Palm oil from Indonesia: nothing to gain from the export ban?

Status: 05/03/2022 08:22

Indonesia supplies two-thirds of the world’s palm oil needs – because it has become unaffordable for many in the country, the export has now ceased. What pleases the population could further harm the agricultural economy and the climate.

By Lena Bodewein, ARD Studio Singapore

in oil Fried tofu or tempeh, another soy variant, sautéed rice with vegetables, meatballs: Indonesian cuisine relies heavily on cooking oil. The ingredient is indispensable, especially in the poorest sections of the population: “I hope that oil prices will not continue to rise, Mr Jokowi – please think of the poor here, they will no longer be able to face if prices continue to rise,” with these words, a fried rice vendor told Reuters news agency Indonesian President Joko Widodo, Jokowi said.

Because the export of palm oil to Indonesia is incredibly successful – almost two-thirds of the world’s palm oil needs are met by Indonesia – food in the country itself has become increasingly more expensive. Manufacturers hoarded supplies for export, and prices for available cooking oil soared. Thousands of Indonesians have taken to the streets in recent weeks to demonstrate in favor of affordable food.

Encouragement of food stall operators

And President Jokowi reacted – with an export ban. “I will closely monitor the impact of this policy so that we have enough cooking oil in the country,” he said. The export ban will only apply until prices have stabilized – a liter of cooking oil should cost no more than 90 euro cents, according to the Indonesian government.

Most Indonesians support the move and hope it will have a quick effect: “I think his policy is good, it can stabilize oil prices,” says a fried tofu seller.

Indonesian food stalls rely on palm oil: A cook in Jakarta turns a banana into hot frying fat.

Image: picture alliance/ZUMAPRESS.com

But the rest of the world panicked. Palm oil is contained in countless products: shower gel, chocolate cream, plastic toys, cleaning products, biscuits, instant noodles. Its consumption goes beyond simple cooking. And all these products are likely to become more expensive due to the palm oil export ban.

South Asian countries in particular, including Pakistan, Bangladesh and India, get most of their palm oil from Indonesia. Like many other countries, they are struggling to cover their needs with other cooking oils – as the sunflower oil market has also been hit hard by Russia’s war in Ukraine.

Problems for producers – and the national currency

Indonesian consumers may be happy with the cheaper cooking oil, but producers are suffering from this decision. An oil producer fears bankruptcy and points out that crude palm oil has a short shelf life. If it cannot be exported, producers will have problems.

Additionally, experts criticize the economic impact on the country – as the export of palm oil brings millions of US dollars to the country. If these currencies disappear, “it will attack the Indonesian currency, it will destabilize the Indonesian financial system and damage our long-term currency reserves”, fears Bhima Yudhistira, director of the Center for Economic and Legal Studies at Celios.

Indonesia cannot therefore simply outsource its oil crisis. And anyone who hopes there will be a positive effect from a palm oil ban should consider: Other cooking oils require more land area. In addition, some countries in Africa and India are debating whether they want to start growing palm oil.

No palm oil from Indonesia

Lena Bodewein, ARD Singapore, May 2, 2022 12:01 p.m.

Leave a Comment