June 11, 2008

Indonesia to scrap soy subsidies next year

Indonesia may scrap subsidies on soy and palm-based cooking oil in 2009 as global prices are expected to ease, the trade minister Mari Elka Pangestu said Tuesday (June 10, 2008).

Pangestu added that the subsidies were originally intended for a short-term period.

The subsidies have been implemented after a rally in commodity prices pushed up soy, wheat and palm oil prices.

Currently Indonesia subsidises local soy prices by IDR1,000 per kilogramme for the food industry and cooking oil prices by IDR2,500 per litre for poor families.

Local cooking oil prices have surged last year on strong demand from both the biofuel and food sectors, pushing global palm oil prices to record highs.

Malaysian palm oil futures have gained about 17 percent so far this year lifted by rallying crude but nearly 20 percent below historic high of MYR4,486 in March.

Meanwhile, Bayu Krisnamurthi, deputy to the chief economics minister, said the Indonesian government was formulating a policy to attract investors to develop food crop estates in a bid to boost food production.