PALMOILMAGAZINE, JAKARTA — Indonesia has long held a strategic position in the global palm oil trade. Its influence extends beyond sheer production volume, shaping supply flows and market dynamics across the global vegetable oil industry. This central role was highlighted at the Prasasti Insight Forum: Reshaping Indonesia’s Palm Oil Foundations in an Era of Climate Risk and Governance Standards.
At the forum, Fuad Bawazier, Member of the Board of Trustees of the Prasasti Center for Policy Studies, emphasized the industry’s weight in the global economy. With approximately 58.7% of total world production, Indonesia’s palm oil sector stands as one of the country’s largest non-oil and gas export earners, generating around US$36.1 billion annually.
“Indonesia currently controls nearly 59% of global palm oil production. This means developments in our domestic industry significantly influence global market direction,” Fuad stated on Friday (6/2/2026).
Indonesia’s dominance is strongly supported by natural advantages. Palm oil academic Witjaksana Darmosarkoro explained that agroclimatic conditions in Indonesia allow oil palm to thrive more optimally than in many other regions—even compared to its place of origin. This advantage positions Indonesia not only as the world’s largest producer, but also as one of its largest consumers.
“This is a natural advantage not shared by all countries,” Witjaksana noted, while acknowledging continued competition from major producers such as Malaysia and Brazil.
Indonesia’s influence is further reflected in global trade structures. Through its membership in the Council of Palm Oil Producing Countries (CPOPC), Indonesia and Malaysia together account for roughly 84% of global palm oil supply—underscoring their pivotal role in maintaining global supply and price stability.
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From an export perspective, Mukti Sardjono, Executive Director of the Indonesian Palm Oil Association (GAPKI), revealed that Indonesian palm oil products now reach more than 160 countries. Key export destinations include China, India, African nations, the European Union, Pakistan, and the United States.
“Rising demand, both domestically and globally, confirms that palm oil remains a strategic commodity that is difficult to substitute,” he said.
More Efficient Land Use
Beyond production scale and global reach, palm oil offers structural advantages over other vegetable oils. Its significantly higher productivity makes it far more land-efficient, creating substantial opportunities for downstream development—from oleochemicals and processed food products to renewable energy.
However, despite its global dominance, Indonesia’s palm oil industry faces persistent structural challenges. Witjaksana pointed to upstream issues, particularly within smallholder plantations. Productivity remains relatively low due to suboptimal seed quality, inconsistent fruit standards, and limited certification coverage.
Also Read: Indonesia to Deploy 70,000 Forest Rangers as Illegal Palm Oil Encroaches on Conservation Areas
“This is a critical issue if Indonesia wants to remain competitive amid increasingly stringent global standards,” he stressed.
Mukti Sardjono echoed similar concerns, noting that national production and productivity have shown a declining trend, while downstream expansion and value creation still hold untapped potential. Land legality remains another major issue, with approximately 4.5 million hectares of oil palm plantations identified within forest-designated areas.
Governance complexity, overlapping institutional roles, policy inconsistencies, and infrastructure limitations—especially export port concentration in Belawan and Dumai—continue to weigh on the industry’s competitiveness.
In response, the government and industry stakeholders are reinforcing the sector’s foundation. The Smallholder Replanting Program (PSR) remains a key initiative, alongside accelerated ISPO certification for smallholders and strengthened research and development across the value chain. These efforts aim to build a more productive, value-added, and sustainability-aligned palm oil industry.
Closing the discussion, Piter Abdullah, Policy and Program Director of Prasasti, emphasized that the Prasasti Insight forum is part of a long-term initiative to strengthen national palm oil policy direction. Through cross-stakeholder dialogue, Prasasti hopes future policy formulation will become more integrated, evidence-based, and capable of addressing climate risks and evolving global governance standards. (P2)
