InfoSAWIT, JAKARTA – The policy of the Minister of Agrarian Affairs and Spatial Planning/Head of the National Land Agency (ATR/BPN), Nusron Wahid, which requires palm oil plantation companies to allocate 30% of their concession land for partnerships with smallholders, deserves appreciation as an effort to enhance social and economic justice in the palm oil industry. However, behind this good intention, there are several challenges and fundamental questions that need to be addressed to ensure that this policy does not disrupt the investment climate and the sustainability of the palm oil industry.
Conceptually, the core-plasma plantation scheme—regulated under the 2014 Plantation Law and updated through Omnibus Law No. 6/2023—is a farmer-friendly policy. Through this scheme, large plantation companies are expected to act as development agents by providing access to financing, technology, superior seeds, and technical guidance to smallholders. The goal is clear: to reduce land ownership disparities and improve the welfare of farmers.
However, the reality on the ground often falls short of the ideal. The implementation of the 20% plasma scheme alone faces numerous obstacles, from a lack of clear implementing regulations to minimal participation from smallholders. According to the Central Statistics Agency (BPS), about 40% of Indonesia's total palm oil plantations, covering 16.8 million hectares, are owned by independent farmers, most of whom have not engaged in plasma partnerships.
One of the main issues faced by smallholders is land legality. Many farmers lack land certificates, making it difficult to access bank financing to purchase superior seeds or improve their farm productivity. As a result, they are forced to rely on informal financing with high-interest rates, which exacerbates their economic conditions.
Additionally, the lack of funds also hinders smallholders from adopting technology and best cultivation practices. In fact, the productivity of smallholder farms often falls far below that of large companies, impacting their income and welfare.
The 30% Policy: A Solution or a New Problem?
Nusron Wahid's policy to increase the plasma land allocation from 20% to 30% raises the question: is this step based on in-depth studies or merely a political response to social pressures? The Ministry of Agriculture, as the technical authority, has decades of experience in managing palm oil plantations and empowering farmers. The allocation of 20% for plasma was formulated through a lengthy process and in-depth studies.
Increasing the allocation to 30% without adequate preparation risks creating new problems. Plantation companies, already facing challenges such as fluctuating CPO prices and environmental pressures, may struggle to meet this obligation. If not balanced with adequate incentives, this policy could reduce investment interest in the palm oil sector.
For this policy to be effective, coordination between the Ministry of ATR/BPN and the Ministry of Agriculture is key. The Ministry of Agriculture has developed the Community Garden Development Facilitation (FPKM) program as an alternative for empowering smallholders. This program provides flexibility for companies in choosing partnership models, such as credit, profit-sharing, or other patterns based on agreements with the community.
Good coordination between the two ministries can ensure that the 30% policy is not only populist but also realistic and implementable without sacrificing investment certainty.
The Indonesian palm oil industry, with an annual production of over 50 million tons, plays a crucial role in the national economy. However, its sustainability depends on our ability to create a balance between social justice and investment certainty.
The government needs to focus on empowering smallholders through comprehensive programs, including resolving land legality issues, improving access to financing, and enhancing technical capacity. On the other hand, the business sector must also be involved in formulating fair and sustainable policies.
The people's hopes for President Prabowo's administration are for policies that are not only populist but also provide investment certainty and promote sustainable economic growth. Public policies should be formulated through an objective, comprehensive process that involves all stakeholders. Only in this way can the Indonesian palm oil industry continue to be an economic driver while addressing social justice challenges. (*)
Disclaimer: This article represents the author's personal opinion and is entirely the author's responsibility, with no connection to InfoSAWIT.
