Impacts of Domestic Policies and External Factors on the Crude Palm Oil Producers’s and Consumer’s Welfare in Indonesia

Abstract

Besides its promising prospect in the world market, crude palm oil (CPO) in Indonesia plays an important role to fulfill the need of domestic downstream industries (such as palm cooking oil, oleo chemical, margarine, soap, and biodiesel) for their input procurements. Broad changes in the structure of regional and global economy will affect production, consumption, and trade of CPO and palm cooking oil in Indonesian. The objectives of this study are to analyze the affecting factors of supply and demand for CPO in domestic and world markets and to evaluate (2003-2007) and to forecast (2012-2016) the impact of domestic policies and external factors on the performance of CPO industry in Indonesia. This study was conducted by formulating an econometric model of CPO industry. The model specification was dynamic simultaneous equations and consist of 27 behavioral equations and 12 identities. Model identification was performed by using the order condition criteria, while model was estimated by using 2SLS method. The result show that domestic price of CPO is more responsive to changes in domestic demand quantity of CPO than export demand of CPO. Moreover, the developing of domestic downstream industries of CPO will increase the quantity of demand for CPO, hence it can increase the prices that is received by CPO producers. Domestic policy in the form of restrictions on exports of CPO with determination of the export tax rate of 20 percents can improve the net welfare that is more than the policy of domestic quota (increased domestic supply of CPO) and the policy of export quota. Increasing domestic supply of CPO gives a negative impact on net welfare. This is because the increasing in domestic supply of CPO has not been supported by the development of downstream industry of CPO (besides palm cooking oil industry), thus increasing the domestic supply of CPO will decrease the domestic price of CPO and domestic price of palm cooking oil. In the long run, after the downstream industries of CPO developed rapidly, the government should focus on policy of domestic market obligation (DMO) for CPO companies, hence they will commit to supply CPO domestic. Finally, the DMO policy will fulfill the needs of downstream industry.

Indonesia merupakan negara produsen minyak sawit terbesar pertama di dunia (sejak tahun 2006), yang sebelumnya dipimpin oleh Malaysia, sedangkan dalam ekspor Indonesia berada pada posisi kedua terbesar setelah Malaysia. Menurut Direktorat Jenderal Perkebunan (2009), permintaan domestik terhadap komoditas minyak sawit terus meningkat dari tahun ke tahun. Hingga tahun 2010 diperkirakan kebutuhan minyak sawit mencapai lebih dari 4 juta ton per tahun. Sementara itu, di pasar dunia, dalam dua dekade terakhir kebutuhan terhadap minyak sawit atau Crude Palm Oil (CPO) dan turunannya juga semakin meningkat, menggeser kedudukan minyak nabati lain, seperti minyak kedelai, minyak kelapa, dan minyak bunga matahari. Tingginya permintaan minyak sawit baik lokal maupun dunia sebagai input industri minyak goreng, biodiesel dan potensi kelapa sawit lainnya yang besar dalam perekonomian mendorong pengembangan perkebunan kelapa sawit. Dalam 32 tahun terakhir luas perkebunan kelapa sawit meningkat pesat lebih dari 36 kali lipat dari 189 ribu hektar pada tahun 1975 menjadi 6 767 ribu hektar pada tahun 2007, dan produksi minyak sawit meningkat lebih dari 44 kali lipat dari 397 ribu ton pada tahun 1975 menjadi 17 665 ribu ton pada tahun 2007 (Direktorat Jenderal Perkebunan, 2009).