Indonesia, the world’s largest palm oil exporter, plans to use funds from its palm oil export levy to finance the development of the country’s cocoa and coconut sectors, according to the country’s trade minister.
Since 2015, Indonesia has collected a levy on palm oil exports to fund its palm oil biodiesel mandate, smallholder replanting program, and palm oil research. Now, the government has decided to merge the agencies responsible for cocoa and coconut development with the agency that manages the palm oil levy, known as BPDPKS.
“It will be a cross subsidy, for cocoa and coconut development, nursery and seedlings from (the crude palm oil levy),” Trade Minister Zulkifli Hasan told Reuters.
The move is aimed at ensuring the security of supply for these other important agricultural commodities. Indonesia currently imposes a 0-15% export tax on cocoa beans, which will now be assigned to BPDPKS to collect and manage.
The industry ministry stated that the plan is necessary as cocoa output in Indonesia has been shrinking by 8.3% annually between 2015 and 2023. Indonesia was the world’s fourth-biggest exporter of cocoa products last year, but had to import 62% of the cocoa beans needed.
However, the plan has faced some pushback from the Indonesian smallholder palm oil group APKASINDO, which urged the government to reconsider and ensure there is enough funding for palm oil farmers. The palm oil association GAPKI also expressed concerns that diverting funds could hamper efforts to accelerate replanting of palm oil, especially among smallholders who account for over 40% of the country’s plantations.
The government has said that BPDPKS has sufficient funds and there is no need to impose additional levies on cocoa and coconut producers. But the industry remains cautious about the potential impact on the palm oil sector’s own development and sustainability efforts.