Palm oil industry problems come from within the country
This article has been translated by PwC Indonesia as part of our Plantation News Highlights service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.
Investor Daily - Problem industri sawit justru datang dari dalam negeri
26 September 2023
Jakarta - The Indonesian Palm Oil Association (IPOA) stated that the current problems in the national palm oil industry actually come from within the country, such as overlapping regulations and multiple agencies involved in policy making. “The many problems faced by the palm oil industry arise from overlapping regulations and multiple agencies involved in palm oil policy making. After we mapped it, at least 31 government agencies are involved in policy making, from regional to central government,” said IPOA Secretary General M. Hadi Sugeng in between events of the 25th Congress of the Indonesian Journalists Association (PWI) in Bandung, West Java, recently.
Hadi gave an example of the case of identifying forest areas. Palm oil companies that have been granted Cultivation Rights (HGU) or farmers who have Ownership Rights (SHM) are also identified as encroaching forest areas. This is determined through recommendations from the governor and various agencies involved. “[The status of] business entities that have SHM or HGU should be final, because the process involved all related institutions and takes into account the existing spatial layout,” explained Hadi. Furthermore, the government implemented the Government Regulation in Lieu of Law (Perppu) No. 2 of 2022 on Job Creation which will impose administrative fines on business entities and the return of plantations into forest areas after one oil palm planting cycle. “IPOA expects a policy certainty to support sustainable industrial investment,” said Hadi.
Palm oil as a national strategic industry is not in good condition, even requiring vigilance. This is because Indonesia’s palm oil production and export performance have stagnated in recent years. Global political escalation has also put pressure on the price of this commodity that supports the Indonesian economy, while domestic obstacles have not yet been resolved. “The increasing consumption in the global market in the next few years is not accompanied by a growth in the production of crude palm oil (CPO) or palm kernel oil (PKO). Meanwhile, Indonesia is the world’s largest producer and exporter of palm oil,” he said.
In the past few years, Indonesia’s palm oil production stagnated at 51 million tonnes, while export performance also declined. Even though the export volume increased this year, the value decreased due to prices. Currently, Indonesian palm oil controls around 58% of the global vegetable oil market and more than 40% of the world palm oil market. PWI Treasurer Muh. Ihsan supports the existence of the palm oil industry because it has become a strategic industry for Indonesia. The socio-economic contribution that palm oil provides to Indonesian people is very significant in improving the welfare of the nation. “We will continue to voice the importance of the Indonesian palm oil industry and encourage its sustainability for the Indonesian people,” explained Ihsan.
