Indonesia’s Policy to Increase Palm Oil Export Tariffs in the midst of Global Food Oil Crisis
Authors: Ica Cahayani and Agata Nina Puspita*
It is too early to state that Indonesia will not increase the tariff for palm oil because in Indonesia, food oil or palm oil are still in the short supply. Many Indonesian people complained to the government because the price of palm oil or food oil has increased from December 2021 to January 2022. In March 2022, the price of Indonesian palm oil decreased, but from a procurement perspective, there was a shortage. The following table is the increasing price of food oil in Indonesia.
Table 1: The Comparison of Oil Commodity Price
|Commodity||Unit||December 2021||January 2022||February 2022||March 2022|
|Bulk Cooking Oil||Lt||17.600 IDR (1.23 USD)||18.100 IDR (1.26 USD)||15.900 IDR (1.11 USD)||16.800 IDR (1.17 USD)|
|Cooking Oil||Lt||18.600 IDR (1.30 USD)||19.100 IDR (1.33 USD)||16.200 IDR (1.13 USD)||18.500 IDR (1.29 USD)|
|Premium Cooking Oil||Lt||20.200 IDR (1.41 USD)||21.000 IDR (1.46 USD)||17.400 IDR (1.21 USD)||20.500 IDR (1.43 USD)|
Source: Basic Needs Market Monitoring System Ministry of Trade (https://ews.kemendag.go.id/)
The problems faced by Indonesia are not only fulfilling domestic demand, but also the pressure from abroad, especially India, which has pushed Indonesia to loosen restrictions on palm oil exports. Global food oil scarcity continues to occur due to the conflict in Ukraine which caused a stagnation in the export and import of sunflower seeds. In connection with that, sunflower seed oil could not be produced and the world depends on palm oil.
Sunflower seed oil is a food oil produced in Europe and one of them is in Ukraine. In other words, the Ukrainian conflict has given major impact to the scarcity of sunflower seed oil. Based on the statement delivered by the UN General Secretary, Antonio Gutteres on 14 March 2022, Ukraine and Russia are countries which have contributed 30% of global sunflower oil providers and contributed to food security in developing countries, Africa and the Middle East. Thus, the unresolved conflict has led to a scarcity of sunflower seed oil even though the market demand for edible oil is very high. It is very possible that if the conflict continues, it will cause not only food oil but also other food crises. This happens because Ukraine is the largest wheat producing country in Europe. Ukraine could be said as “European Bread Basket” which means that Europe’s food dependence on Ukrainian wheat is quite high. Therefore, if the conflict continues, it will not only cause the scarcity and the increase in the price of sunflower seed oil, but it will also trigger another food crisis. The following figure is the data of sunflower seed oil prices which have continued to increase since February 2022.
Figure: Sunflower Seed Oil Price
The conflict issues have impacted the scarcity of sunflower seed oil. The continuing of global food oil scarcity is also caused by global climate change that triggers drought. One of them is that soybean oil is limited in production so that the demand for Indonesian palm oil is very high. Soybean oil could not cover the scarcity of sunflower seed oil because Argentina and Paraguay as the world’s largest soybean producers are also experiencing a drought so that soybean crops fail.
In addition, soybean oil could not cover the scarcity of sunflower seed oil because Argentina and Paraguay as the world’s largest soybean producers are experiencing drought so that soybean crops fail to harvest. Soybean oil prices reached 58.500 IDR per litre on 19 March 2022. Indonesia as the “world bag of palm oil” experienced fluctuations in oil prices, which was also experienced by Indonesian people. The price of food oil in the future market has increased in order to anticipate that sunflower seed oil could not be produced in the long term and the sunflower seed oil market is in danger of disappearing if the Ukrainian conflict does not end soon.
Global food oil crisis is not only a nightmare for the global community buat also the Indonesian people. Indonesia as a palm oil producing country has a good opportunity to produce palm oil for export and fulfil the demand for oil in the global market. On the contrary, Indonesia must be fully aware of the need for food oil in the country in order to not experience a shortage. One of the ways is by increasing the export tariff of palm oil in order to be able to achieve a balance in the existence of palm oil in the country and in the global market because food oil or palm oil must be able to be controlled. If the price of food oil or palm oil could be controlled, food oil crisis could be avoided in the long term.
If the conflict in the European region continues, the global food crisis will not only occur in the scarcity of sunflower seed oil and soybean oil but also will place a sufficient burden on palm oil production to fulfil the demand for food oil in the future global market. There will be a number of other problems that will arise if the conflict continues and the food crises in other sectors will also experience will also experience shortages over time. The following table is the price of palm oil and soybean oil.
Table 2: Palm Oil and Soybean in Market Prices
|Closing Date||CPO FOB Indonesia||CPO FOB Malaysia||SBO Rotterdam ex-mill|
|8 March 2022||1,785.00||1,810.36||1,939.67|
|9 March 2022||1,910.00||1,939.62||2,032.83|
|10 March 2022||1,970.00||1,951.11||2,015.93|
|11 March 2022||1,910.00||1,876.79||1,985.80|
|14 March 2022||1,850.00||1,812.59||1,992.72|
|15 March 2022||1,815.00||1,762.70||1,962.91|
|16 March 2022||1,780.00||1,779.22||1,962.56|
Source: Palm Oil Analytics (https://www.cpopc.org/market-trends/palm-oil-market-prices/)
The Indonesian government’s policy is based on a statement from the Ministry of Finance of the Republic of Indonesia that the regulation increases tariffs in order to reach US$375 per ton of crude palm oil (CPO) when the international market price increases above US$1,500 per ton. Besides, Indonesia’s government through the Ministry of Trade of the Republic Indonesia stated that the government would increase the upper limit on the overall export tax on palm oil combined with an increase in import duties of 80% to reach US$675 per ton. The reason for doubling the upper limit on palm oil export tariffs is in order to prevent companies from overdoing it without thinking about the scarcity of domestic oil. Therefore, there must be a balance between exports and imports so that crude oil is distributed properly.
The increase in global oil prices is caused by conflicts in sunflower seed oil producing countries which support 30% of the world’s food oil demand; and global climate change which has caused two oil-producing countries to experience drought so that production could not be maximised. In addition, the only thing that supports the world’s food oil demand is Indonesian palm oil. Therefore, Indonesian economic policy makers take a firm stance in responding to the global food oil demand. One of them is by adding palm oil export tariffs.
The addition of the export tariff limit is stated in the Minister of Finance Regulation No. 23/PMK.05/2022 regarding changes to the current Minister of Finance Regulation No. 57/PMK.05/2020 which concerns Service Tariffs for the Public Service Agency of the Palm Oil Plantation Management Agency at Ministry of Finance. The policy of increasing palm oil export tariffs becomes the part of Indonesia’s economic policy in responding to the global food oil crisis. In accordance with the opinion of K. J. Hostli, it is stated that foreign policy is an idea in forming a formulation with the aim of solving problems that occur in a country. It becomes the reason for Indonesia to increase palm oil exports tariffs. In the midst of the global food oil crisis, increasing export tariffs is an economic policy step that will certainly be carried out by not only Indonesia but also other countries. Increasing tariffs is also due to Indonesia following fluctuations in the global market prices.
*Agata Nina Puspita, Student of Department of International Relation, Gadjah Mada University, Indonesia.
Brick By Brick, BRICS Now a New Bridge for a New World
Measuring BRICS in single decades, in 2001, BRIC started as an acronym for Brazil, Russia, India, and China; Goldman Sachs economist Jim O’Neill claimed that by 2050 the four BRIC economies would come to dominate the global economy. So South Africa was added to BRIC in 2010. The following countries are now expressing interest in joining: Afghanistan, Algeria, Argentina, Bahrain, Bangladesh, Belarus, Egypt, Indonesia, Iran, Kazakhstan, Mexico, Nicaragua, Nigeria, Pakistan, Saudi Arabia, Senegal, Sudan, Syria, the United Arab Emirates, Thailand, Tunisia, Turkey, Uruguay, Venezuela, and Zimbabwe. Is this now the awakening of BRICS+ or BRICS power?
BRICS+ by 2030 will add dozen new members and carve new indices, and by 2040, it will lead to new intellectualism on geopolitics and socio-economies for the super complex 2050 age of smart living.
Historically, BRICS nations pushed on their people-power agenda over super-power titles. They made extreme value-creation economic models over focusing on powerful military-industrial complexes. They focused on nation-building and avoided special mandates to manage global affairs. They have been on a quest to upgrade them. They were feeding hungry mouths, as they were population rich, constantly up-skilling, and improving value creation as they were SME rich. They kept a steady watch to create multilateralism to uplift humankind.
They, too, made mistakes, as did the rest of the world
In the third decade of the third millennium, come 2020, three transformations erupted. First, futurism changed the rules on the ‘physicality of work’ and created a new imbalance with the ‘mentality of performance’; this has divided the workforce of world; the old system of over a billion commuting daily to the center of a complex maze to arrive daily at the sanctum of the company and create climate change. So now, in response, some 50% of the world’s workforce has chosen to stay away and work remotely in the surroundings of wide-open choices. Furthermore, technology uplifted micro-power-nations and exposed Western economies now stripped naked in bubble baths on slippery floors, they tippy-toe practicing conga-lines
Newly magnified economy: Behold, what microscopes exposed the magnified inner workings of the body. Similarly, the integrated networks have exposed the digital connectivity and working of millions of villages, cities, and nations with additional billions of people to interact, trade, improve grassroots prosperity and create a well-informed and opinionated citizenry. Some 100 years ago, if only 1% of the world’s population knew what was happening, today it is a dozen times more, and by 2030 double again. Why would these numbers change the global economic matrix when translated into micro-trading, micro-manufacturing, and micro-exporting? International opinion today is already strong enough to crush any national opinion of any nation still lingering under the illusion of a self-promoted victory.
When the SME sector already exists within each nation, the global markets are always hungry for good quality goods and services, and the rains of almost free digital technologies make such transformation a quick turnaround. Therefore, mindsets are critically essential; the need to define the difference between the job seeker mindset that builds the organizations and the job creator mindset that originates and creates that organization in the first place.
So what are the lessons, key features, and blueprints in sight?
Mistakes and new lessons: Last many decades, as the new world was rising, Western citizens felt like China experts, and their regular visits to local China towns restaurants in each city misguided them that Laundromat trained Chinese could only produce some chicken fried rice. Ever since the advent of the camera, the East was always projected as poor and dysfunctional; mesmerized by the media coverage during the last many decades, the West was equally convinced that India, a land of only snake charmers and fakirs, finally someday speak better English. The general perceptions about Asia, besides eating rice, if they could ever make cheaper products for the West. The rest is history, mistakes, and lessons.
After the big ding-dong nights of 2000 New Year’s Eve, today’s new story starts from the 20th chapter. Now China and India alone have created some 500 million new entrepreneurs, not by a magic pill or meta-crypto-wand but by National Mobilization of Entrepreneurialism, a slow, painful deployment of SMEs across the nation, and by creating mobilization protocols to identify, classify, and digitizing based on multiple factors from type and size to the evaluation of their “respectable” role in future communities and economic factors. This methodology was far more advanced in strategy and stern management over the globalization frenzy from the West, where sudden exporting of manufacturing of the industrial plants to kill manufacturing and destroying the middle class out of the West already declared globalization a great success.
The other mistake is to assume this is an economic or an academic study, at best, like an Oscar Slap on sleepy rotundas occupied with endless printing of money across the Western economies. Instead, this is an entrepreneurial response for the entrepreneurial nations to awaken hidden entrepreneurial talents in up-skilling SMEs and re-skilling manufacturers at national levels.
Recommendations and warnings: No airline can survive with only Flight Engineers and Frequent Flyers stuffed inside the cockpits; that space is only reserved for highly trained pilots. Henceforth, across the world, any economic development of any size, shape, or authority may find other more suitable alternate paths of occupation if they still cannot demonstrate any levels of understanding, applicable skills, or mobilization mastery on the National Mobilization of Entrepreneurialism to up-skill exporters and re-skill manufactures and uplift national SME sector as the most prominent economic contributor of the nation. Study the biggest error of economic thinking
Underestimating the hidden powers of early thinking and starting a tiny unknown SME is a mistake of mindsets; here, entrepreneurialism like a saga unfolds, like a voluminous piece of literature but demanding literacy, understanding the job seeker mindsets and the ability to differentiate with entrepreneurial job creator mindset is already winning half the battle. Study the Mindset Hypotheses
Nations failing to realize the power of the billion SME rising in Asia and still unable to declare a national agenda of national mobilization of SMEs now must acquire an understanding of the 4B Factor: a billion displaced due to the pandemic, a billion replaced due to technology, a billion misplaced in wrong jobs now a billion on starvation watch. Furthermore, this 4 billion ever digitally connected mass of people ever in the history of humankind is now the most significant force of global opinion. Notice nations are already intoxicated with joy over the popularity of their national public opinion while having just an opposite international opinion on the world stage.
Recommendation; everyone is born an entrepreneur; our system chips away at this talent. Nevertheless, 10% to 50% high potential SMEs of any nation once are identified, classified, and digitized within 100 days. The uplifting digital platforms of up-skilling exporters and re-skilling manufacturers will result in 10% to 50% quadrupling their performance, productivity, and profitability. Imagine how much-regimented efforts will activate a positive national economic revolution based on real value creation, uplifting grassroots prosperity. How soon is a nation ready for a significant change? The rest is easy.
Promoting Economic Security: Enhancing Stability and Well-being
The stability and well-being of people, communities, and countries are critically dependent on economic security. It covers a range of topics, such as access to necessities, work opportunities, stable incomes, and defense against economic shocks. The need of guaranteeing economic security has increased significantly in the modern world, which is characterized by technical developments, geopolitical shifts, and unexpected disasters. The importance of economic security is examined in this article, along with important tactics for promoting adaptability and preserving people’s quality of life.
The value of economic security to individuals, communities, and countries cannot be overstated. By fostering an atmosphere where people and families can achieve their basic needs without suffering undue stress, it promotes stability. Because of this stability, people can recuperate and start over after severe shocks like economic downturns, natural disasters, or health crises.
Furthermore, economic security contributes to social cohesion by reducing inequality and fostering inclusivity. When individuals feel economically secure, they are more likely to actively participate in society, contribute to their communities, and engage in productive endeavors. This sense of security leads to greater social harmony and a collective feeling of prosperity.
Moreover, economic security is vital for long-term sustainable development. It enables individuals and societies to invest in education, healthcare, infrastructure, and innovation. These investments drive economic growth, improve overall well-being, and create the foundation for a prosperous future. By ensuring economic security, countries can build resilient and sustainable economies that benefit their citizens and contribute to global progress.
To enhance economic security, several key strategies can be implemented. Firstly, governments and businesses should prioritize diversifying their economies by promoting sectors with growth potential and resilience. By reducing reliance on a single industry or market, countries can mitigate the impact of economic downturns and build a more robust and diversified economy.
Investing in education and skills development is another crucial strategy. Governments and organizations must focus on providing quality education, vocational training, and lifelong learning opportunities. Equipping individuals with the necessary tools and knowledge enables them to adapt to changing economic landscapes and remain competitive in the job market.
Strong social safety nets are necessary to protect people during times of economic upheaval. The most disadvantaged populations should be given priority in the design and implementation of comprehensive social welfare systems by the government. Creating a safety net for all citizens entails implementing programs for income support, healthcare coverage, and unemployment benefits.
Promoting entrepreneurship and innovation can create new opportunities for economic growth and job creation. Governments can support aspiring entrepreneurs by providing access to capital, mentorship programs, and favorable regulatory environments. Embracing technological advancements and fostering a culture of innovation further enhances economic security, particularly in an increasingly digital world.
International cooperation is essential since economic security is a global issue. Cooperation between nations is necessary to advance ethical business practices, lessen economic inequality, and improve financial stability. Initiating discourse, coordinating policy, and assisting nations in economic crises are all important functions of multilateral organizations.
Societies can improve their economic security and create a more secure and prosperous future by putting these strategies into practice: diversifying the economy, investing in education and skills, creating social safety nets, encouraging entrepreneurship and innovation, and fostering international cooperation.
Having economic security is crucial in a world that is uncertain and changing quickly. Governments, corporations, and individuals may all work together to create an environment that promotes economic security by putting a priority on stability, resilience, and inclusivity. We can create a more resilient and prosperous future for everybody through diversity, education, social safety nets, entrepreneurship, and international cooperation. By making investments in financial stability, we build a more just and sustainable world.
The Impact of Globalization on the South Asian Economy
Globalization refers to the process by which economies, societies, and cultures from different countries become integrated with one another. The economies of the countries that make up South-East Asia, which include India, Pakistan, Bangladesh, Nepal, and Sri Lanka, have been significantly impacted by the spread of globalization in recent decades. The effects of globalization on the economies of South Asian countries have been mixed, with some positive and some negative results.
Positive Impacts of Globalization on the South Asian Economy
The expansion of South-East Asia’s trade and investment opportunities is one of the aspects of globalization that has had the most positive impact on the region’s economy. Because of its large consumer base, low labor costs, and strategic location, the region has become an attractive destination for foreign investors. As a consequence of this, the level of foreign direct investment (FDI) in South Asia has significantly increased, which has led to the development of new industries and the production of new jobs.
The expansion of the service industry in Sout-East Asia can also be attributed to the effects of globalization. South Asian countries have emerged as a hub for the outsourcing of services such as information technology (IT) and business process outsourcing as a result of the emergence of new technologies and the increased availability of skilled labor (BPO). As a direct consequence of this, the area has benefited from an increase in both the number of available jobs and the amount of money it brings.
Last but not least, globalization has facilitated greater cultural interaction and integration throughout South-East Asia. The region possesses a significant cultural legacy, and the advent of globalization has made it possible for South Asian music, films, and cuisine to become popular all over the world. This has not only contributed to a greater awareness of the region’s cultural heritage, but it has also opened up new doors for the travel and hospitality industry.
Negative Impacts of Globalization on the South-East Asian Economy
Even though there have been some positive effects, there have also been some negative effects that globalization has had on the South Asian economy. The widening gap between rich and poor is one of the most pressing problems that we face today. The advantages brought about by globalization have accrued almost entirely to a relatively small number of people, which has contributed to a widening income gap. As a consequence of this, social unrest and a wider gap in incomes have emerged.
Another significant obstacle that has been presented is the displacement of workers and traditional industries. Due to the effects of globalization, many smaller businesses have been forced to shut down, and their employees have been relocated to larger companies that are more productive. As a consequence of this, there has been an increase in unemployment as well as social unrest, particularly in rural areas.
Globalization has contributed to the deterioration of the environment in South Asia. The region has seen a growth in industries such as the textile industry, both of which have had a significant impact on the environment as a result of their expansion. The population’s health and well-being have suffered as a direct result of environmental degradation, which can be traced back to the increased consumption of natural resources and the improper disposal of waste produced by industrial processes.
The economy of the South-East Asian region has been affected in both positive and negative ways by the phenomenon of globalization. While it has resulted in the growth of industries and increased cultural exchange, it has also resulted in the displacement of workers and the widening of income inequality. While it has contributed to the growth of industries and increased cultural exchange, it has also resulted in the displacement of workers. In order to address these challenges, policy interventions that foster inclusive growth, protect the environment, and create new opportunities for the population will be required. By acting in this manner, countries in South Asia will be able to take advantage of globalization’s positive aspects while mitigating some of its more damaging effects.
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