JOURNAL MONITOR EDITION 39 : PAKISTAN AS GATEWAY FOR EXPANSION OF THE INDONESIAN PALM OIL EXPORT MARKET IN SOUTH ASIA, CENTRAL ASIA AND MIDDLE EAST
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Pakistan’s large palm oil consumption makes this country become one of the main export destinations for Indonesian palm products. The large population, increasing purchasing power and shifting tastes are factors that drive the large consumption of Pakistani palm oil, and are even expected to continue to increase in the future.
Since the implementation of the IP-FTA in 2013, Indonesia’s palm oil exports to Pakistan have continued to increase until it has succeeded in shifting the dominance of Malaysia as the main exporter of the palm oil market in that country. Although facing obstacles in the form of a PFA’s recommendation that prohibits the consumption of Vanasphati Ghee from palm oil, but Indonesia’s palm oil export performance remains high. Even in the current pandemic and global economic recession, Indonesian export performance of palm oil especially RPO products to Pakistan, reached 1.82 million tons with an export value of USD 1.14 billion, or higher than the same period in 2019.
Pakistan also has the potential as a gateway to access the palm oil market in South Asia, Central Asia, and the Middle East and its surrounding, through the development of a trade and investment hub for Indonesian palm products. This is because Pakistan has several advantages such as a strategic geographical location and is supported by the development of facilities in the context of the implementation of the PRC Pakistan Economic Corridor/China Pakistan Economic Corridor, and also the incorporation of Pakistan in trade cooperation both bilateral and regional which can have implications for ease of market access due to relaxation of tariff and non-tariff barriers with trading partner countries.
The development of hubs and trade liberalization are also able to provide greater economic benefits such as export foreign exchange, real GDP, and welfare that can be felt by Indonesia, Pakistan, and other regional countries that are involved in the palm oil trade. Therefore, it is necessary to immediately build a hub through the development of a Joint Venture between Indonesian and Pakistani business actors by implementing three investment options, namely the development of storage, industrial refinery, or downstream industries which located in Gwadar or Karachi.