Indonesian Palm Oil Association (IPOA) reported crude palm oil (CPO) price dropped from the average US$722 a metric ton (MT) of CPO in February to $636 MT of CPO in March - Photo: Special

JAKARTA (TheInsiderStories) – Sumatra Island is expected to be able to transform into a downstream industrial center for palm oil derivative products, rather than just exporting crude palm oil (CPO) or semi-finished products, said senior official government today (11/23).

This method is believed to be able to make provinces in Sumatra more resilient to the dynamics of the world economy, including prices of commodities such as palm oil and rubber, which are now in sluggish territory.

National Development Planning minister and Head of Bappenas Bambang Brodjonegoro rated, that excessive dependence on superior commodities makes a region not have good economic stability. This has been experienced by West Sumatra, which is too dependent on CPO and rubber as the main export commodity. As a result, the province’s economic growth has slowed.

“We have to diversify with the processing industry. The oil palm oil industry, the palm oil derivative or chemical industry,” he explained at the West Sumatra Governor’s Office on Friday (11/23).

Referring to the abundant Natural Resources on the island of Sumatra, especially CPO, rubber and petroleum, the minister encouraged policy makers at the regional level to be able to focus on diversifying these commodities. The intended diversification includes making a large downstream industry to accommodate raw products.

In his views, the opening of the downstream space makes Sumatra more resistant to the ups and downs of commodity prices. For example CPO, finished products that can be processed such as soap, cooking oil, or oleochemical products. These products can be exported at a higher price than raw products.

“And when the price of raw products goes up and down, the finished product is actually stable,” Bambang said.

In addition, the downstream of palm products is at the same time a move for the Indonesian government to fight against European Union palm resolution.

The European market is known for a long time feeling hot with the flood of CPO products as the basic ingredient of the world’s big industries. Environmental issues were also played to suppress the growth of the national palm oil industry.

“This oil palm is under extraordinary attack from Europe. The main cause of trade war. Because this palm oil is very practical and is favored as vegetable oil. So this threatens vegetable oil which is commonly produced by farmers in Europe,” Brodjonegoro said.

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