As part of the free trade agreement, Indonesia must scrap its 5 percent import duty on cocoa powder, which would encourage imports from rival grinders Malaysia and Singapore at the expense of domestic grinders. Malaysia and Singapore also benefit from zero tax on imported fermented cocoa beans, which are used to improve the flavour of cocoa powder, whereas Indonesia imposes a 5 percent duty on such imported beans from West Africa.
Jasman said Indonesia's cocoa grinders have asked the government to delay the scrapping of the 5 percent import duty and to provide funding for local farmers to ferment more cocoa beans and increase domestic production. "We must increase (output of) fermented beans. At the moment, more than 90 percent of Indonesian beans are not fermented," Jasman told Reuters in a telephone interview.
He said the government is encouraging farmers to do the fermentation process, but that it may take at least a year to see a pick-up local supplies of fermented beans. "We asked the government to postpone the tax cut by one year," Jasman said, adding that such request is among the 228 areas that Indonesia wants to be renegotiated.
For Indonesian grinders to be competitive, they must reduce imports of fermented beans, which are still subject to a 5 percent import duty, he said. In other countries, beans imports are not taxed. Indonesia imports about 8,000 tonnes of cocoa powder a year from Malaysia and Singapore, or a fifth of the amount needed by the domestic food industry.