On 3 April 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as Indonesia´s 11th economic policy package, the latest inflation and manufacturing figures, an update on palm oil export, tenders for geothermal power development, fruit export, the fuel price policy, and much more.

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Global ratings agency Fitch Ratings cut its outlook on three Indonesian palm oil companies - Sinar Mas Agro Resources and Technology (SMART), Ivo Mas Tungkal, and Sawit Mas Sejahtera - from stable to negative. The rating of the three companies was cut to AA (idn) by Fitch Ratings Indonesia. However, an AA (idn) rating still denotes a low probability of default for the company and its bonds. The rating of bonds of SMAR, due in 2017 and 2019, were also cut to AA (idn). The three palm oil companies are owned by Golden Agri Resources, part of the Sinar Mas Group that is controlled by Eka Tjipta Widjaja, one of the richest Indonesians.

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The National Assembly of France agreed to impose an additional tax on imports of crude palm oil (CPO) and its derivatives used for the production of food products. An additional tax of 90 euro per ton (on top of the existing 104 euro per ton import tariff) is expected to be implemented in 2017. This tax increase is part of France's wider biodiversity bill that aims to reduce deforestation and protects French citizens from the negative health effects from consuming palm oil. Indonesia and Malaysia, the world's largest CPO producers have objected strongly to this higher tax.

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Efforts made by the Indonesian government to convince France not to impose a progressive tax on imports of crude palm oil (CPO) and its derivatives have had some success. According to the latest stories, French authorities agree to cut the proposed additional import tax from 300 euro to 90 euro per ton. Earlier, on 21 January 2016, France approved a bill that gives birth to a progressive import tax on CPO and derivatives starting at an additional 300 euro per ton in 2017 and then increasing to 700 euro per ton in 2019, and to 900 euro per ton in 2020. Currently, France's import tax on CPO is just above 100 euro per ton.

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On 13 March 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as the performance of Indonesian blue chip stocks, the impact of negative interest rates in the Eurozone, logistics costs, coal mining, crude palm oil, Japanese investment, and more.

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Fadhil Hasan, Executive Director of the Indonesian Palm Oil Association (Gapki), expects Indonesia's crude palm oil (CPO) production to decline to around 32.1 million tons in 2016 from 32.5 million tons in the preceding year. This decline, which would be the first (full calendar year) drop in Indonesia's palm oil output since 1998, is caused by the El Nino weather phenomenon. El Nino causes dry weather in Southeast Asia hence curtailing palm oil fruit yields. CPO production in Malaysia, the world's second-largest CPO producer and exporter (after Indonesia), has also been affected.

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The crude palm oil (CPO) price continues to rise supported by the impact of the El Nino weather phenomenon. El Nino causes a dry spell in Southeast Asia, home to the world's largest palm oil plantations. As a result, CPO inventories in Malaysia may have declined to 2.11 million tons, an 11-month low in February 2016. Meanwhile, Singapore-based agribusiness trader Olam International Ltd said CPO stocks will decline to the range of 1.5 - 2.0 million tons in the second quarter of 2016. Obstacles to higher CPO prices are Malaysia's strengthening ringgit (which curtails demand for Malaysian palm oil) and attractive prices of soybean oil.

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Again, crude palm oil (CPO) shipments from Indonesia - the world's largest CPO producer and exporter - declined. Based on the latest data from the Indonesian Palm Oil Producers Association (Gapki), palm oil exports from Indonesia fell 16 percent on a month-on-month (m/m) basis to 2.1 million tons in January 2016. This decline was mainly caused by falling palm oil demand from the key export countries China and India.

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On 24 January 2016, Indonesia Investments released the latest edition of its newsletter. This free newsletter, which is sent to our subscribers once per week, contains the most important news stories from Indonesia that have been reported on our website over the last seven days. Most of the topics involve economic matters such as foreign direct investment as well as updates on various industries such as coal mining, palm oil, geothermal power, oil & gas, cement, ceramics, 4G technology, and more.

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Indonesia turned into a net oil importer in 2004 as domestic oil output declined sharply while domestic fuel consumption surged amid the growing economy (hence becoming more and more dependent on oil imports). Prior to 2016, the Indonesian government provided generous energy subsidies (for fuel and electricity), resulting in a deteriorating budget deficit, trade deficit, current account deficit, and pressure on the rupiah. Moreover, government spending on energy consumption limited room for government spending on productive sectors such as infrastructure and social development.

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Crude palm oil (CPO) production in Indonesia and Malaysia is expected to decline due to the impact of the El Nino weather phenomenon (that brought a prolonged dry season to Southeast Asia). CPO production in Malaysia could fall between 1.5 and 2 million tons this year according to Dorab Mistry, Director at Godrej International. Declining output in the world's two leading palm oil producers and exporters implies that palm oil prices should be able to rise further. At the start of this week palm oil futures traded in Kuala Lumpur (June delivery) rose to 2,779 ringgit (approx. USD $695) per ton, the highest level since March 2014.

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Although the palm oil industry of Indonesia is resented by many for the negative impact it has on mother nature (for example the seasonal forest fires that occur on parts of Sumatra and Kalimantan), it also constitutes a vital industry: across the globe crude palm oil (CPO) is used for the production of a wide variety of products from food, cooking oil to cosmetics or biodiesel. Indonesia is the world's largest producer and exporter of CPO. This column is the first installment in a series, written by Senior Consultant William Yang, that discusses Indonesia's palm oil industry, particularly the different business models, the risks, and how to invest safely in this industry.

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The crude palm oil business received a blow when France announced it plans to impose progressive tax on imports of crude palm oil and its derivatives. French authorities approved a bill on 21 January 2016 that will raise the import tax on palm oil from around 100 euro per ton currently to 300 euro per ton in 2017. This tariff will then be raised to 700 euro per ton in 2019, and to 900 euro per ton in 2020. Through this tax hike France aims to discourage the palm oil industry, hence curtailing global deforestation as well as to protect its citizens from the negative health effects caused by the consumption of palm oil.

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Agribusiness company Astra Agro Lestari, one of Indonesia's leading crude palm oil (CPO) producers, is expected to show a better performance in 2016 on an expected rise in palm oil prices. Although palm oil futures currently feel the negative effects of tumbling global crude oil prices, these futures are estimated to have risen to about 2,700 ringgit per ton by May 2016 from around 2,385 (approx. USD $540)  per ton currently.

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The world's two largest crude palm oil (CPO) producers and exporters - Indonesia and Malaysia - signed an agreement on Saturday (21/11) for the establishment of an intergovernmental palm oil council, called the Council of Palm Oil Producer Countries (CPOPC), that aims to control the global CPO supply, stabilize prices, promote sustainable practices in the palm oil industry, and enhance the welfare of oil palm smallholders. Both countries will invest USD $5 million each for the set up of this new council. Its headquarters will be located in Jakarta.

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With the forest fires still raging on parts of the Indonesian islands of Sumatra and Kalimantan, damaging the tropical environment, while the toxic haze still spreads to other parts of Southeast Asia, having caused an estimated 500,000 cases of respiratory tract infection as well as 19 casualties, the ongoing disaster has been labelled a crime against humanity. A new and interesting research report, released by Dr. Herry Purnomo (scientist at the Bogor-based Center for International Forestry Research), points to a link between local elections and spikes in Indonesian forest fires.

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Indonesia and Malaysia, the world's leading crude palm oil (CPO) producers and exporters, will cooperate for the development of a special economic zone on Indonesian territory to boost the palm oil industry's downstream industry. Private companies will be given incentives to invest in this zone and develop industries to process CPO into olein, a key ingredient for the production of cosmetics and margarine. Furthermore, both countries plan to establish the Council of Palm Oil Producer Countries.

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Crude palm oil (CPO) output in Indonesia, the world’s largest CPO producer and exporter, may decline by 20 percent to 27.5 million tons in 2016 due to the negative impact of the El Nino weather phenomenon. On a positive note, declining CPO output in Indonesia could provide some support for benchmark Malaysian palm prices that fell to a 6.5-year low of 1,836 ringgit last week.

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The declining crude palm oil (CPO) price in the world market and the imposition of the USD $50 per ton export levy on CPO by the Indonesian government, effective from 16 July 2015, has severely affected Indonesian oil palm planters with the worst affected being the small holders and plasma farmers as they carry the highest production cost.

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Indonesian President Joko Widodo (often called Jokowi) emphasized that the government of Indonesia needs to boost development of renewable energy. Although Indonesia contains huge potential for renewable energy (particularly geothermal energy), the share of renewable energy in Indonesia’s total energy use currently stands at around 5 percent only, the remainder being fossil energy. By providing incentives, attractive tariffs and an easier licensing and registration process, the government can generate more investment in this sector.

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