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IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
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Inception date: 01 Sep 2018 | Removal date: open ended

Local sourcing

The presidential regulation 66/2018 introduces a requirement for locally-sold diesel to contain a minimum bio-component of 20% (so-called "B20 biodiesel mix"). As stated in the preamble of the regulation, it is meant to foster the growth of the local palm oil industry.

In a press release from 13 September 2018, the Indonesian Coordinating Ministry for Economic Affairs stated that "the B20 mandatory expansion is designed to be able to reduce oil fuel imports, as well as save foreign exchange. In the end, the government wants to reduce the trade balance deficit" (own translation).

This intervention is classified as a de facto local content requirement, as foreign palm oil imports are unlikely to be able to compete with local ones, as Indonesia is by far the biggest producer, followed by Malaysia (which shares a palm oil cartel with Indonesia covering over 85% of world production). Hence, this intervention should be interpreted as forcing local diesel consumers to use Indonesian palm oil instead of foreign diesel without a bio-component (which would be in line with the government's goal of reducing oil fuel imports).

The regulation came into force on 1 September 2018.

AFFECTED COUNTRIES

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