Indonesia trade minister sacked after palm oil export flip-flops

Indonesian President Joko Widodo has sacked the trade minister following controversy over a series of policy reversals on palm oil exports, as he reshuffled his cabinet on Wednesday.

Zulkifli Hasan, chairman of the National Mandate Party (PAN) and a former forestry minister, was sworn in as the country’s new trade minister.

His predecessor Muhammad Lutfi oversaw a flip-flop on policies to contain a surge in domestic cooking oil prices, which included a ban on palm oil shipments from the world’s biggest exporter.

The three-week export ban sent shockwaves through global markets and led to a series of arrests for alleged corruption before it was lifted on May 23.

The domestic price of palm fruits had also tumbled by about 70 percent since the ban, Gulat Manurung, chairman of the Indonesian smallholders’ group APKASINDO, said in a statement last month.

Rapidly resolve issues

The president, popularly known as Jokowi, said Zulkifli’s “long track record” and “field experience” gave him confidence he would resolve the issues.

The new minister pledged after his appointment to “rapidly resolve issues on the availability and affordability of cooking oil in particular”.

However, his appointment drew mixed reactions from analysts.

Bhima Yudhistira, director of the Center of Economic and Law Studies (CELIOS), said he was disappointed that the president was accommodating the needs of his coalition rather than improving the performance of his government.

“If Jokowi wants to leave his legacy, the most important thing is to appoint a minister of trade with a professional background, and there are a lot of options. Why choose a chairman of a political party?”

The Traditional Market Traders Association (IKAPPI) congratulated the new minister, saying there were complicated issues he needed to address.

“We want to say welcome to the jungle. This wilderness needs to be tidied up and we hope that [the minister] will side with traditional market traders, support SMEs and strengthen domestic trade,” the group said in a statement.

Jokowi also announced changes to the agrarian and spatial planning ministry, appointing former armed forces chief, Hadi Tjahjanto, who he said will be tasked with resolving land disputes, particularly in relation to the proposed new capital of Nusantara in East Kalimantan.

The president also inaugurated three deputy ministers to the ministries of manpower, spatial planning and home affairs.

Palm oil supplier

At the time of the ban, India raised concerns about “trade barriers” caused in part by the palm oil ban at the World Trade Organisation (WTO), according to local media.

In late April, it was reported that almost 300,000 tonnes of edible palm oil destined for India has been trapped in Indonesia as a result of the ban.

Indonesia is the second largest supplier of palm oil to India after neighbouring Malaysia, exporting more than 3 million tonnes of the product to the South Asian country in 2021.

In Pakistan, there were fears that stocks of palm oil could run out in May, prompting the Pakistan Vanaspati Manufacturers Association (PVMA) to call on the Ministry of Industries and Production to “take up the issue with Indonesia”.

Pakistan imports 80 percent of its palm oil from Indonesia and 20 percent from Malaysia.

Indonesia exported 34 million tonnes of palm oil products in 2020, generating more than $15bn in revenue, according to the Indonesian Palm Oil Association (IPOA/GAPKI).