27/02/2013 (TEMPO Interactive) - Fadhil Hasan, Executive Director of the Indonesian Palm Oil Association, regrets the government's decision not to lower the exit duty of crude palm oil (CPO) and its derivative products this year. He believes that Trade Minister Gita Wirjawan's decree would loom over Indonesia's CPO products, further lowering their competitiveness in global markets.

"We cannot compete with Malaysia. Moreover, production also declined due to bad weather," he said on Monday, February 25.

The increasing price of CPO had made the government decide to raise the commodity's exit duty to 10.5 percent from a previous 9 percent whereas--at the same time, Malaysia only raised its CPO export duty to 4.5 percent from nothing.

With an exit duty that is 6 percent higher than Malaysia's the Association feels it would be difficult to compete in export with the neighboring country. "A six- percent difference is burdensome," Fadhil said.

The Secretary General of the Indonesian Palm Oil Farmers Association (Apkasindo), Arsjad Asmar, had urged the government to lower CPO's export tax to a maximum of four percent, in order to maintain competitiveness with other countries, including Malaysia--the world's second largest CPO producer after Indonesia.

Responding to the requests, Trade Minister Gita Wirjawan said the government would stick to its decision, and would not "be affected by Malaysia's policy."

Gita argued that the government had an obligation to encourage downstream industries, hence the decision to raise CPO export duty.

Gita also explained that Indonesia and Malaysia have differing interests when it comes to CPO export policies. Malaysia's downstream industries are already well developed, he argued.