Indonesia plans to develop cocoa and coconut sectors using palm oil fund

JAKARTA: Indonesia plans to use money from a tax on palm oil exports to fund the development of the country’s cocoa and coconut sector, the country’s trade minister said on Wednesday.

The world’s largest palm oil exporter has been charging the levy since 2015 to fund mandatory use of palm oil biodiesel, a smallholder reforestation program and palm oil research.

“Initially, we planned separate agencies for cocoa and coconut, but we decided to merge them with BPDPKS,” Trade Minister Zulkifli Hasan told Reuters. BPDPKS refers to the country’s agency responsible for collecting palm oil export tax and disbursing the funds.

“It will be a cross-subsidy for the development of cocoa and coconut crops, nurseries and seedlings (from the crude palm oil fee),” he said.

Indonesia currently imposes an export tax of 0-15 percent on cocoa beans, which the government will transfer to BPDPKS to collect and administer, said Economic Coordinator Airlangga Hartarto.

Zulkifli said the plans would be implemented soon and the agency had enough money so there was no need to impose an additional tax on cocoa and coconut producers.

The industry ministry said in a statement that the plan was needed to guarantee security of supply, given that cocoa production is expected to decline by 8.3 percent annually between 2015 and 2023.

Indonesia was the world’s fourth-largest exporter of cocoa products last year, although it had to import 62 percent of the cocoa beans it needed, the ministry said.

Indonesian small-scale palm oil producer group APKASINDO has appealed to the government to reconsider the plan and said that not enough funds have yet been allocated to finance palm oil plantations.

Indonesia plans to double palm oil replanting subsidies to 60 million rupiah ($3,695.72) per hectare from May, but the agency still budgeted 30 million rupiah per hectare for the program during its recent 2025 budget meeting.

A replanting programme aimed at increasing oil palm yields has been hampered by administrative hurdles and farmers’ fears of losing income when the trees mature.

The Indonesian Association of Palm Oil Producers (GAPKI) said production had stagnated over the past five years and accelerating reforestation among smallholders was urgently needed, as they account for more than 40 percent of the country’s palm oil plantations.

“We need to speed up replanting, especially for smallholder farmers. If the fund is used for other commodities, will the BPDPKS funds be enough?” said GAPKI chairman Eddy Martono.

(1 dollar = 16,235.0000 rupees)