Indonesian government plans to boost oleochemical production

The Indonesian government plans to boost production of oleochemicals, or chemicals derived from plant and animal fats. The increase would be up to the country’s current maximum production of 3.8 million tons, an official from the Industry Ministry said.
The increase aims to help boost exports of processed products to 60% of total palm oil exports this year, compared to 47% in 2012.
The ministry’s secretary for agro-based industry general directorate, Abdul Rochim, said on May 14, 2013, that the ministry would maximize oleochemical production to help achieve this year’s export target and further boost the exports of processed products to 70% of total palm oil exports by 2020.
According to Abdul, the country produced 2 million tons of oleochemicals in 2012, up 33% from 1.5 million tons the previous year.
According to the Indonesian Oleochemicals Manufacturers Association (Apolin), 80% of total production is allocated to exports.
Abdul said the government was optimistic about its target given Indonesia’s emerging downstream palm oil industry and the growing interest among agribusiness players to invest in oleochemicals.
Indonesia lowered its export tax on refined palm oil products from 25% to 10%, complementing a progressive tax on the export of crude palm oil (CPO), which starts at 22.5% whenever the price of the commodity goes beyond US$750 per ton.
Exporters are required to pay an export tax of 1.5% for every $50 increase in the price from the threshold.
Thanks to the measures, exports of palm oil products soared 47% to 12.54 million tons from 8.49 million tons in 2011, and contributed 65% to total palm oil exports. Exports of palm oil products reached US$12.1 billion last year, up 31% compared to the previous year, according to the Central Statistic Agency (BPS).
In addition, Abdul said that the oleochemicals sector had received a total Rp. 14 trillion (US$1.4 billion) investment from 12 companies since 2011. To lure more investors, he added the government would also grant tax holidays and tax allowances to companies willing to invest.
As an example, Abdul said the government had given Unilever Oleochemical Indonesia, which plans to set up a refinery to process palm oil into oleochemicals in Sei Mangke, North Sumatra, with an investment of US$133 million, a five-year tax holiday and two years to enjoy a 50% discounted tax.
Apolin Chairman Stefanus Goei King An said that the tax bundle would help the association surpass its 2013 target of 3 million tons.
Oleochemicals are the basic ingredients in soap, shampoo, detergent and plastic. Over 26 million tons were produced last year.
(May 15, 2013)