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Indonesia urged to retaliate ‘deadly’ EU biodiesel tariffs

Made Anthony Iswara The Jakarta Post   Thu, December 12, 2019

Buoyed by the success of the B20 program, the government decided to increase CPO content in biodiesel to 30 percent. Called B30, this biofuel will be introduced in early 2020. (JP/Budi Sutrisno)

BALI – Indonesian biodiesel and palm oil producers are pressuring the government to be up in arms following the European Union’s five-year biodiesel tariffs, which took effect on Monday.

Indonesian Biofuel Producers (Aprobi) chairman Master Parulian Tumanggor said the industry group would push the government to file an objection against the duties with the World Trade Organization (WTO).

The industry group is “extremely disappointed” with the new tariffs, calling the EU’s accusations of Indonesian government biodiesel subsidies “completely false”, said Master.

“We will fight for it, whether it is through the EU court or the WTO,” APROBI co-chairman Paulus Tjakrawan told The Jakarta Post.

The EU duties, which will remain in place for five years, range from 8 to 18 percent for Indonesian exporters of biofuel made from vegetable oils and animal fats, the European Commission said.

The new measure follows the European Commission’s findings that Indonesian producers sold biodiesel at unfairly low prices due to government grants, tax exemptions and access to raw materials below market prices.

Trade Ministry director for trade security Pradnyawati said the ministry would scrutinize the EU’s biodiesel tariffs and coordinate with affected industries to decide its next step.

“The possible steps vary from appealing the decision at the EU’s local courts […] to challenging the EU at the WTO-DSB,” Pradnyawati said, referring to the WTO dispute settlement body.

The European Commission’s findings specificially point to trade-distorting government aid to Ciliandra Perkasa, Wilmar Group, Musim Mas Group and Permata Group, through the Indonesian Oil Palm Estate Fund (BPDP-KS) and export financing from Indonesia Eximbank.

Musim Mas senior manager Togar Sitanggang declined to comment on the issue when contacted by the Post.

Aprobi’s Master, who is also a commissioner at Wilmar Group, said “not a single rupiah” had been disbursed from the state budget to subsidize the industry.

“The EU has investigated Indonesia but it remains adamant that funds from the BPDP-KS are categorized as government subsidy,” said Master.

The BPDP-KS, he explained, pooled funds from CPO exporters’ export levies to cover price differences between biodiesels that were sold to state-owned oil and gas company Pertamina and international prices.

Master said the fund aimed to stabilize supply and demand as the government implemented 20 percent blended biodiesel (B20) throughout 2019 and B30 starting from January next year.

“[…] so that there’s balance in supply and demand to avoid [drastic] drops in palm oil prices that would jeopardize farmers’ income”, he added.

Imports from Indonesia account for 400 million euro of the EU’s overall 9 billion euro biodiesel market, according to the European Commission, which coordinates trade policy for the European bloc.

The European Biodiesel Board, which represents 32 percent of total EU biodiesel production, lodged the initial complaint in October 2018 as Indonesian biodiesel is considered to be driving EU producers into losses.

Indonesian exporters’ combined share of the EU biodiesel market leaped to 3.3 percent, or 516,088 metric tons, in the 12 months through September 2018 compared to 0.2 percent in 2017 and 0.3 percent in 2016, according to the commission.

Indonesian Palm Oil Producers Association (Gapki) secretary-general Kanya Lakshmi Sidarta said the EU’s high tarrifs could be “deadly” for the country’s palm oil sector.

The EU was the second-largest palm oil export destination for Indonesia in 2018, with demand reaching 4.78 million tons, according to Gapki data. India is the largest export destination for Indonesian palm oil at 6.7 million tons and China is the third-largest at 4.4 million tons.

“So [the EU] deems the subsidy […] unfair. But that’s only what they say,” Kanya said, critizing the bloc for failing to consider international mechanisms before imposing the tariffs. “Can every country just do things arbitrarily?”

Palm oil, a top plantation contributor for tropical Indonesia, is a significant foreign exchange revenue generator for the country and has contributed 1.5 to 2.5 percent to gross domestic product. Smallholder oil palm farmers account for more than 3 million hectares of land in the country.

While the bloc had only aimed at biodiesel in its latest policy, the decision could also further tarnish the image of palm oil companies and their subsidiaries among the general public, Kanya said, decreasing exports to the EU in the long run.

But filing a dispute with the WTO would also be problematic, Kanya of GAPKI said. She said WTO disputes could take years, while in the meantime, palm oil businesses would continue to struggle. The EU could also impose a new policy if Indonesia won the case, nullifying all legal efforts.

“We are hoping for bigger support from the government to respond […] there need to be more strategic moves for non-technical matters that could only be done by authorities,” said Kanya, urging the government to provide a thorough study before presenting the case at the WTO.

The trade spat further flares the prolonged feud between the two trading partners over the commodity. Last year, the EU planned to phase out the use of palm oil by 2030 as it considers the commodity to be a high-risk vegetable oil that has caused deforestation.

Indonesia and the EU were also embroiled in a new quarrel last month following the bloc’s complaint to the World Trade Organization (WTO) over Indonesia’s nickel export ban and alleged illegal subsidies.

https://www.thejakartapost.com/news/2019/12/12/indonesia-urged-to-retaliate-deadly-eu-biodiesel-tariffs-.html

 

From: THE JAKARTA POST (INDONESIA) Thu, December 12, 2019

 

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