STRATEGIC ASSESSMENT.-Jakarta. Indonesia’s ban on palm oil products does not raise concern for the supply of the European Union market as the bloc has reserves for several weeks, E.U. vegetable oil group FEDIOL said on Tuesday. In a separate statement, the organization had said earlier that sunflower oil supplies had improved in the European Union over the past weeks as producers adapted to the shortfall in Ukrainian supplies and some sunflower oil had arrived by rail and truck. The Indonesian Anti-corruption Society (MAKI) on Tuesday said the questioning of Trade Minister Muhammad Luthfi by the Attorney General’s Office (AGO) was important in order to gain information regarding the ministry’s process of granting crude palm oil (CPO) permits.
Indonesian lawmakers have demanded an accounting of the illegal palm oil plantations that continue to operate in the country, after the government revealed it had missed out on at least $3 billion in taxes from these companies in 2021. That figure itself is likely an underestimate, with a previous audit putting the lost revenue from just one province, Riau, at $7.4 billion.
Lawmakers have given the environment ministry until the end of July to collect data on illegal plantations, including the identities of their owners, in Riau and Central Kalimantan provinces; the two provinces account for two-thirds of the illegal plantation area in Indonesia. Experts say uncovering the true identities of the plantation owners is the first step to addressing the problem, and should be followed up by an evaluation and improvement in the management of the palm oil industry.
The price of cooking oil remains far above IDR14,000 per liter, a cap the government has said must be met in order for the palm oil export ban to be lifted. Almost a week after the shipment of cooking oil and cooking oil materials — notably crude palm oil (CPO) — was suspended, the absence of a substantial decline in domestic market prices raises questions about the effectiveness of the ban.
The national average price of subsidized bulk cooking oil had dropped to IDR17,200 per liter on Wednesday, Trade Ministry data show, which is down only 1.15 percent over the course of the week since the ban started, on Apr. 28. However, the ministry data also show that bulk cooking oil was still sold at IDR18,491 per liter in Jakarta and even at prices surpassing IDR20,000 per liter in other major provinces, like Banten and West Java.
“So far, the export ban has not had any big effect [on the bulk cooking oil price],” Indonesian Vegetable Oil Refiners Association (GIMNI) Executive Director Sahat Sinaga said on Thursday. Meanwhile, Indonesian Market Traders Association (IKAPPI) Chairman Abdullah Mansuri also said that so far the CPO export ban policy has not had the expected impact. Market traders still get bulk cooking oil supplies from distributors at high prices above the provisions so that the selling price to consumers still exceeds the maximum retail price.
Trade Minister Muhammad Lutfi has threatened exporters with strict sanctions if they violate an export ban on crude and refined palm oil products, as the country strives to address a cooking oil shortage.
“Offending exporters will be given strict sanctions according to existing rules and regulations. I will make sure that the government along with the police force and other law enforcement bodies will monitor the implementation of this policy,” the minister said on Thursday. “The government’s priority at the moment is to ensure the availability of cooking oil at an affordable price to all people of Indonesia. I hope we all can understand the urgency of this policy and work together for the good of the people of Indonesia.”
In the inauguration of the 2022 National Development Planning Deliberation at the State Palace, Thursday, President Jokowi said that in 2022 and 2023 the global economic and political situation will experience turmoil and uncertainty. The pandemic is not completely over.
Several countries are still struggling to suppress the spread of COVID-19 and are even still implementing a lockdown. Jokowi appealed to the public that sensitivity to crisis is needed in order to be able to make good plans and appropriate scenarios to deal with the situation. “We must be really prepared if this crisis continues until next year. Everyone must be careful,” he said.
Pertamina, the Indonesian state oil and gas company, on Thursday launched commercial flights under the brand Pelita Air, with the government pledging affordable domestic service as it aims to steer clear of the mismanagement and debt that has plagued flag carrier Garuda Indonesia.
State-Owned Enterprises (SOEs) Minister Erick Thohir launched the first Pelita Air flight serving the Jakarta-Bali route, which left from Terminal III of Soekarno-Hatta Airport for I Gusti Ngurah Rai Airport, Bali. Pelita Air’s president director Dendy Kurniawan said the airline chose Jakarta-Bali as the first route because it was the busiest domestic route in Indonesia.
In February 2022, Indonesian Defense Minister Prabowo Subianto signed agreements with France to purchase 42 Dassault Rafale fighter jets and two Scorpene-class submarines. Soon after, the United States conditionally approved the sale of 36 F-15EX fighter jets.
The aircraft alone will cost Indonesia US$22 billion. The country has been buying big since 2021 when it announced plans to acquire six FREMM- and two Maestrale-class frigates from Italy as part of a US$125 billion long-term modernisation plan.
The case for modernisation is clear, and was compounded in 2021 when the 40-year old submarine KRI Nanggala (402) sank after a mechanical failure — this too followed a series of military plane crashes. Indonesia has suffered from a lack of modern weapon systems since the late 1990s due to the combination of a monetary crisis and an arms embargo imposed for human rights violation in East Timor. Although the embargo was lifted in 2005, Indonesia is still yet to catch up.
With increasing incursions of foreign vessels into its exclusive economic zone and rising cases of illegal fishing, piracy, drug smuggling and human trafficking, Indonesia is badly in need of reliable defence equipment with sufficient deterrent power to protect its territory. The Rafale, which has a radar system that can oversee a 100 kilometre radius, provides further reach compared to Indonesia’s existing F-16’s limit of 84 kilometres.
The Natuna islanders’ fishing grounds fall within Indonesia’s 200-nautical-mile exclusive economic zone (EEZ) — but also overlaps China’s nine-dash line claiming most of the South China Sea. This overlapping claim has led to tensions, even though the Permanent Court of Arbitration in 2016 found the nine-dash line to have no legal basis, in a case brought by the Philippines.
And although Indonesia is not a claimant in the South China Sea disputes between China and several Southeast Asian countries, it has been “rapidly hardening” the Natunas with military installations, noted Ridzwan Rahmat, principal defense analyst at military publisher Janes. “Over the last five years, I’ve not seen an island in Southeast Asia that’s been militarized as rapidly as in the Natuna Islands,” said Ridzwan.
Maritime tensions have not hurt ties on the trade and investment front thus far. President Jokowi hoped China would continue to support Indonesia’s development, including that of its new capital in East Kalimantan. Asked about the impact should China cut its investments in Indonesia, Achmad Sukarsono, associate director and lead analyst for Indonesia at risk consultancy Control Risks, said Indonesia can continue to develop its infrastructure without China’s Belt and Road Initiative (BRI).
