28/02/2013 (TEMPO Interactive) - The government has rejected calls to reduce the export tax rate on crude palm oil (CPO) regardless of a lower rate imposed by Malaysia, the world's second largest exporter of the commodity after Indonesia.

Previously, the Indonesian Palm Oil Farmers Association demanded the government to review its decision of raising the tax from 9 percent to 10.5 percent following a surge in prices, effective in March. Malaysia also raised its tax from zero to 4.5 percent tax.

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.

The policy, Gita said, would create "a balance of interests" between downstream industries and the need to boost palm oil exports.

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