16/05/2013 (Jakarta Post) - The government is expecting to increase production of oleochemicals (chemicals derived from plant and animal fats) to the country’s current maximum production of 3.8 million tons, an official from the Industry Ministry said.

Such an increase aims to help boost exports of processed products to 60 percent of total palm oil exports this year, compared to 47 percent in 2012.

The ministry’s secretary for agro-based industry general directorate, Abdul Rochim, said on Tuesday 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 percent out of total palm oil exports by 2020.

According to Abdul, the country produced 2 million tons of oleochemicals in 2012, up 33 percent from 1.5 million tons the previous year.

According to the Indonesian Oleochemicals Manufacturers Association (Apolin), 80 percent of total production is allocated to exports.

Abdul said the government was optimistic of its target given Indonesia’s emerging downstream palm oil industry and the growing interest among agribusiness players to invest in oleochemicals especially after the move to spur growth in the value-added industry.

Indonesia lowered its export tax on refined palm oil products from 25 percent to 10 percent, complementing a progressive tax on the export of crude palm oil (CPO), which starts at 22.5 percent whenever the price of the commodity goes beyond US$750 per ton.

Exporters are required to pay an export tax of 1.5 percent for every $50 increase in the price from the threshold.

Thanks to the measures, exports of palm oil products soared 47 percent to 12.54 million tons from 8.49 million tons in 2011, and contributed 65 percent to total palm oil exports. Exports of palm oil products reached $12.1 billion last year, up 31 percent compared to the previous year, according to the Central Statistic Agency (BPS).

In addition, Abdul added that the oleochemicals sector had received a total Rp. 14 trillion investment from 12 companies since 2011. To lure more investors, he added the government would also grant tax holiday and tax allowance to companies willing to invest big.

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 $133 million — a five-year tax holiday and two years to enjoy 50 percent discounted tax.

Apolin chairman Stefanus Goei King An said that the tax bundle would help the association to surpass its 2013 target of 3 million tons.

Oleochemicals is one of the basic ingredients in soap, shampoo, detergent and plastic, over 26 million tons was produced last year.