Indonesia’s palm oil sector enters 2027 with a positive but increasingly complex outlook. National CPO and palm kernel production is projected at 54.5–57.0 million tonnes, while domestic consumption is expected to reach 24.5–26.5 million tonnes, driven by higher biodiesel blending and growing demand from the food and oleochemical sectors. Beyond market fundamentals, the industry faces a critical policy challenge as legal uncertainty, land-use governance, smallholder productivity and the expanding role of state-owned plantation assets reshape the sector. The government’s priorities should include strengthening land-tenure certainty, consolidating spatial data under the One Map Policy, accelerating smallholder replanting and productivity gains, and maintaining greater flexibility in biodiesel and DMO policies. Balancing investment certainty, environmental protection and smallholder interests will be essential to sustaining Indonesia’s competitiveness in the global palm oil market.
PALMOILMAGAZINE, JAKARTA — As the year draws to a close and we welcome 2027, Indonesia’s palm oil sector stands on a foundation of extraordinary resilience. Over the past few decades, this “green gold” commodity has weathered a relentless wave of challenges—ranging from the relentless negative campaigns, increasingly stringent international market standards, to the uncertain dynamics of the domestic business climate.
The industry has also proven resilient in navigating various restrictive policies, such as the turmoil surrounding the Domestic Market Obligation (DMO), the increase in the mandatory blending ratio of biodiesel (B50%), the repossessing of overlapped plantations, and legal uncertainty regarding land-use. However, this resilience certainly has its limits. As the backbone of foreign exchange earnings and the national economy, palm oil cannot continue to be burdened by legal uncertainty and contradictory regulations.
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Looking ahead to 2027, the government should put an end to the various rules that stifle investment and instead focus on building a healthy, competitive business climate that ensures legal certainty. These are the key topics of discussions at the annual Indonesian Palm Oil Conference (IPOC), organized by the Indonesian Palm Oil Association (GAPKI) in Bali on November 11–13, 2026.
One issue that warrants close attention is the government’s decision to grant PT Agrinas Palma Nusantara (Agrinas) a palm oil concession of 400 thousand hectares in Papua. The development plan outlines a fairly clear land-use division, with 250,000 hectares is set aside for cultivations, while another 150,000 hectares is designated as conservation zones and customary land.
Legally, this 400,000-hectare concession automatically changes the status of land that was previously designated as forest area into “other land use” (APL). This sets a new precedent and a model for revisiting the national forest land use map to accommodate the development of sustainable, ethical palm oil cultivations.
Also Read: The Agrarian Reform Law and Investment Prospects of Palm Oil
Hence, the issue oil palm expansion in Papua goes beyond simply determining a land use area or allocating concession, but to ensure that land-use decisions have a clear and accountable spatial basis in alignment with the National One Map Policy. Consequently, the designation of areas must be based on environmental and social impact assessments, evaluations of conservation and carbon stock values (HCV and HCS) criteria, and extensive consultation to obtain consent from indigenous communities.
Degraded land suitable for agricultural activities may be considered for exclusion from the forestry sector. Conversely, areas with high carbon sequestration potential and biodiversity hotspots must be preserved from development.
If the merger of Agrinas’ and PTPN’s assets under the PalmCo goes smoothly, state control of land will jump to 2.0 – 2.5 million hectares between 2030 and 2045. This massive entry of state-owned enterprises will fundamentally reshape the oil palm plantation ownership landscape: the state’s share will rise to 10–12 percent, smallholders will control 42–44 percent, while the private sector’s share will decline to 44–48 percent. This shift in land ownership will correspond with gradual expansion of the national oil palm plantations to 19.0–22.5 million hectares and lead to a significant increase in production from 2030 to 2045.
Also Read: Indonesia Reclaims 6.2 Million Hectares of Forest Area Used by Palm Oil and Mining
The outlook of palm oil remains positive in 2027 with national production of CPO and palm kernel (PK) in 2027 is projected to be stagnant at the range of 54.5 to 57.0 million tons. Meanwhile, domestic consumption is projected to reach 24.5 to 26.5 million tons. The surge in domestic market is primarily driven by the increase of the biodiesel mandate as well as expanding demand from oleochemical and food sectors. Nationally, the average productivity of plantations is targeted to gradually increase to reach 3.2 to 3.4 metric tons of CPO per hectare annually.
History has proven that the strength of Indonesia’s palm oil sector stems from the pulse of a dynamic market. Therefore, the role of the private sector and smallholder farmers as the primary drivers of the economy must be preserved, while the government ensures that the regulatory framework operates fairly.
To foster a conducive business climate leading up to 2027, the government needs to establish several concrete regulatory foundations.
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Firstly, the issuance of implementing regulations under the Agrarian Reform Law that are land-based investment-friendly and provide legal certainty regarding Land Use Rights (HGU). Without solid legal guarantees for land tenure, businesses and farmers will continue to be haunted by agrarian conflicts that drain the industry’s energy.
Secondly, refining the revised forestry maps and stabilizing the total area of plantation cover nationwide. The consolidation of precise spatial data under the One Map Policy is an absolute requirement to ensure there is no longer any overlap between forest areas and plantations that have been in production for decades.
Thirdly, accelerating the Smallholder Oil Palm Replanting Program (PSR) and providing structured institutional capacity-building for farmers. The productivity gap between smallholder plantations with 2–3 metric tons of CPO/ha/year, and company-owned plantations capable of producing 4–6 metric tons CPO/ha/year is a major challenge. To narrow this yield gap, the allocation of funds from the Plantation Fund Management Agency (BPDP) must be restructured so that the largest portion is dedicated to providing direct assistance to smallholder farmers.
Also Read: 176 OKU Smallholders Receive Palm Oil Cultivation Training to Boost Productivity
Fourthly, flexibility in trade and market policies. The implementation of mandatory biodiesel targets needs to be executed pragmatically and not rigidly, while always taking into account the domestic CPO supply balance and global price dynamics. In line with this, Domestic Market Obligation (DMO) policies must be implemented with a degree of flexibility so that industry players retain maneuverability to expand exports and capitalize on international market opportunities.
Looking ahead to the national palm oil industry in 2027, Indonesia stands at a critical juncture. Striking a balance between providing legal certainty for businesses, preserving environmental functions, and strengthening the position of smallholder farmers is the only way for the national palm oil industry to remain resilient in the face of economic uncertainty and the onslaught of global protectionism. It is time for regulations to serve not as restraints, but as a means to bolster the competitiveness of Indonesian palm oil on the world stage. (*)
By Agam Fatchurrochman and Edi Suhardi, Sustainability Analist
