InfoSAWIT, JAKARTA – Business partnerships in Indonesia's palm oil plantation sector have gained increasing relevance in recent years, according to Gunawan, Senior Advisor to the Indonesian Human Rights Committee for Social Justice (IHCS) and member of the National Council of the Palm Oil Farmers Union (SPKS).

These partnerships encompass various models, including the Nucleus Estate and Smallholders (PIR) scheme, Primary Cooperative Credit for Members (KKPA), and unified management systems. “Despite the success of these models, challenges remain in ensuring fairness and sustainability for all stakeholders, particularly smallholder farmers,” Gunawan stated during a recent seminar in Jakarta.

Indonesia’s Plantation Law provides a legal framework for such partnerships, enabling collaboration in areas ranging from input supply to marketing. Additionally, a Constitutional Court ruling on Law No. 39/2014 clarifies that partnership models are not restricted to those explicitly mentioned in the law. The ruling allows parties to develop cooperation agreements tailored to their needs, offering flexibility to achieve mutual goals.

“While these models offer significant opportunities for farmers and companies alike, implementation often struggles with issues of inequity,” Gunawan added.

A major challenge lies in the imbalance of negotiating power between large corporations and smallholder farmers. Many farmers feel disadvantaged and underrepresented in partnerships, which can impact their livelihoods.

Gunawan emphasized that plantation partnerships could serve as a means of economic democratization, fostering farmer empowerment. He pointed out that agrarian reform, particularly land redistribution to smallholders, should be integral to these partnerships.

 “With the principles of solidarity and kinship, partnerships have the potential to become tools for reducing discrimination and inequalities often faced by smallholders in the palm oil supply chain,” Gunawan noted.

Addressing these challenges will require greater commitment from stakeholders to ensure smallholders are adequately represented and benefit equitably from partnerships. Strengthening farmer protections and creating transparent, fair agreements will be critical to achieving sustainable and inclusive growth in Indonesia’s palm oil sector. (T2)

For more in-depth coverage, read the September 2024 edition of InfoSAWIT.