,000 as a
result of the export ban, farmers were damaged (Betahita, 2022). The Indonesian Palm
Oil Growers Association (Asosiasi Petani Kelapa Sawit Indonesia or APKASINDO) said
that in the 20 days following the implementation of the CPO export ban, farmers lost IDR
11.4 trillion (about USD 750 million). Additionally, it was claimed that 6.58 million
tonnes of FFB were harmed since the refineries were unable to process them (CNN
Indonesia, 2022).
The prohibition is predicted to have an effect on international brands as well. In contrast
to Procter & Gamble, which used over 650,000 tons of palm oil for the fiscal year 2020–
2021, Nestle purchased about 450,000 tons of palm oil and palm kernel oil from
Indonesia and Malaysia in 2020. It sources about 70% of its palm oil from Indonesia and
Malaysia.
L'Oréal, Ferrero, Danone, and Unilever are some major international brands that rely
heavily on palm oil; if the ban is upheld, their costs may increase.
3.4. Changes from the government towards the outcomes
The export embargo was again repealed on May 19, 2022, by the Indonesian President
not long after it had first been put into effect. According to President Widodo, the export
embargo was unnecessary as domestic supplies increased to 211,000 tonnes per month,

exceeding domestic demand (Sekretariat Kabinet RI, 2022d). In accordance with MOT
Regulation No. 30/2022, the export ban was lifted. But on May 23, by MOT Regulation
No. 33/2022, the DMO policy was once again put into effect.
The government announced the "flush-out policy," also known as MOT Regulation No.
38/2022 on Program to Accelerate the Distribution of CPO, RBD Palm Oil, RBD Palm
Olein, and UCO Through Exports, in June. Participating CPO exporters were granted an
exemption from the requirement to provide domestic cooking oil under the program,
provided they paid an additional fee of USD 200 per tonne in addition to the export duty
(at the time, USD 288 per tonne) and levy (at the time, USD 200 per tonne)4 (MOF
Regulation No. 102/PMK.05/2022). The flush-out program, as its name implies, aimed to
increase the consumption of oil palm fruits in order to raise their prices for the benefit of
home growers. The program, which ran from June to July 2022, aimed to distribute
export licenses for at least a million tonnes of CPO.


In addition, following the relaxation of the export embargo, the following regulations
have been put into place:
1. In July 2022, the government put into effect a zero-levy policy5 by MOF Regulation
No. 115/2022 (MOF, 2022) in order to further enhance CPO exports and raise the price
of fruits for farmers. From July to October, the new zero export levy rate was in force
(MOF, 2022). It remained in effect beginning on November 1st, 2022, but was limited to
a CPO price of USD 800 per tonne (MOF Regulation No. 154/PMK.05/2022).
2. In response to the DMO reenactment, MOT issued Minyakita6 as a low-cost cooking
oil brand under MOT Regulation No. 41/2022. The MOT-owned brand sells cooking oil
in straightforward packaging for IDR 14,000 per liter using DMO-sourced materials
(MOT, 2022). However, it appears that Minyakita has had no impact on cooking oil
prices since its announcement in July, as they have continued to be higher than the MRP.
The average retail price for cooking oil in straightforward packaging between July and
November 2022 was IDR 17,460 per liter. This was 14.09% more than it had been the
year prior at the same time period (SP2KP, 2022). Additionally, Minyakita was initially

discovered on numerous e-commerce platforms and was being sold for more than the
promised MRP, with prices ranging from IDR 16,000 per liter to more than 40,000 per
liter (Widyastuti, 2022; Safitri, 2022). Both the DMO and Minyakita are still in force as
of this writing.


Current situation and expected developments
4.1. Current situation of Indonesia in the global market
On April 28, 2022, Indonesia, the world's largest supplier of palm oil, decided to suspend
exports of crude palm oil and edible oil for an indefinite period.
The ban comes as cooking oil prices in the country have risen sharply by more than 40%
since the beginning of the year. Indonesians and economists greeted the decision with
mixed reactions.
"In fact, banning the export of crude palm oil and edible oil will cause a sharp decline in
export revenue. Palm oil exports currently contribute more than 12% of Indonesia's nonoil and gas exports, bringing in more than $3 billion a month.The loss of this revenue will
hurt the rupiah, destabilize the financial system in Indonesia and affect currency reserves
in the long term," said Bhima Yudhistira, director of the Indonesian Center for Economic
and Legal Research.
Indonesia's export ban on crude palm oil (CPO) and derivatives is the epitome of the
changing political winds in national and global food trade amid an impending global food
crisis. Although Jakarta lifted its palm oil ban on May 23, it may not be the last time
Indonesia bans exports of food items. Food prices are rising globally.
Just before Indonesia's ban, global food inflation was raging; the Food and Agriculture
Organization's (FAO) food price index hit an all-time high in March. This inflation began
in 2021 as the global economy recovered from the pandemic, but global food production
and distribution remains constrained by labor shortages, supply chain disruptions and
extreme weather.
Earlier, the scarcity of cooking oil and record high prices, as sunflower oil supplies
declined due to the Russia-Ukraine conflict, forced many countries to turn to palm oil
alternatives. Currently, with the ban of Indonesia - a country contributing 1/3 of global

cooking oil exports, food and food price inflation is forecasted to increase even more,
affecting people's lives in many countries.
4.2. Expected development
A month later, Indonesia lifted the export ban, making the market more stable and
helping palm oil prices plummet to $744.45 per tonne at the end of September 2022.
However, this stability does not last long as it begins to escalate in the winter of 2023 and
is currently hovering around $884 per tonne.
The reason is that the Indonesian government wants to increase the proportion of palm
oil- based fuel blending in biofuels from 30% to 35%. The move is part of a B35
program