Jokowi Bans Cooking Oil Exports, Will the Price Drop?

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President Joko Widodo (Jokowi) announced a ban on the export of cooking oil and crude palm oil (CPO) raw materials.

The ban is effective from Thursday, April 28, 2022 until a deadline to be determined.

“I will continue to monitor and evaluate this policy so that the availability of cooking oil in the country is abundant at affordable prices,” said Jokowi, quoted from the Presidential Secretariat’s YouTube channel, Friday (22/4/2022).

Through the export ban policy, will the price of cooking oil go down?

Not necessarily down
Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira said the policy of banning cooking oil and CPO exports did not necessarily reduce cooking oil prices.

Because according to him, price reductions can only be done if the export ban policy is accompanied by the highest retail price (HET) policy for cooking oil.

“Will the price of cooking oil go down? It is not certain that the price will automatically fall if it is not accompanied by the HET policy on packaged cooking oil,” said Bhima to Kompas.com, Saturday (23/4/2022).

Bhima added that so far the problem lies in the weak supervision of producers and distributors.

For that, what must be done is not prohibiting exports. Instead, it is enough to return the CPO domestic market obligation (DMO) policy to 20 percent.

DMO itself is a mandatory supply limit that requires palm oil producers to meet domestic stocks.

“The supply of 20 percent of total CPO exports for cooking oil is more than sufficient. Once again, it is not appropriate for a total export ban to be carried out,” said Bhima.

Export ban benefits Malaysia
Indonesia is a country with the largest crude palm oil production in the world. While in second position, occupied by neighboring country, Malaysia.

According to Bhima, the export ban will benefit Malaysia as a competitor for Indonesian CPO.

Not only that, other countries that produce alternative vegetable oils, such as soybean oil and sunflower oil also benefit.

Bhima also added, if only to meet domestic needs, there is no need to stop exports.

Because the same policy was also carried out on coal commodities in January 2022. The results did not solve the problem.

“Is the problem solved? No, it was protested by potential buyers abroad. Such methods must be stopped,” said Bhima.

Loss of foreign exchange
Bhima said that Indonesia was also threatened with losing foreign exchange of US$ 3 billion.

The reason is that during March 2022, the value of Indonesia’s CPO exports reached 3 billion US dollars.

“So the estimate is in May if the assumption is that the export ban is valid for a full month, a loss of foreign exchange of US$3 billion will occur,” he explained.

This figure, Bhima added, is equivalent to 12 percent of total non-oil and gas exports. According to him, this could also destroy the stability of the rupiah.

“Please, Pak Jokowi, rethink this non-solutionary policy. Mr. Jokowi’s whisperer should also not just give misleading policy advice,” suggested Bhima.