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Take Advantages on Palm Oil Potential to Realize the Vision of The Country to Highly Get Income

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Take Advantages on Palm Oil Potential to Realize the Vision of The Country to Highly Get Income

InfoSAWIT, JAKARTA – Of all kinds of annual plantations cultivated in Indonesia, palm oil plays the vital roles in the economy namely in income, exchange, development in many regions, poverty alleviation in many villages, employment, and sources for many sustainable consumption goods in the long term.

But what is promising more is that palm oil would play more important roles as the source of sustainable fuel material. The promise of elected President Prabowo Subianto to accelerate Indonesia to realize renewable energy, would cover the plan to expand vegetable fuel production by escalating biodiesel mixture 35% or B35 from crude palm oil to be B50.

Until now palm oil has become the second biggest non-oil and gas export after coal with the value about US$ 30,3 billion last year or 12 percent of the total exports. As the biggest palm oil producer in the world within the total production 55 million tons in 2023, Indonesia supplied 54 percent for palm oil trade in the world and one third of the total vegetable oil supplies globally. Palm oil also supplied more than 45 percent of the vegetable oil consumption globally.

The better information when the climate change happens in that palm oil is the most productive vegetable oil of all vegetable oils. Besides having the best productivity, palm oil trees need less workers and production input per unit compared to other vegetable oils. That is why palm oil is the cheapest oil to be produced so far.

The commodity also significantly contributes to poverty alleviation in many villages because 40% of about 16,5 million hectares palm oil plantations in Indonesia belong to 6,7 million smallholders and palm oil industries directly and indirectly hire about 16 million men.

Nevertheless, the biggest worry about biodiesel production which elected President Prabowo’s ambitious program is the environmental impacts because many environmental non-government organizations accused the commodity as one main factor in deforestation. The other worry is that the probability to get closer competition between food and fuel demands that would have something to do with inflation. Palm oil consumption for biodiesel in Indonesia last year reached 23,2 million tons or 46 percent of the total consumption nationally – 44 percent for food, and 10 percent for oleochemicals.

But we still think that the plan to double palm oil production is worth it environmentally, technically, and commercially because there are available areas out of natural forests which are fixed to develop palm oil plantations. Palm oil is the best and fixed commodity to be cultivated around equator regions, such as, Indonesia.

Many countries in the world would not be bored if the production in Indonesia, for instance, be doubled to be more than 100 million tons per year because palm oil demands as the source of food and fuel would keep escalating. Palm oil is multi-function and could be found in more than half consumers’ goods in supermarkets in the world, as World Wildlife Fund (WWF) mentioned.

Nevertheless, there are some conditions to realize the ambitious plan. The program should base on roadmap of long term – development that needs better governance, research and development expansion, to get superior seeds, policies in integrated downstream and upstream policy sectors, and sustainable environment, social, and governance (ESG) standards.

The first, it needs to create policy and regulation frames which are conducive to develop sustainable palm oil plantation. The government needs to reinforce the certainty of policy by reviewing every related law in palm oil and substitute the laws or regulation which delivered losses for palm oil industries.

Palm oil industries are facing issues in governance that they themselves caused, namely related to the mistargeted policies in the upstream and downstream managements and market intervention. Apart from the vital roles, palm oil industries have suffered from because of anti-market policies that were close, such as, export quota, domestic market obligation, and fixed price that has been implemented since the early of 2022 to stabilize palm cooking oil price that the government decided after it (palm cooking oil) was very expensive because of vegetable oil supply massive disruption in the globe.

The policies that regulated palm cooking oil for some goals, namely biodiesel, and domestic and export palm cooking oil, should be harmonized and synchronized with the production capacity in national scale. It is about to prevent unnecessary competition. In this context, biodiesel production target that needs crude palm oil (CPO) should be reviewed in a whole to prevent the disruption of palm oil supply for domestic and export needs.

The government should also improve palm oil institutions and governance by simplifying bureaucracy and reinforce business predictability. There should be good coordination among ministries/institutions to make long term – palm oil development roadmap because without good coordination, it would be impossible for the government to design or formulate policy that has integrated development for the most important industries.

One most important element from the roadmap is about to eliminate the regulation and institutions which are overlapping. They might be the main factors to escalate area conflict waves in the indigenous people, deforestation, and scrambled natural resource extraction practices. Until now there have been nine institutions in national scale that directly and indirectly regulate palm oil industries. But the coherent policy should only be published if every related policy with palm oil industries, is formulated and implemented by only one government’s institution.

The last is that it is undeniable that palm oil production development should be well maintained both by escalating the harvest (productivity) and palm oil plantation expansion which adjust with every sustainable standard. The government should also deliver incentive for the companies to expand research and development to get innovation in superior seeds.

Until now there have been ten certified palm oil seed producers and they are operating in many regions in Indonesia. The research in some big plantation companies has developed seeds that could double the average harvests up to eight or even nine tons per hectare. The positive result should be spread and used to escalate the smallholders’ plantation productivity and palm oil production nationally.

Smallholders replanting program by planting superior seeds should get faster with the fund help from Palm Oil Plantation Fund Management Agency. If about 6,5 million hectares of the smallholders’ plantations are planted by superior seeds, the program to double palm oil production in Indonesia would be 100 million tons. This means, it does not need to get palm oil expansion larger. (*)

By: Chairman of Indonesian Palm Oil Association (IPOA) Eddy Martono

Disclaimer: this article is personal and the writer himself is in charge. There is nothing to do with InfoSAWIT.