‘Adding value’: Indonesia president vows to process more palm oil for domestic cosmetics growth

By Richard Whitehead

- Last updated on GMT

Indonesian President  wants to process more palm oil for cosmetics. ©GettyImages
Indonesian President wants to process more palm oil for cosmetics. ©GettyImages

Related tags Palm oil Indonesia

Indonesian President Joko Widodo wants to process more palm oil at home for goods including cosmetics and personal care items.

This would mean potentially fewer exports overseas, where it is eagerly purchased by India and China, and acquired more reticently by European countries.

"We want crude palm oil to become processed goods. Why not? Or jet fuel or cosmetics, soap​," Jokowi said in an interview earlier this month.

The direction we’re going is we want to build a semi-processed or processed goods industry or downstream industry. No longer raw materials, we want added values​.”

Doing so would help Indonesia get more value from the crop, its second biggest export, valued at US$18.2bn per year and accounting for almost 10% of its foreign trade.

Though Jokowi has not yet mentioned outlawing exports altogether, doing so is not without precedent.

The country already plans to halt shipments of nickel ore from January in a bid to increase end-product production of the metal on home soil. Indonesia is the world’s biggest producer of nickel ore by a long stretch, as it is with palm oil, though little processing of either commodity is done domestically.

Banning exports threatens to take thousands of tons of the metal from circulation, cutting global supplies and setting markets reeling.

However, ministers believe the ban could boost Indonesia’s earnings from nickel fivefold over the next five years through the growth of local industries such as stainless steel and battery materials.

Future with nickle

Authorities have expressed hopes that nickel-related industries will eventually grow to become one of the country’s main industry segments, and could potentially overshadow palm oil in 10 to 15 years.

The world’s biggest producer and exporter of palm oil controls more than half of the world’s supply, with about a third of the 34.7m tonnes Indonesia shipped last year was in crude format. It has facilities to refine far more than its entire production capacity, analysts believe.

By refining and processing it first, Indonesia would be able to put a premium on the commodity while encouraging domestic manufacturers to process more of it into cosmetics, food and fuel, among a raft of other uses for palm oil.

Fewer shipments from the world’s biggest producer would reduce global supply at a time when demand is expected to pick up and play havoc with international prices.

The president is known to be a fan of German industrial policy, and how the country has focused on developing its domestic economy over recent decades through a strong manufacturing sector. Indonesia’s own supercharged economy is projected to grow at its fastest pace in seven years next year.

We want to see how industrialisation is in Germany, so can use it as an example​,” he said.

We can also take a look at China. We want Indonesia to have a different type of industrialisation because Indonesia has different raw materials​.”

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