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Bisnis.com, JAKARTA – Director of Segara Research Institute Piter Abdullah Redjalam assesses that the establishment of a crude palm oil (CPO) exchange in Indonesia is not easy. Minimal intervention is one of the requirements for the exchange to be recognized in the global market.
The government through the Ministry of Trade, in this case Bappebti, is preparing to establish an Indonesian CPO exchange. Later, every CPO export must be carried out through the CPO futures exchange. So far, Indonesian CPO trading still refers to the Rotterdam and Malaysian exchanges (MDEX).
“The government must convince and ensure that intervention from the government to support it is minimal,” Piter said in a public discussion on the White Paper on the Development and Policy of the Indonesian Palm Oil Industry, Monday (2/10/2023).
On the other hand, according to him, requiring exports through the domestic futures exchange will also not necessarily eliminate the role of the Rotterdam and Malaysia exchanges. The reason is, to create a global price reference, an exchange must have proven its credibility.
Piter said the Rotterdam and Malaysia exchanges had gone through a long road for decades to be recognized by business actors globally. Therefore, the government, said Piter, also needs to provide incentives to business actors to participate in transactions through the CPO exchange without coercion. “But the government must be consistent in how the CPO exchange is really based on market mechanisms so that the prices formed are credible prices,” Piter said.
On the contrary, he viewed that regulating the export of CPO and its derivative products too strictly through the CPO exchange, would actually become a boomerang for Indonesia and harm the palm oil industry. Producing countries, Piter said, should not always be the price setters.
“A market that is credible, efficient and does not experience distortion, will become a common reference,” he said.
For example, Piter said that the world price of crude oil has not been dictated by major producers such as Saudi Arabia, Russia and Iraq. Instead, it refers to prices in the Brent and West Texas Intermediate (WTI) markets in Europe and the United States.
A number of crude oil exporting countries that are members of OPEC, may influence the movement of oil prices with a strategy to reduce or increase production, but this is only one of many factors determining prices.
“Commodity prices on the exchange are determined by the fundamental factors of supply and demand which change with economic events and trigger waves of buying and selling,” he said.
According to Bisnis.com, on Monday (7/8/2023), Chairman of the Indonesian Palm Oil Producers Association (Gapki), Eddy Martono said entrepreneurs were considering the mandatory exchange fees that risked CPO prices that were no longer competitive. “This will make buyers move to other producing countries,” Eddy said when contacted on Monday (7/8/2023).
The price consideration will be more expensive because when the CPO reference price is away from the threshold of US$680 per ton, the government sets an export levy (PE) of US$85 per ton and export duty (BK) of US$33 per ton. According to him, the mandatory exchange fee will only increase the burden on business actors. “If we add the burden of exchange fees, it is feared that our prices will become uncompetitive,” he said.
On the other hand, Chairman of the Indonesian Palm Oil Farmers Association (Apkasindo) Gulat Manurung views that the establishment of the CPO exchange is a mandate from President Joko Widodo to the Minister of Trade to be able to create an independent reference price for Indonesian CPO.
“We palm oil farmers insist that the Indonesian CPO exchange is not just about profit and loss but the nationalism of all palm oil stakeholders,” Gulat said.
Through the CPO exchange, the CPO price will become a reference for the purchase price of farmers’ oil palm fresh fruit bunches (FFB) at palm oil mills. As for downstream, Gulat continued, the CPO price formed on the exchange will become a transparent export benchmark price. According to him, the benefits of the CPO exchange are not only useful for export purposes, but also allow for CPO transactions for domestic purposes.