Indonesia and Malaysia are known as the largest palm oil producers in the world. In the context of the world market of palm oil, the palm oil trade policy between the two countries are significantly determine the competitiveness of palm oil on the world market.
The difference policy of the two countries is the existence of export levies in Indonesia while Malaysia does not implement the policy. The competitiveness of Indonesian palm oil is experiencing a decline of 24.19 percent in China, 13.03 percent in Europe, and a significant decline occurred in the Indian market by 64.29 percent due to the increase in import taxes imposed by India. Malaysia also experienced a decline in competitiveness of 20.76 percent in China, 60.78 percent in India, and 10.36 percent in the European Union.
This condition indicates that policy Indonesia’s international trade is unable to maintain or even increase the competitiveness of Indonesian palm oil. The existence of an export levy policy is a disincentive for palm oil exports. Export tax policy and Indonesian palm oil export levies should consider the condition of the exchange rate of the Rupiah against the currency destination countries and the palm oil import tariff policy imposed by the destination country Indonesian exports.
Besides that, the paradigm of international palm oil trade policy should be changed from the old paradigm that made export tax an instrument increasing government revenues, to the new paradigm that makes export taxes as an instrument to maintain export competitiveness.