Indonesia, the world's top palm oil producer, may slash export taxes on crude palm oil to compete with Malaysia, which recently lowered its export tax on CPO to zero per cent.
Trade Minister Gita Wirjawan said on Friday that the tax reduction was needed to generate a competitive edge, but that it should still help spur growth in the downstream industry,
"Ideally, it should be zero to allow us to compete with the rival, which applies zero per cent. But will it support the development of our downstream industry?", Gita told reporters at his office in Jakarta. Gita added that he had consulted with Industry Minister MS Hidayat over the competitiveness issue, and agreed to take the necessary measure.
Earlier this week, the Indonesian Palm Oil Association (Gapki) asked the government to lower the export tax on crude palm oil temporarily as a quick response to Malaysia's move of reducing its export tax to zero per cent this month.
The measure will help local producers manage the abundant supply until March, when local production is expected to moderate, according to Gapki.
Last October, Malaysia announced a cut in palm oil export taxes to between 4.5 per cent and 8.5 per cent from 23 per cent starting January to decrease local supply.
The tariffs apply when the price of palm oil exceeds the threshold of 2,250 ringgit (S$913). The tariff is zero per cent this month as the price fell below the threshold.
Malaysia's move is a response to Indonesia's new tax regime launched in 2011, which slashed the export tax on refined palm oil products from 25 per cent to 10 per cent, to foster growth in the processing and refining industry.