China Opens Door to More Indonesian Palm Oil as EU Seeks Import Ban
China will consider raising this year’s import quota for Indonesian palm oil by at least 500,000 tons
By Anita Rachman
BOGOR, Indonesia—Chinese Premier Li Keqiang signaled Monday that Beijing will increase imports of Indonesian palm oil, expanding a key market for Jakarta as environmental concerns fuel opposition to the product in other parts of the world.
After meeting with Indonesian President Joko Widodo during a two-day visit to the country, Mr. Li said China would consider raising this year’s import quota for Indonesian palm oil by at least 500,000 tons, in what would be the second consecutive annual increase. China, the largest buyer of Indonesian palm oil behind India and the European Union, imported 3.7 million tons of the product last year.
Indonesia is the world’s largest producer of palm oil, exporting a record of around 30 million tons of crude palm oil and its derivatives in 2017. Production of palm oil, the world’s most widely used vegetable oil, and derivatives that go into making detergents, cosmetics and biofuel, is one of Indonesia’s most important industries, employing millions and bringing in billions of dollars in foreign currency through exports.
Indonesian Foreign Minister Retno Marsudi said China needed more palm oil partly because it is developing a biofuel blend of 5% palm oil and diesel.
Indonesia and neighboring Malaysia are currently in a trade spat with the European Union, which is seeking to ban the import of palm oil used for biofuel by 2021, largely due to concerns that the development of plantations is contributing to global deforestation.
Indonesia and Malaysia account for more than 85% of global palm-oil supply and both have criticized the EU ban as protectionist and designed to safeguard markets for European farmers.
The new quota from China will help reduce Indonesia’s dependency on European markets, said Danang Girindrawardana, executive director of the Indonesian Palm Oil Association.
Beijing and Jakarta have been expanding ties under Mr. Widodo, with Chinese tourists becoming the top visitors to the Southeast Asian nation and foreign investment rising to record levels. China was Indonesia’s third-largest foreign investor in 2017, with much of the investment going into smelters to refine minerals for export.
China is also seeking to build Southeast Asia’s first high-speed railway on Indonesia’s main island of Java, a multibillion-dollar project that so far has been hung up by land-acquisition problems and other issues.
Indonesia is seeking to improve its trade balance. Officials said Monday that the economy, the largest in Southeast Asia, expanded 5.06% in the first quarter of 2018, below economists’ expectations, in part because import growth continued to outpace exports.