Indonesian Government Policy to Encourage Downstream Palm Oil Industry in The Post-Pandemic Period
The other side of the Covid pandemic is the increasingly global community awareness of health and hygiene. The global community has begun to consume nutritious foods to strengthen their body’s immunity and more maintain the cleanliness of the body and the environment as a form of protection to avoid viruses. The adaptation to the new normal lifestyle also has implications for the increasing global demand for nutritious food products and personal care products (hygiene products).
The opportunity for this increased global demand can be optimally utilized by the Indonesian palm oil industry, considering that palm oil is a miracle oil with a million benefits and is very versatile as a raw material for both health products (supplements) and hygiene products. This opportunity for the palm oil industry is also expected to get bigger along with changing trends and preferences of global consumers who prefer to consume natural ingredients that are considered safer for use in the long term.
The issue of the potential for the deepening and expansion of downstream palm oil to take advantage of this momentum was also raised as a topic discussed in the Webinar initiated by APOLIN and Majalah Sawit Indonesia. In the discussion, there were academics, entrepreneurs, and the government who provided insights regarding the use of palm oil phytonutrients for nutritional fulfillment and personal care.
One of the speakers in the webinar is Apt. Ahmad Gazali, M.Si, who is also researcher at IOPRI in the field of Product Processing and Quality, explained that the phytonutrients contained in palm oil such as Carotenoid, Vitamin E, Tocotrienol, Squalene, Phytosterol, and Ubiquinone can be used both for food and health products as well as personal care products including for cosmetics. Other speakers, namely Darmono Taniwiryono as researcher and entrepreneur from PT Nutri Palma Nabati, and Kusuma Ida Anjani as an entrepreneur from the cosmetics industry, also shared the same thing. Based on the exposure of the three sources, it shows the large market opportunities for downstream palm oil products to meet consumer needs, both domestically and globally.
The large opportunity for the palm oil industry to exploit the potential of the consumer goods market has also been captured and has become the focus of attention of the Indonesian Government. Emil Satria, who serves as Director of the Forest and Plantation Products Industry of the Indonesian Ministry of Industry who was also present as a speaker in that webinar also explained the government’s concrete support for the downstream industry, especially in the pandemic period, 2019-2020.
The manufacturing sector included in the high tech and high investment category, so it needs to be supported by a conducive business climate and ensures an attractive level of industry profitability. One of the crucial policies for downstream development is the guarantee of raw material supply through the implementation of progressive export levy by the Minister of Finance Regulation 191/2020 (PMK 191/2020), where the raw material (CPO/CPKO) export levy rate is higher than its downstream products. In addition, the export duty tariff harmonization is also carried out through a cooperation scheme for international market access to ensure the availability of supporting materials.
Apart from fiscal policy instruments, the Indonesian Government also provides tax incentives for the palm oil-based oleofood and oleochemical industries, namely; (1) Superdeduction Tax for R&D and Vocational Research; (2) exemption from import duty for capital goods for the oleochemical industry (Minister of Finance Regulation 188/2015, Regulation of the Minister of Industry 19/2010); (3) tax incentives for industrial sectors affected by the pandemic (Minister of Finance Regulation 188/2015), including the oleochemical sector; and (4) Tax allowance (Minister of Finance Regulation 96/2020, Government Regulation 78/2019) and Tax Holiday (Minister of Finance Regulation 130/2020, Investment Coordinating Board Regulation 7/2020) for industrial investment for the pioneer industry, exemption from import duties for industrial capital goods beta-carotene, tocopherol and tocotrienol.
The Indonesian government’s policy also focuses on strengthening industrial competitiveness through the gas price discount policy (Minister of Finance Regulation 18/2020) for industries that can be enjoyed by the oleochemical industry and changes in the status of SBE waste become non-hazardous waste. The Indonesian government also provides incentives and facilities during the pandemic for the industrial sector, such as the issuance of IOMKI Izin Operasional Mobilitas dan Kegiatan Industri or Operational Permit for Mobility and Industrial Activities) and exemption from import duty for cleaning active ingredients that are still imported as supporting materials for the personal care industry.
These various government policy instruments are expected to encourage the development of the domestic downstream palm oil industry to create higher added value and produce a greater multiplier effect for the Indonesian economy. The national palm oil industry can also take more advantage of the momentum more optimally to produce and sell palm oil-based end products that have higher economic value so more profitable for producers but also benefits consumers.
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