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There Should Be One Government’s Institution to Fully Take Advantage on Palm Oil Potential

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There Should Be One Government’s Institution to Fully Take Advantage on Palm Oil Potential

InfoSAWIT, JAKARTA – The elected President Prabowo Subianto emphasized his commitment to manage the abundant natural resources in Indonesia to be the products with higher additional values in this country and for the exports. One natural resource that is always mentioned as the promising one is (crude) palm oil.

The commitment is the rightest and strategic for a long period.

First, palm oil is the renewable commodity. It is different from coal which becomes the second biggest export and other mineral which are not renewable. The production process raised pollution. Palm oil sectors directly hire about 17 million workers and involve more than five million smallholders.

The second, palm oil within annual exports that reached US$ 30 billion, contributed 12 percent of non-oil exports totally and four percent of the gross domestic product nationally. Palm oil would keep always playing its role significantly for the economy because the production process is relatively cheap. This commodity is multifunction and fulfilling 40 percent of vegetable oil demands in the world but it is planted and developed in less than six percent areas in the world where vegetable oils are developed.

But we would never maximally develop the potential of this commodity to empower our economy nationally if the government would not improve its supply chain governance.

It may be fresh in our mind the impacts from series of palm oil market intervention that was launched in first semester 2022, such as, price upper limit, domestic market obligation, and export band to get solution on the most expensive palm cooking oil. The disaster happened when Indonesia had become the biggest palm oil producer in the world. It emphasized that the lack of cooperation and coordination among the government(s).

The sad palm cooking oil crisis in 2022 re-emphasized that it would be significant to establish an institution that would be in charge to manage and supervise every palm oil industry, namely because of its use expansion as material for food and biofuel to solve palm cooking oil crisis and climate change. It would effectively need policy coordination to manage competition among food, biofuel demands, and industries that involve more than 16 million hectares plantations that hundreds of companies and about five million smallholders owned.

If Prabowo, that would be the President of Indonesia in this October, is really serious with his commitment to develop palm oil industries further, he has to review every policy and institution directly or indirectly that has regulated and managed the commodity.

The main challenge is that there are at least eight ministries and tens other institutions directly and indirectly managing and supervising palm oil industries. Ministries that directly manage the industries are coordinator ministry in economy, ministry of agriculture, ministry of industry, ministry of environment and forestry, ministry of agrarian affairs and spatial, ministry of trade, coordinator ministry in investment, and ministry of energy and mineral resource.

It would be very difficult to maintain the consistency and predictability of policy and formulate integrated development policy(ies) for this significant industry when many institutions are involved and supervising. One main issue that attaches to the bureaucracy is the lack of coordination and cooperation.

That is why it would be very crucial for Prabowo to totally reform palm oil industrial governance and manage it in one regulator institution that would be in charge to deal and regulate everything that has something with palm oil. The regulator institution until its particular limits, can use some elements from the models in Malaysian Palm Oil Board that Parliament of Malaysia established based on special acts in May 2000. Malaysia itself is the second biggest palm oil producer in the world.

Single palm oil regulator agency/institution that we recommend should deliver direct reports to the president and would be in charge to get/publish policy, regulation, permit, development program, monitoring research and development, and even coordinate with every activity that has something to do with palm oil and its derivative (products).

The regulator agency should have the mandate to develop, promote, commerce the findings of research, deliver services of technical consultation for palm oil industries from upstream to downstream sectors, collaborate and coordinate with national and international scale – organizations to reinforce palm oil industries and trade.

Knowing for the big mandate and function, chairman or top coordinator of the regulator agency should be directly signed by president and the executive boards should consist of the representatives of ministries that their jurisdiction covers the sectors that have something to do with palm oil industries directly, such as, agriculture, land, spatial, forestry and environment, industry, trade, and investment.

Palm oil regulator institution should involve other stakeholders, such as, smallholders, plantation companies, non-government organizations, and international scale organization to get or publish policy to confirm that every perspective has been considered in balance.

The obedience to sustainability and environment regulation should be monitored by regular audit and inspection by related authorities. The disobedience would get punishment or revocation of license and certification.

The agency should be supported by the professional in adequate numbers with the skill and enough fund to realize the programs. That is why Palm Oil Plantation Fund Management Agency that was established in 2014 to get crude palm oil fund to fund palm oil plantation development should be integrated in the palm oil regulator institution to be.

The other task that needs attention immediately is to get data integration and identification of the smallholders in traceability system which should be simple, safe in cost, and wise to qualify every term and condition that would be regulated in European Union Deforestation Regulation (EUDR).

We think, palm oil regulator institution (to be) can use complete data and map that had been collected through comprehensive audit for every palm oil industry some time ago, as the main data basic to coordinate every policy about palm oil industries from upstream to downstream sectors in the global, central government, and regional governments levels. (*)

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

Disclaimer: this article is personal opinion only and the writer himself is in charge with his and has nothing to do with dengan InfoSAWIT.