The deal is expected to raise Indonesian palm oil exports market share in Pakistan and compete on the same level with rival Malaysia that has received lower duties since 2007. Currently, Pakistan applies 9,500 to 10,800 Pakistani rupees per tonne on Indonesian palm oil products.
“In 2010 Indonesia exported CPO to Pakistan worth $77 million,” Sanaullah, the Pakistani ambassador to Indonesia, told reporters.
“I am hopeful, with the PTA, it will rise to $300 million or even more than that this year.”
Pakistan imported 178,000 tonnes of Indonesian CPO last year, according to Indonesian industry estimates.
The two countries had been discussing the proposed PTA for several years, and it will now be ratified by both governments within a month, Sanaullah added.
In 2007-2008, Indonesia’s CPO exports to Pakistan were worth $500 million, but fell to under $100 million in the following years as Pakistan switched to Malaysian CPO.
The benchmark April palm oil futures on the Bursa Malaysia Derivatives Exchange was up 0.5 per cent to 3,071 ringgit per tonne.
Analysts say Malaysian crude palm oil prices could come under pressure if Pakistan shifts to Indonesia.
“They will surely come under pressure,” Pawan Kumar, a Singapore-based analyst at Rabobank, said on any impact on Malaysian benchmark prices after the Pakistan-Indonesia pact.
There are media reports that Malaysia will reform its CPO export duties and introduce a 1 billion ringgit fund to rescue refiners affected by Indonesia’s export tax structure.
Overall output in Indonesia, which overtook Malaysia as No 1 palm oil producer in 2007, is expected to be about 25 million to 26 million tonnes this year.
Sumatra, Kalimantan and Sulawesi are the main producing areas for palm oil which is used in products such as food, cosmetics, tyres and bio fuel.
Indonesia has a palm export tax system that aims to boost downstream industries, secure domestic supplies and reduce volatility in cooking oil prices.
Last year, Southeast Asia’s biggest economy changed the structure of its palm export taxes, raising the structure for crude palm oil shipments and cutting refined product (olein) taxes in an attempt to boost its downstream industries.
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