Indonesia ' s palm oil subsector

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Indonesia's palm oil subsector, Volume 1

Author:	Larson, Donald F.;	Collection Title:	Policy, Research working paper ; no. WPS 1654
Country:	Indonesia;	Date Stored:	1996/09/01
Document Date:	1996/09/30	Document Type:	Policy Research Working Paper
Language:	English	Major Sector:	Agriculture, fishing, and forestry
Region:	East Asia and Pacific	Report Number:	WPS1654
Sub Sectors:	Perennial Crops	SubTopics:	Environmental Economics & Policies; Markets and Market Access; Economic Theory & Research; Payment Systems & Infrastructure; Consumption; Access to Markets
Volume No:	1

Summary: Debate on Indonesia's palm oil policy was stimulated by a sharp increase in cooking oil prices in 1994-95 and a resulting increase in the export tax rate on crude palm oil. Palm oil has been one of the fastest growing subsectors in Indonesia. Using a quantitative model, the author analyzes the effect of government policies, including the export tax, buffer stock operations by the BULOG (the national logistics agency), and directed sales from public estates. The author acknowledges the export tax's effectiveness in lowering domestic prices, but observes that its impact on inflation and consumer welfare is minimal. The tax has also had the unintended effect of transferring income from oil palm growers located primarily off Java. The structure of the tax discourages local processing by squeezing processing margins. And determining tax rates on palm oil products independent from the underlying crude palm oil price creates uncertainty about marketing margins for processors. The author recommends repealing the tax and discontinuing buffer stock operations and directed sales from public estates. The author concludes with recommendations on investment policy. Direct incentives to private investors have been used to overcome investment risks and uncertainties, but investors should no longer need those incentives. Instead, Indonesia's government should focus more on alleviating obstacles to private investment. The Bank might be of assistance in this area.


Official Documents Official, scanned versions of documents (may include signatures, etc.)
File Type		Description	File Size (mb)

	PDF 56 pages	Official version*	3.92 (approx.)
	Text	Text version**


Light-Weight Documents Lighter (less MB) documents which may or may not be the final, official version
File Type		Description	File Size (mb)

	PDF 56 pages	WPS1654	1.95

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** The text version is the OCR text of the final scanned version and is not an accurate representation of the final text.
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