PALMOILMAGAZINE, JAKARTA – President Prabowo Subianto has put the achievement of food and energy self-sufficiency in the next four to five years at the top of his economic development goals as one of the keys to bringing prosperity to the country’s 280 million people.
The President often mentions the strategic role of palm oil in achieving energy self-reliance and food security, and he is strongly committed to further boosting the palm oil industry toward reaching the long-term production target of 100 million tonnes annually by 2045, double the current annual output of around 50 million tonnes.
Prabowo also has committed to increasing the mandatory palm oil content in the biodiesel mix to 40 percent (B40), from 35 percent (B35) currently. Palm oil use in biodiesel accounted for 46 percent of total consumption last year, with the food industry taking up 44 percent and the oleochemical industry 10 percent.
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The President’s idea to bolster palm oil production is indeed quite appropriate since the commodity is a very important component of the economy even now, as the Industry Ministry’s Agro-industry Director General Putu Juli Ardika elaborated last month at a business conference in Jakarta.
Ardika told the conference that the palm oil industry alone contributed 3.5 percent to Indonesia’s gross domestic product in 2023, employing 17 million workers both directly and indirectly, involving more than 5 million shareholders and accounting for 12 percent of total export earnings.
According to him, equally important is that the industry has expanded its growth centers, which had been concentrated in Java for many decades, to Sumatra, Kalimantan and Sulawesi. The commodity is also the most advanced in terms of downstreaming, as palm oil is now used in 193 manufacturing processes. Many agronomists and industry players share the view that the plan to double palm oil production is still environmentally viable and technically feasible, because there are still large, degraded areas that can be converted into oil palm estates without touching primary forests.
Yet, we are still waiting for Prabowo’s policy guidelines for turning the palm oil industry into a national strategic project. The cabinet composition he announced in late October does not convey a clear-cut message about bureaucratic coordination in administering, governing and overseeing the industry’s development
Interministerial coordination is crucial for this industry, because the palm oil sector transcends the jurisdictions of the agriculture, industry, energy, environment, trade, forestry, agrarian and spatial planning ministries.
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We still painfully remember the damages inflicted on the palm oil industry by the series of erratic market intervention measures launched in the first semester of 2022, such as fixed price ceilings, domestic market obligation (DMO) and even a total ban on palm oil exports to cope with the skyrocketing prices of cooking oil.
The cooking oil debacle that occurred even after Indonesia had become the world’s largest palm oil producer only confirmed the extreme lack of cooperation and coordination within the government. The bitter experience with the cooking oil crisis reiterates the vital need of a single, authoritative governing body to manage and oversee the whole palm oil industry, especially because of its expanded use as inputs for both food and biofuel to cope with climate change.
Managing the competition in palm oil demand between the food and biofuel sectors and governing the industry require effective policy coordination. Palm oil producers are still dealing with much more formidable challenges in governance, legal uncertainty, unpredictable policies and too many agencies with overlapping authorities.
The perpetual lack of coordination in administration, governance and oversight is the most damaging deficiency in the palm oil ecosystem. This is quite unfortunate, because other factors like expansion opportunities for sustainable oil palm estates are quite good, and international market perception for this commodity has been improving steadily.
The Indonesian Oil Palm Association (GAPKI) has confirmed there is still a vast area of degraded land that can be converted into oil palm plantations without touching primary forests. Hence, there should not be concern about any competition between food and energy for land or over the long-term sustainability of palm oil-based biofuel. By utilizing degraded or marginal lands for biofuel feedstocks, countries can sidestep the food vs. fuel dilemma.
A study by the University of Maryland’s geographical sciences department on deforestation trends in Indonesia between 1991 and 2020 concluded, among other things, that the country has millions of hectares of underutilized, degraded land that was deforested prior to 2020. In addition, palm oil has been increasingly treated with positive news stories and opinion articles. It has even been recommended as a much-needed vegetable oil globally, not only for food and numerous other consumer products, but also biofuel.
Another piece of good news is that in October, the European Commission decided to postpone the enforcement of the European Union Deforestation-free Regulation (EUDR) scheduled to start on Dec. 31, which would have imposed big barriers to palm oil entering the international market.
Yet even a more positive view on the compelling case for palm oil is expressed in Not the End of the World by Hannah Ritchie, the lead researcher at Our World in Data, based at Oxford University. She uses data to understand global development and environmental challenges, and offers a strong perspective that palm oil is “an insanely productive plant” that yields far more oil per hectare than other crops, such as soybean or coconut.
This high productivity is crucial when considering the global demand for vegetable oils. The more positive international perception is particularly important, given the growing global population and increasing demand for food and consumer products as well as renewable energy. By producing more oil on less land, palm oil could actually help preserve forests and natural habitats that might otherwise be cleared for less efficient crops. Hopefully, President Prabowo will soon capitalize on these positive perceptions and issue strategic guidelines to boost the palm oil industry as the mainstay of Indonesia’s food security and energy self-sufficiency. The key is integrating governance of the palm oil industry and ensuring high sustainability standards in oil palm cultivation.
By Edi Suhardi
A sustainability analyst
