PALMOILMAGAZINE, JAKARTA – The Indonesian government has issued Government Regulation (PP) No. 8 of 2025, which mandates that all export proceeds (DHE) from the natural resources sector—including palm oil—must be placed within the national financial system.
Under this policy, all exporters in the sector are required to deposit 100% of their export earnings into special accounts at national banks for a duration of 12 months. While the policy aims to strengthen economic resilience and stabilize the rupiah exchange rate, it raises an important question: what does this mean for smallholder farmers and palm oil processing mills?
Smallholders typically don’t export directly. They sell fresh fruit bunches (FFB) to cooperatives, middlemen, or directly to mills. However, in the palm oil supply chain, farmers are inextricably linked to the export ecosystem. When exporters—the final link in this chain—are affected by the foreign exchange holding policy, the pressure cascades down to mills, cooperatives, and ultimately the farmers.
This ripple effect is already being felt. Reports show a decline in FFB prices at the farmer level by around IDR 30–50 per kilogram. The cause is not merely global market fluctuations but also the limited liquidity among exporters, who are now required to hold their earnings domestically for a year. When exporters struggle to purchase CPO from mills, those mills in turn reduce their FFB intake from farmers. This situation can leave farmers with unsold harvests, or force them to delay harvesting altogether.
What’s more concerning is the potential for exporters to prioritize sourcing from their own business groups. This could marginalize independent mills and self-supporting farmers from the market. If left unchecked, it could lead to mill closures and widespread job losses.
On the other hand, if the regulation succeeds in stabilizing the rupiah and boosting exports, FFB prices might eventually recover. However, that outcome remains speculative. The policy is still in its early stages, and its true impact depends heavily on how the government and private sector manage the transition.
It’s important to recognize that the palm oil sector should not be treated the same as the mining or oil & gas industries. Under PP No. 8/2025, the oil & gas sector is only required to retain 30% of its DHE, while the plantation sector must retain 100%. This places a disproportionate burden on the palm oil industry, which is labor-intensive and spread across remote regions. These fundamental differences should be factored into any evaluation of the policy.
If not managed carefully, PP No. 8/2025 could inadvertently undermine Indonesia’s broader goals of advancing palm oil downstream processing and energy independence. Disrupted company liquidity will limit investment capacity in value-added industries, potentially affecting national programs like biodiesel and renewable energy due to reduced domestic CPO supply.
In short, PP No. 8/2025 should be reviewed with prudence. Macroeconomic policies must not come at the expense of smallholder farmers—who do not directly benefit from export revenues but bear the brunt of systemic changes. The government must foster inclusive dialogue and ensure that protecting the national economy does not come at the cost of the people’s economy.
By: Mansuetus Darto, Palm Oil Practitioner and Member of the Palm Oil Farmers Union
Disclaimer: The views expressed in this article are solely those of the author.
