20/04/2011 (The Malaysian Insider) - Consumption of crude palm oil (CPO) in Indonesia, the world’s top producer, will rise by about 80 per cent to 18.7 million tonnes by 2015, due to greater demand from downstream industries, a government official said.

Southeast Asia’s largest economy consumed between 10.5 million and 11 million tonnes of CPO in 2010, but will increase this to 28 million tonnes by 2020, Abdul Rochim, an official at the Indonesian industry ministry told Reuters in an interview.

“With the policy of accelerating local palm oil industry development, we hope that added value product (production) will increase sharply,” Rochim said today.

He added that Indonesia would produce 30 million tonnes of CPO by 2015. Indonesia, which is seen producing 21-23 million tonnes of palm oil this year, outstripped Malaysia as the top palm oil producer in 2007.

Last year, Indonesia exported 15.6 million tonnes of palm oil products, with byproduct exports at 6.8 million tonnes and crude palm oil at 8.7 million tonnes, according to the Association of Indonesian Palm Oil.

Global palm output is 45 million tonnes.

Producers of the edible oil, used to make a wide range of items including biscuits and ice cream, have seen margins rise and are approving more downstream investments.

Indonesia also plans to offer fiscal incentives and restructure its export tax policy on crude palm oil, after it steadily raised the tax to 22.5 per cent in April from just 3 per cent a year ago, to spur downstream processing in the country.

Palm oil manufacturers aiming to expand in the archipelago of 17,000 islands have to grapple with power shortages, a lack of roads and ageing ports that make it hard to process and transport goods.

Land bill

Investors hope a new land bill, awaiting discussion by the country’s parliament, will be implemented this year to speed land acquisition for infrastructure projects.

The Dumai region on northern Sumatra island is one area earmarked by the government for downstream palm oil development, but investors are hoping for better railways and ports.

Rochim said the government was planning to set-up palm oil downstream industry clusters in three provinces — North Sumatera, Riau and East Kalimantan.

He said that in 2009, Indonesia produced 8.7 million tonnes of palm cooking oil, 300,000 tonnes of biodiesel and 500,000 tonnes of oleochemicals.

In 2015 the ministry has set a target to increase cooking oil production to 9.2 million tonnes, biodiesel to 4.8 million tonnes, and 1.6 million tonnes of oleochemical products.

To achieve this, he added that there would be USUSUS$867 million (RM2.627 billion) of new investment from both the private and public sectors. — Reuters