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Indonesian trade official, palm oil execs charged in cooking oil crisis

Oil palm kernels

Oil palm kernels: evidence suggests the promised benefits of monoculture plantations are a mirage for most of the people affected by their development. Photo: Carsten Ten Brink/Flickr (CC-ND 2.0)

  • A trade ministry official and three palm oil executives have been charged by prosecutors in Indonesia in connection with a cooking oil shortage that has rocked the world’s biggest vegetable oil-producing country.
  • The suspects are alleged to have conspired to secure export permits to sell crude palm oil at record-high prices internationally instead of complying with a domestic market obligation.
  • The cooking oil shortage has prompted widespread outrage in a country that produces more than half of the world’s palm oil, driving up prices and forcing the government to step in with subsidies.
  • The companies named in the conspiracy are the Permata Hijau Group, Wilmar Nabati Indonesia, Multimas Nabati Asahan, and Musim Mas.

JAKARTA — Indonesian prosecutors have charged a top trade ministry official and three palm oil executives in connection with a scarcity of cooking oil that has driven up protest and caused public unrest.

The Attorney General’s Office announced on April 19 that it had charged Indrasari Wisnu Wardhana, the director-general of foreign trade at the Ministry of Trade, for issuing permits to export crude palm oil (CPO) to four companies: the Permata Hijau Group, Wilmar Nabati Indonesia, Multimas Nabati Asahan, and Musim Mas.

All four companies are major players in the industry. Indonesia’s Permata Hijau Group is one of the top 10 palm oil processors and traders in the country. Wilmar Nabati Indonesia and Multimas Nabati Asahan are arms of Wilmar International, the world’s largest palm oil trader. Singapore-based Musim Mas owns one of the largest palm oil refinery networks in the world.

The investigation was triggered by acute shortages of cooking oil in Indonesia, the world’s biggest producer of palm oil. Cooking oil prices have remained persistently high since the end of 2021, according to Attorney General Sanitiar Burhanuddin.

The scarcity has prompted widespread complaints from the public and from politicians, with parliament launching hearings into why Indonesia, which produces more than half of the world’s crude palm oil, by far the dominant source of edible vegetable oil, is running out of domestic supplies.

“This scarcity is very ironic because Indonesia is the world’s largest producer of CPO,” Burhanuddin said during an online press conference.

In response to the scarcity, the government imposed a domestic market obligation policy, or DMO, in February. The policy mandated companies to allocate 20% of their CPO for domestic use. The government also imposed a domestic price obligation, or DPO, which capped the selling price of CPO.

Before that, the government capped the price of palm cooking oil at retail outlets at 14,000 rupiah (about $1) per liter, after seeing prices of skyrocket amid the shortage.

“But in practice, exporting companies didn’t meet the DPO requirement,” Burhanuddin said.

Indonesian Attorney General Sanitiar Burhanuddin announced four suspects in a graft case related to the issuance of export permits to four major palm oil companies in Indonesia. Image courtesy of the Attorney’s General Office.

The companies that failed to meet the DPO requirement are the ones that managed to secure export permits from Indrasari, prosecutors allege. This allowed them to continue to export their CPO and take advantage of the current record-high price of the commodity on the international market, now at about $1,600 per metric ton.

At the same time, the companies sold CPO to the domestic market at prices higher than those set by the government.

As a result, executives from these companies and Indrasari are suspected of conspiring together, Burhanuddin said.

Read more: Indonesians, too reliant on palm oil, should go back to their roots (commentary)

Prosecutors have not named the executives charged, identifying them only by their initials and position: S.M.A., the senior manager of corporate affairs at Permata Hijau; M.P.T., a board member at Wilmar Nabati Indonesia; and P.T., the general manager of general affairs at Musim Mas. No one from Multimas Nabati Asahan had been charged yet.

“The three suspects have been intensely communicating with suspect IWW [Indrasari] so that Permata Hijau Group, Wilmar Nabati Indonesia, PT Multimas Nabati Asahan and PT Musim Mas [could] receive approvals for export, even though those companies weren’t qualified to receive the approvals,” Burhanuddin said.

The alleged conspiracy caused massive losses to the state, as the government has had to hand out direct financial aid to the public to subsidize their cooking oil purchase, Buhanuddin added. The suspects’ actions have also “rendered people’s life difficult,” he said.

Responding to the charge against one of his top officials, Trade Minister Muhammad Lutfi said his ministry is cooperating fully with the investigation.

“The Trade Ministry is also always ready to give information needed in the process of law enforcement,” he said.

 

Banner image: Oil palm kernels. Image courtesy of Carsten Ten Brink/Flickr (CC-ND 2.0)

 

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