JAKARTA (Reuters) -The Indonesia Palm Oil Association, GAPKI, on Friday urged the government to delay a planned hike in the palm oil export levy, warning it could harm competitiveness amid global trade uncertainties due to the U.S. tariffs and geopolitical tension.
Indonesia is due to raise its palm oil export levy to between 4.75% and 10% from May 17 to help fund a biodiesel blending mandate as well as a palm oil replanting programme. The levy currently stands at 3% to 7.5%.
“The situation is full of uncertainties and it is a big risk to launch a policy that will impact competitiveness of Indonesia’s palm oil exports,” GAPKI said in a letter addressed to Finance Minister Sri Mulyani Indrawati.
A spokesperson for the palm oil fund that collects the levy said GAPKI’s request will be discussed at a meeting with government ministries next week. The finance ministry and coordinating ministry of economic affairs did not respond to a request for comment.
Indonesia, the world’s biggest palm oil producer, is facing proposed U.S. tariffs of 32%, while number two producer Malaysia faces a 24% rate. The tariffs have been put on hold until July.
“It is feared that this will make Indonesian palm oil exports increasingly uncompetitive compared to Malaysia, especially for the U.S. market which is currently dominated by Indonesia,” the group said.
Malaysia charges an export duty of between 3% and 10%, depending on the price of palm oil. For May, the duty has been set at 10%.
Sri Mulyani Indrawati said previously that Indonesia would adjust its crude palm oil export tax to reduce the burden on exporters from U.S. tariffs. The tax is separate to the levy.
Meanwhile, heightened tension between major palm oil buyers India and Pakistan has sparked concern about reduced demand, GAPKI said.
“There is no permanent ceasefire between India and Pakistan yet that had caused buyers from both nations to delay purchase of crude palm oil and its derivatives,” the group added.
(Reporting by Bernadette Christina; Additional reporting by Gayatri Suroyo; Editing by Kate Mayberry and Sonali Paul)
