Indonesia, as the world biggest crude palm oil (CPO) producer, needs to accelerate its efforts to build a downstream industry for palm oil as CPO runner-up Malaysia is far ahead in developing a value-added CPO industry.
In 2015, Indonesia’s CPO production reached 32.5 million tons, with exports reaching 26.4 million tons. The export value went down from US$21.1 billion in 2014 to $18.6 billion in 2015.
Institute for Development of Economics and Finance (INDEF) economist Berly Martawardaya has predicted that the export value in 2016 will not differ greatly from 2015 due to stagnant global demand for CPO. He warned that Malaysia would take advantage of this situation if Indonesia remained slow in building its downstream industry.
“We need to export more palm oil derivative products to counter underperforming CPO exports. Malaysia was aware of this problem and shifted to processed products,” he told The Jakarta Post after a Roundtable on Sustainable Palm Oil (RSPO) event in Jakarta on Tuesday.
By building a downstream industry, Berly continued, Malaysian palm oil companies had even imported Indonesian CPO through their subsidiaries or joint ventures to then process the CPO into derivative products that have relatively stable demand and better prices.
“The F and B [food and beverage] industry in Indonesia could be the anchor for a downstreaming program. We have many world-class F and B industry players such as Indofood,” he said.