CIPS Expects Cooking Oil Export Growth After Relaxed DMO

TEMPO.CO, Jakarta - A researcher from the Center for Indonesian Policy Studies (CIPS) Krisna Gupta, said that the reduced cooking oil domestic market obligation quota can open the door to growing the number of exports. 

“The relaxed DMO introduced by the Trade Ministry needs to be welcomed on a positive note as this shows the government has adapted to the current condition,” said Krisna in a written statement on Monday, May 1, 2023, state news agency Antara reported. 

Theoretically, Krisna said, the DMO can maintain domestic supply to ensure that Indonesia will not experiencing a shortage of cooking oil. However, he elaborated that the upper-ceiling retail price (HET) is proven to be ineffective because it negates incentives provided for businesses in the cooking oil trade and makes it hard for prices to return to normal.

"International prices have long stabilized at a familiar level, even in the past two weeks it has started to weaken,”  Krisna said. ”Domestic obligations have been fulfilled due to high demand during Ramadan and Eid al-Fitr."

The DMO policy has an impact on other palm oil derivatives, which are not related to cooking oil as not all palm oil variants can be used for cooking oil.

Furthermore, the DMO policy makes it difficult for exporters because not all of them have the specialization to supply the domestic market, nor do they necessarily understand the domestic distribution chain.

According to Krisna, CPO production in Indonesia has been declining since 2019. In 2021, CPO production declined by 0.9 percent from the previous year to 46.89 million tons, based on GAPKI data.

ANTARA

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