InfoSAWIT, JAKARTA — The recent implementation of strict and effective law enforcement by the government against palm oil plantation companies operating in forest areas has raised concerns among industry players. In recent weeks, a special task force established to regulate the palm oil sector has seized over 300,000 hectares of plantation land across 19 provinces due to alleged forestry law violations without proper legal processes.

The head of the task force, Major General Yusman Madayun, confirmed on March 17, 2025, that the seized plantations would be handed over to the state-owned enterprise (SOE) PT Agrinas Nusantara, a newly formed company derived from the state-owned technical consulting firm PT Indra Karya. Earlier, on March 10, the Attorney General's Office had transferred 221,000 hectares of palm oil plantations in Riau, previously seized from the private company PT Duta Palma for violating forestry regulations, to Agrinas. However, this case was resolved through judicial proceedings.

The direct seizure of palm oil plantations by the special task force without due legal process raises serious legal questions and threatens business certainty in an industry that is increasingly vital as a provider of food, renewable energy, jobs, and revenue.

A surprising decision came when the government announced in February the establishment of a new SOE, PT Agrinas Palma Nusantara (Agrinas), specifically to manage the seized plantations. This move contradicts widely recognized government directives aimed at enhancing fiscal and economic management efficiency.

Establishing a company without the necessary experience and skilled workforce in plantation management not only risks wasting public funds but also potentially exacerbates environmental damage that should be mitigated through actions against illegal plantations.

Allowing Agrinas to start from scratch in recruiting skilled operational staff will not only require significant time and financial resources but also increase the risk of substantial damage to existing plantations, including significant production losses.

Managing a plantation is a complex process that requires a considerable workforce and guidance from numerous agricultural extension workers. Additionally, operations must comply with various laws and regulations. While the palm oil industry has shown resilience in facing ongoing operational challenges and market distortions, these radical actions are now seen as a major threat to the survival of the palm oil industry in Indonesia. The sudden takeover of well-managed, high-yield plantations run by leading plantation companies could severely impact efforts to achieve palm oil production growth targets.

It is crucial for the government to implement preventive measures to minimize disruptions to businesses and avoid unnecessary duplications in the palm oil sector. It would be more prudent to transfer the seized palm oil plantations to the parent SOE in the plantation sector, PT Perkebunan Nusantara. This holding company was established in 2014 to manage 14 SOEs with plantations of palm oil, tea, rubber, sugar, coffee, and cocoa across various regions in Indonesia.

The establishment of a holding company for SOEs in the agricultural sector is part of a broader strategy to enhance efficiency, profitability, and competitiveness of SOEs in similar business sectors. The parent company ownership model facilitates more effective oversight and well-coordinated management, which can improve efficiency in corporate governance practices.

With this structure, consistent standards can be applied across all companies, ensuring more consistent compliance with environmental, social, and operational guidelines. By implementing collaborative marketing strategies, optimizing resource use, and strengthening negotiations, these companies can effectively enhance their competitive position, especially against large multinational corporations.

This specific idea has recently led to the formation of Danantara, a superholding company for all state-owned enterprises. However, since Agrinas has officially registered as a SOE and has a former military general as its CEO, we recommend an alternative business model as a solution to address potential risks and avoid undesirable consequences.

Agrinas should collaborate with PT Perkebunan Nusantara in the procurement of professional personnel to fill director, manager, and worker positions, as well as in managing the previously seized plantations. Agrinas is expected to effectively manage plantation assets that meet standards, including those owned by PT Duta Palma that have been seized. Given that palm oil plantations are located across nearly 19 provinces in Kalimantan, Sumatra, and Papua, and that PT Perkebunan Nusantara also manages palm oil plantations in various regions across these three major islands, this parent company is in a very advantageous position regarding operational efficiency and the availability of skilled labor and management to assist in managing the seized plantations.

There are no bureaucratic or managerial obstacles hindering the implementation of the proposed business model, as both Agrinas and PT Perkebunan Nusantara fall under the supervision of the newly established superholding Danantara.

One alternative model is for Agrinas to collaborate with existing local private companies to form a new independent management team responsible for ongoing daily operational activities. This model is used in managing large assets, exceeding 4,000 hectares, which provide sufficient resources to support the operational continuity of palm oil mills already present in various private business units. This model has proven more effective in maintaining coordination and operational integration with existing private company management.

The practices applied in palm oil management will remain intact, while operational continuity will be ensured during the process of appointing a new management team. Agrinas has a long-term plan to manage its own assets while maintaining operational partnerships with local private companies.

The third alternative business model is applied to smaller assets seized from companies. Agrinas opts to transfer the management of these assets to existing private plantation companies, aiming for full management within a joint venture framework.

As the rightful landholder, Agrinas is responsible for ensuring a continuous revenue stream from the profit-sharing agreements of the successfully seized plantations, while carefully exploring business development opportunities in the related regions. Implementing alternative business models and efficient management methods will enable the government to align various interests and mitigate risks associated with these controversial decisions. (*)
Author: Edi Suhardi/Sustainability Analyst
Disclaimer: This article represents the author's personal opinion and is entirely the author's responsibility, with no connection to InfoSAWIT.