Second Half 2015 - Anticipating Market Price Direction:
New Palm Oil Export Levy (CSF) and Its Impact on Indonesian Palm Oil Market
Dr. Fadhil Hasan
Mohamad Fadhil Hasan is the Director of Corporate Affairs Asian Agri Group, and Board Member of the Indonesian Palm Oil Association. In addition, he is also member of the Committee for National Economy and Industry of Republic of Indonesia and Chairman of Indonesian Bank Central’s Supervisory Board (BSBI). Fadhil Hasan has more than thirty years experiences in conducting economic policy research and consultancy in macroeconomics, industries, and agricultural, both in government and private sectors.
He graduated from Bogor Agricultural University, earned an MSc from Department of Economics, Iowa State University, USA and finished his Ph.D program at the University of Kentucky, USA majoring in Agricultural Economics.
This article analyses the impacts of the new levy imposed on CPO and its products on various players of the industry--in term who gain and who loss from this policy and Indonesian palm oil market. The levy is called CPO Supporting Fund (CSF). The new levy triggered by the continue declines of CPO prices, along with the ineffectiveness of mandatory biodiesel program implemented in Indonesia due to the lack and the uncertainty of subsidy. Thus, the objective of the levy is first to provide an adequate subsidy for biodiesel and to increase the utilization of CPO in the domestic market so that it will boost prices of CPO in international market. At the same time by increasing the blending of biodiesel up to B15 this will reduce import of fossil fuel so that it saves foreign exhanges badly needed to stabilize exchange rates. The analysis shows that this policy in short term will hurt the producer of CPO but it is neutral for the processors and benefits the producer of biodiesel. It will also hurt the competitiveness of Indonesian palm oil industry against other producer of palm oil. Its impact on price and supply-demand of CPO is still uncertain. It depends on how big is the volume of CPO absorbed by the biodiesel markets. Thus, the effectiveness of the B15 mandatory program is key factor in determining the likely impacts of the CPO Supporting Fund (CSF)
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