The Dynamics of Indonesia

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The Dynamics of Indonesia's Crude Palm Oil
From: The Dynamics of Indonesia's Crude Palm Oil Export Tag: crude soybean oil price
Roberto Akyuwen
Senior Lecturer, Finance Training Center Jogjakarta, Ministry of Finance RI
Jl. Solo Km 11, Kalasan, Sleman, Jogjakarta 55571, Indonesia
Telephone: 62-274-496219, Facsimile: 62-274-497235
Email: [email protected]
Arifin Indra Sulistyanto
Senior Managing Director, Indonesia Eximbank,
Indonesia Stock Exchange Building Tower II, 8th Fl., SCBD
Jl. Jend. Sudirman Kav. 52-53 Jakarta 12190, Indonesia
Telephone: 62-21-5154638, Facsimile: 62-21-5154639
Email: [email protected]
Oil palm has played an important role in supporting Indonesia’s economy. The main product
of oil palm plantation is crude palm oil (CPO) and most of it has been exported to various
countries. In 2006, total export volume of CPO has reached 12.1 million tons with the value
of US$ 4.82 billion. Since 2007, Indonesia has become the main CPO producer in the world,
replacing Malaysia. Total production of Indonesia’s CPO in 2007 was 16.8 million tons. This
research is aimed at analyzing the dynamics and factors affecting the performance of CPO
export. The main tool of analysis was multiple regressions by occupying 38 years of time
series data. The other tools were descriptive statistics, test of statistic between two means,
and trends. It was found that government policies were not optimum in supporting the
performance of Indonesia’s CPO export. For instance, the government was inconsistent in
implementing export tax and domestic market obligation (DMO) schemes and has no specific
effort to build infrastructures which were vitally needed by CPO producers such as export
ports and storage tanks. Furthermore, the government of Indonesia was only passive in
responding to negative issues and black campaigns launched repeatedly in international
market. At the upstream, there was no policy synergy between central and local governments
in overcoming land certification and permission administration problems in palm oil
plantations. The export financing was the most important factor which has significant and
positive impact on Indonesia’s CPO export volume. The other factor was CPO price in the
world market. The black campaign also has significant but negative impact. The black
campaign launched in the international market includes negative effects of food containing
CPO on consumer’s health and production process of CPO which has damaged the
environment. The prices of sunflower and soybean oil were the last two factors which have
had significant and positive impact on CPO export volume. On the reverse, variables which
have no impact on Indonesia’s CPO export volume include domestic price, domestic
consumption, CPO production volume, exchange rate, GDP per capita of export destination
countries, world crude oil price, and government policy. Although affected by global crisis,
Indonesia’s CPO export still has a very bright prospect in the future due to increasing
consumption of various products which were produced by using CPO as production input.
The international demand on CPO will increase in the years to come in line with the growth
of world population.

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