Widodo reverses course and bans all palm oil exports
Indonesia took a drastic step and implemented a thorough ban on palm oil exports yesterday to help reduce domestic shortages and hold down prices. The move comes as the world’s largest producer of the commodity flip flopped on the policy that analysts said was taken hastily by Jakarta to defend President Joko Widodo’s carefully crafted populist image.
In a televised address on Wednesday, Widodo admitted the decision to halt the exports of oilseeds and products intended for edible oils, including crude palm oil (CPO), will carry “negative impacts” on Indonesia’s foreign exchange reserve and tax income.
“It is ironic that we, as the world’s largest producer of palm oil, are having difficulties getting cooking oil,” Widodo said.
“As president, I allow that to happen, it’s been four months of scarcity and the government has tried various policies but they haven’t been effective. Therefore, the government decided to prohibit the export of raw materials for cooking oil and cooking oil to foreign countries.”
The shortage has been exacerbated by poor regulation and producers who are reluctant to forego high international prices.
The shortage has also been partly caused by Russia’s invasion of Ukraine that has sent prices of a number of staple foods skyrocketing globally. Widodo, known widely as Jokowi, announced the CPO export ban on Friday, only to have it reversed by his coordinating minister for economic affairs Airlangga Hartarto on Tuesday, who said the ban would only apply to products used in local production of cooking oil.
The last minute policy flip-flop underlines Jakarta’s tendency to launch a widely significant policy without having a proper assessment on its impacts, said Bhima
Yudhistira, executive director at Jakarta-based think tank Centre for Economic and Law Studies.
“The ban shows that Jokowi is seeking to boost his popularity by imposing these nationalist policies, but the CPO ban will only make palm oil farmers feel that [Jakarta] is betraying them,” Bhima added.
Arya Fernandes, political researcher from Centre for Strategic and International Studies Indonesia, said the decision to impose a complete ban on palm oil exports might be influenced by the declining approval rating of Widodo’s administration due to a range of domestic issues, particularly the rising prices of staple foods and fuel.
A survey this week by Jakartabased pollster Indikator Politik found public approval of Jokowi fell to 59.9 per cent in April, from 71.7 per cent in February, mainly due to climbing prices of staple goods, including cooking oil.
Indonesians are sensitive to prices of staple goods and fuel, and when they’re on the rise, political elites in Jakarta get spooked by the potential of social unrest. In 1998, nationwide protests ensued after the Asian economic crisis drove up the prices of basic goods and fuel, eventually leading to the downfall of former dictator Suharto.
Jakarta’s decision this time to ban palm oil export will be short term, just like its ban on coal exports in January, Bhima said. The government plans to resume exports when the price of bulk cooking oil in local markets falls to 14,000 rupiah (HK$7.6) per litre. It has soared 70 per cent in recent weeks to 26,000 rupiah.
Henry Saragih, chairman of the Indonesian Farmers Union, said his members incurred over 250 billion rupiah in losses since Widodo announced the export ban and demanded the government compensate farmers.