$3b to Be Invested in CPO Processing
ID/Damiana N. Simanjuntak
The Industry Ministry says $3 billion will be invested in Indonesian downstream businesses in the palm oil sector in the next two years, claiming tax policies to attract entrepreneurs to the processing component of the industry and discourage crude palm oil exports are showing signs of success.
Benny Wachyudi, director general of agribusiness at the Industry Ministry, said on Tuesday that in 2012, $800 million was forecast to be invested in Indonesia’s downstream CPO operations.
Among the major investors is Singapore-based Wilmar, which plans to invest $500 million for various purposes including the construction in East Java of a jet fuel plant, and flour mills with a capacity of 345,000 tons per year.
“From 2013 to 2014, the investment will be worth $2.2 billion. [This is because] there are many new players looking to enter in addition to the expansion of existing companies,” Benny said.
To encourage investment in value-added products, the government last year slashed the export tax on refined palm oil to 10 percent from 23 percent, and increased the crude palm oil export tax to a maximum of 22.5 percent.
Benny said the measure had helped to boost the development of the downstream business, noting that the next phase in the growth of Indonesia’s palm oil industry will be to produce more CPO-based products.
Benny noted that the CPO exports has been falling as a proportion of total production. “In 2010, our CPO production was 22 million tons of which 10.78 million tons was exported. Last year, our CPO production stood at 25.5 million while exports were at 9.53 million tons,” he added.
The government projected that CPO production would reach 40 million tons by 2020 while exports would stand at 12 million tons. Currently Indonesia produces 74 CPO-based products. “By 2020, we are hoping that around 150 CPO-based products can be made domestically. This is where we’re heading. But we will start with 100 products first and then 120 products and so on,” he added.
In a bid to increase the number of CPO-based products, the government is planning to encourage more research and development.
“CPO research and development has yet to be developed commercially in Indonesia, which is ironic given that we are the largest CPO producer in the world. In the near future, I will gather researchers to intensively discuss on how to push our research and development,” Benny added.
He said that all stakeholders in the sector needed to give their support to boosting research and development, in particular at the CPO-based industrial zone in Sei Mangkei, North Sumatra.