DMO Should be Vanished for being Risky to get Inefficient Palm Oil Trade

Doc. InfoSAWIT
DMO Should be Vanished for being Risky to get Inefficient Palm Oil Trade

InfoSAWIT, JAKARTA - Domestic market obligation (DMO) and domestic price obligation (DPO) should be vanished because they are risky to get uncertainty and inefficient palm oil trade.

For over six months of implementation, non-barrier tariff limited export volume which impacted to the late economic progress in Indonesia.

It was told by Dean of Business and Economy Faculty Universitas Indonesia (UI), Eugenia Mardanugraha in a webinar of Forum Jurnalis Sawit (FSJ) on Friday (16/9/2022). When DMO and DPO run, the impact that many smallholders should get was the decreasing fresh fruit bunch (FFB) purchase. They are difficult to sell their plantation productivity.

Eugenia told, this happens for the government has not reliable study about DMO and DPO before they should be implemented.

“For it is inefficient, it is better that DMO and DPO should be eliminated. If it happens, smallholders’ FFB price would automatically get better and the productivity and their welfare would be increasing,” Eugenia who is also the Chairman Team of Research in LPEM UI, said.

Eugenia suggested, the government could deliver or use other instrument, such as, export levy and Out Fee to control crude palm oil (CPO) export volume. The levy should be used to subsidize palm cooking oil to control its price.

Eugenia thought, DMO cannot make palm cooking oil get cheaper but decrease the numbers of CPO exports which eventually decreases the economic progress. The expensive palm cooking oil for all these days happened not from the available CPO in the domestic but for the increasing CPO price in the globe. The expensive palm cooking oil happened for the policy about the highest retail price that made palm cooking oil producer decrease the supply and made the rareness.

From what LPEM UI researched in 2022, Eugenia told, the export ban on 28 April – 22 May 2022 decreased gross domestic product (GDP) in the second quarter of 2022 that reached 3%.

The government announced that the economic progress in the third quarter of 2022 should be 5.45%. if there is no way to stop exports, GDP in the third quarter of 2022 would be about 3.009 billion rupiah or the economic progress would be 8.5%.

The same statement was told by Executive Director of Palm Oil Agribusiness Strategic Institute (PASPI), Tungkot Sipayung. He thought, DMO and DPO by government would potentially minimize the economic progress and it would be difficult to run. On the other hand, the substitutions of DMO and DPO over and over, is proved to postpone and decrease palm oil competition because the regulations have been based on the old ones.

Sipayung suggested the government to maintain the mechanism which has been tested for all these years, which is, the combination between export levy and Out Fee. (T2)