‘New GFC’: Indonesia’s palm oil export ban amplifies food crisis

As he celebrates the Islamic festival of Eid al-Fitr on Monday, Eman Sulaiman’s family home in Bogor, West Java, will be crammed with relatives from morning until night.

Shortages of edible oil and already skyrocketing prices exacerbated by Russia’s invasion of Ukraine have put the squeeze on households and markets in South-East Asia’s largest economy as global food inflation goes through the roof.“At least five of the snacks I sold were fried ones such as croquette, fried stuffed tofu and spring rolls.

With the war in Ukraine affecting the supply of alternative vegetable oils – Ukraine and Russia are the world’s top producers of sunflower oil – and with drought in South America hitting soybean oil production, there are fears Indonesia’s shock move will lead global prices of food and other consumer products to soar further.

The decision has rocked Indonesia’s palm oil industry and economists there believe the cost to state revenue will be as much as $US1.4 billion if exports are blocked for a month. “Two months ago the government imposed a price cap that predictably enough caused massive shortages and spectacular queues by desperate customers. Now the president abruptly announces an export ban, then the government announces four days later that the ban is watered down, then reverses course 24 hours later by imposing a total ban,” said Lembong, who served in Indonesian President Joko Widodo’s ministry during the president’s first term.

“The policy is quite risky. It looks like the government was panicking,” says Ahmad Heri Firdaus, an economic analyst and researcher at the Institute for Development of Economics and Finance in Jakarta.

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