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NEWS UPDATES Asean Affairs   23 September 2013  

Govt considers reducing cacao import duty

Indonesia: The government is deliberating on reducing the import duty for cacao – of which Indonesia is the world’s biggest producer – to bring in more imports and meet rising demands for the emerging processing industry amid a stagnating harvest.

Deputy Trade Minister Bayu Krisnamurthi said earlier this week, the government was mulling bringing in more cacao to supply the country’s upstream cocoa industry, which has seen promising growth these last few years, after the government introduced a regulation to restrict the export of raw cacao to encourage exports of fermented cacao and investment in the processing industry.

Bayu said the government needed to evaluate the import policy, which imposed a 5 percent import duty on cacao to avoid raw material shortages, as with growing demands and stagnating production, the country was predicted to be a net cacao importer by 2015 — despite being the world’s top cacao supplier with a production of 800,000 tons
per annum.

Agriculture Minister Suswono said on Friday such a regulation was important to the country’s move to orient its cacao industry toward the upstream sector.

“The industry has its own installed capacity that needs to be met and domestic production has its maximum yield. As long as domestic supply is not adequate for supporting the processing industry and the policy doesn’t burden local farmers, it’s okay [to reduce import duty and bring in more cacao beans],” Suswono told reporters.

“Such a policy will only be in effect temporarily, until we can boost production to supply domestic industry. We’re optimistic we can increase production with our Gernas Kakao [National Cacao Movement] to avoid a shortage.”

The government launched the Gernas Kakao program in 2009, which was slated to end by 2012 before being extended to 2014, to rehabilitate and intensify 1.6 million hectares of cacao fields in the country and boost production. The government has targeted Indonesia to be the world’s top cacao producer by 2020, which could see it book 2 million tons of annual production.

In 2010, the government also introduced a regulation that imposed 15 percent export fees for raw cacao to increase supply for domestic industry and encourage imports of fermented cacao and the growth of the processing industry.

A number of foreign investors have expressed their interest in building facilities in Indonesia, including Switzerland-based Barry Callebaut and Malaysian-based JBCocoa, which will start operating this year.

The latest interested investor is Cargill, which is slated to open its facility (with the capacity to process 70,000 tons of cocoa beans) in mid-2014 in Gresik, East Java.

The growing investment, however, is not in line with the country’s production progress.

Indonesia produced 936,266 tons of cacao last year, a 31.46 percent increase compared to 2011, according to data from the Agriculture Ministry.

Production, however, slumped by 15 percent in 2011 from 837,918 tons in 2010.

In 2008-2010, production only saw around a 2 percent annual increase.

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It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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