Impact on export tax on the palm oil industry in Indonesia and Malaysia

Analysis of the government policies affecting the palm oil industry revealed that the export duty for crude palm oil (CPO) and palm kernel oil (PKO) was the first implemented in 1995 in Indonesia and 1989 in Malaysia. The three main institutions involved in the implementation of palm oil development program in Malaysia were: the palm oil and Licensing Authority, the Palm Oil Research Institute of Malaysia, and the Malaysian Palm Oil Promotion Council. Export credit, palm oil credit, and payment arrangement scheme were the other government policies designed to enhance the development of the palm oil industry. The average area productivity, average plant productivity (except for crude palm oil), per capita consumption of CPO and PKO significantly increased after the imposition of export tax. In Indonesia, average yearly export volume of palm oil products, except palm kernel, and in Malaysia, average yearly export volume of palm oil products, except for CPO, increased after imposition of export tax. In Indonesia, average yearly net trade value of palm oil products, except for palm kernel, significantly increased. In Malaysia, average yearly net trade values of palm oil products except for CPO, significantly increased. In Indonesia, CM [Competitive of Index] palm oil products, except for CPO and palm kernel, positively increased. In Malaysia, CM of processed palm oil, and palm kernel, positively increased. The average RCA for palm oil products, except for palm kernel cake, in Indonesia and Malaysia significantly increased after imposition of export tax. Results of regression analysis show that domestic production, domestic consumption, export price, and CM significantly affected the export volume of CPO in Indonesia. For PKO, foreign exchange rate and CM had positive and significant effect on the export volume. In Malaysia, domestic consumption, producers price, export price, and CM significantly influenced the export volume of CPO. In case of PKO, the export volume was significantly affected by foreign exchange rate, domestic production, domestic consumption, and CM. The partial equilibrium analysis showed that importation of export tax on CPO and PKO in Indonesia reduced domestic production and increased the domestic consumption of such products. The welfare loss to producers, welfare gain to consumers, government revenues, net economic loss in production and consumption, and net effect of export tax increased as export tax rates on CPO and PKO were increased. In Malaysia, the analysis showed that the imposition of export tax on CPO and PKO reduced the domestic production while increased the domestic consumption. Likewise, the welfare loss to producer, welfare gain to consumers, government revenues, net economic loss in production and consumption, and net effect of export tax increased as export tax rates on CPO and PKO were increased