Indonesia May Get Loans from China for CPO replanting

Coordinating Minister for Maritime Affairs (Image credit: Coordinating Minister for Maritime Affairs)

JAKARTA (TheInsiderStories)— The Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan on Friday (25/04) said China Development Bank has offered loans to finance palm oil replanting program for smallholders.

The low-interest rate loan was offered by the Chinese Prime Minister Li Keqiang when visited Indonesia in early May. In the same meeting, China has agreed to increase import of crude palm oil (CPO) from Indonesia by at least 500,000 tons.

Panjaitan said the loan amount can reach up to US$15 billion. He encouraged the Indonesian Palm Oil Farmers Association to take up the offer as it offers lower interest rate compared to the domestic micro-financing. He will negotiate the CDB to get the low-interest rate.

Panjaitan had a meeting with the Indonesian Palm Oil Farmers Association and they requested a replanting credit program of 2.5 million hectares that will be distributed through two cooperatives.

CDB hands over all financing distribution schemes to Indonesia. However, CDB did not want the government’s intervention in this program.

Meanwhile, the Chairman of Indonesian Palm Oil Farmers Association Riau Branch Gulat Manurung on Friday (25/05) said the CDB offered an interest rate of 4 per cent to 5 per cent with a grace period of five years for the replanting program. This program will benefit 1.5 million members of Indonesian Palm Oil Farmers Association with a total land of 4.7 million hectares in 21 provinces.

According to the Ministry of Agriculture data, currently, there are 2.4 million hectares owned by smallholders that need replanting. It consists of 1.5 million hectares of self-employed land and 0.9 million hectares of plasma farmers’ land.

Indonesian government targets oil palm tree replanting of 185,000 hectares this year, significantly increased from last year’s oil palm tree replanting realization of 3,000 hectares out of 20,870 hectares’ target.

The government prepared a budget of Rp4.6 trillion through the Indonesian Oil Palm Estate Fund, of which every farmer will get Rp25 million per hectare for replanting.

The replanting program will increase the oil palm tree productivity to 25 tons per year from 10-20 ton per year. Replanting program is one solution to anticipate the output-stagnation due to a moratorium oil palm plantation.

Indonesia is the largest producer of palm oil with last year total exports of 28 million tonnes of crude palm oil, valued at US$23 billion. Crude palm oil contributed to 12 per cent of Indonesia’s export. However, Indonesian palm oil exports dropped to 7.84 million tones in the first quarter of 2018 from 8.02 million tones in the first quarter last year.