JOURNAL MONITOR VOL.2 NO.13 : DOWNSTREAM AND THE CHANGE IN THE EXPORT COMPOSITION OF INDONESIAN PALM OIL
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Most of Indonesia’s palm oil production for export-oriented, so the economic benefits that are felt are relatively lower because the price of palm oil (CPO and CPKO) is cheaper and there is no value-added. Therefore, the Indonesian government began to intensively develop palm oil downstream by issuing various policies such as export taxes and tax incentives for domestic industry since 2011.
The implication of these policies succed in encouraging the downstream development of palm oil in Indonesia. It can be seen from the change in the composition of exports of Indonesian oil palm products, which was dominated by exports of raw materials (CPO) in 2010, but then the export structure of Indonesian oil palm products in 2020 was dominated by exports of processed/derivative product of palm oil. The development of downstream also has implications for increasing the export value of palm oil products to reach USD 22.9 billion in 2020 and succeeded in bringing palm oil products as the main contributor to export foreign exchange in Indonesia’s trade balance in amid the pandemic and economic recession.
In addition to the increasing export value of palm oil products, exports of Indonesian palm products are of higher quality because they are dominated by downstream products and are produced by oil palm plantation centers which are spread across Indonesia and are based on people’s businesses (farmers and MSMEs). This shows that the increasing foreign exchange of oil palm product exports has become a “fresh blood” injection for the national economy and is part of the solutions to achieve SDGs related to income growth, increased employment opportunities, and economic equity