Sustainable Palm Oil FGD Vol 14 : Integrate Palm Oil Down to Upstream Industries Sustainably

Doc. palmoilmagazine

Palm oil plantation industries as upstream sector really develop fast in Indonesia that still stand when crisis happened. The increasing crude palm oil (CPO) production in every year encouraged much progress in the society and also nationally develops downstream industries.

CPO production which keeps increasing reinforced Indonesia as the biggest CPO producer in the world since Indonesia surpassed Malaysia in 2005 until now. According to Indonesian Palm Oil Association (IPOA) CPO production in Indonesia in 2022 reached 46,73 million tons.

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In the globe, it contributed up to 51% from palm oil consumption in the world. Indonesia plays important roles as the biggest CPO producer because the people’s consumption always globally increases every year.

For CPO production increases every year, it certainly needs supports from many parties to sustainably develop palm oil industries in Indonesia and reinforce market penetration in this country on sustainable palm oil.

Integrating upstream to downstream industries in this country is part of strategy to support food and energy security nationally. That is why integrated palm oil from upstream to downstream sectors would be the big power for palm oil industries nationally.

Policy Analysis of Associate Coordinator Ministry in Economy, Khadikin said that there have been 2.511 palm oil plantation companies in Indonesia in 26 provinces. Their production capacity reached 84,8 million tons within the utilization about 55% that produced 47 million tons of CPO.

“Indonesia is the number one palm oil producer in the world within its markets 55% in the globe,” he said in Focus Group Discussion (FGD) SAWIT BERKELANJUTAN VOL 14, with the theme “Mengintegrasikan Industri Hulu Hingga Hilir Sawit Berkelanjutan”, that  InfoSAWIT conducted with the supports from Palm Oil Plantation Fund Management Agency (PFMA), Wednesday (7/6/2023) in Jakarta.

He also said, about 60% palm oil products in Indonesia were for the exports, which means, Indonesia contributed to provide consumption goods, food, and energy for the world. With the prediction of the world population about 9,8 billion in 2050, the crowd people in urbans, as it is predicted, would get additional needs on vegetable oil up to 200 million tons in the future. Palm oil can supply the numbers because it is the most efficient and productive vegetable oil of all.

Within average production 5 tons per hectare, palm oil plantations can be planted in a four million – hectare of agricultural areas, save hundreds million areas to plant other needs (commodities). Khadikin also said, plantation industries play important roles for agro – industries. In the first semester of 2022, of the total agro-industries export that reached US$ 25,12 billion, 56,6% were dominated by plantation industries.

This is the same with the vision of Visi Hilirisasi 2045: Indonesia would become the producers and consumers’ center of palm oil derivative products in the world to become CPO price setter in the world through palm oil downstream industrial roadmap nationally by implementing productivity enhancement, downstream program (oleofood, oleochemical, biofuels), improving ecosystem, governance, and capacity building.

Meanwhile, Head Corporate Division Palm Oil Plantation Fund Management Agency (PFMA), Achmad Maulizal Sutawijaya said, palm oil sector in Indonesia that involve 2,4 million independent smallholders and 16 million workers, could encourage positively gross domestic product (GDP) in plantation sector. GDP in the third quarter of 2023 could positively increase at 5,72%. 2022 palm oil exports reached 34,67 million tons or about Rp 34,5 trillion.

“Export levy successfully encouraged downstream program with decreasing CPO export composition. Besides, the numbers of levy that PFMA managed in 2022 reached Rp 800 billion or increased 123,31%,” he said.

But what about the challenges in palm oil sector, such as, European Union Deforestation Regulations (EUDR)? What did PFMA do to face the challenge? Mauli thought, palm oil producer countries still have bargaining position because European Union could not fulfill their vegetable oil needs in the continent but by having imports.

Prior the increasing demands on biodiesel fuel in European Union were the chance for palm oil to penetrate. “But the publication of EUDR in 2023, palm oil biodiesel producers in Indonesia should escalate sustainability aspects in their supply chain so that the countries in the continent would not decrease their demands on biodiesel material,” Mauli said.

That is why to support the industries, there would be strategic things to do in European Union, such as, legal actions to solve discrimination issue about palm oil trade from Indonesia.

The second, bilateral relationship as persuasive way among the countries to muffle discrimination trend on palm oil in European countries. The third, certification to implement sustainable certification that many countries acknowledge to penetrate the exports. “The fourth, media coverage by taking advantages on trusted communication channel in three (3) countries (German, French, and Belgium),” Mauli said.



Board of Editorials of InfoSAWIT, Edi Suhardi said, the publication of EUDR would raise concern about sustainability in palm oil industrial integration. That is why it needs fair trade compromise; trade barrier and protectionism; and deprivation of poverty alleviation.

Approved or not, Edi continued, it is a must to get sustainability on palm oil with kinds of standards and system; definition and criteria of sustainability would keep developing. But the planters need to get their position and platform of their sustainability commitment. Would it be in progressive process or traditional one?

“It needs to recognize plurality of markets, multi-tier sustainability standards, and develop palm oil coalition to reject the effort in creating single market – sustainability norm,” he said.

It also needs to get new balanced commitment in sustainability. In addition, European Union is not the only one to acknowledge sustainable palm oil standard.

“European Union would be the potential market with close standards. Labels, such as, free deforestation, sustainability would not influence palm oil exports from Indonesia to the continent. The market would adapt but would have something to do with independent smallholders,” he said.

Meanwhile Rukaiyah Rafiq of Forum Petani Kelapa Sawit Berkelanjutan Indonesia (Fortasbi) thought, in general sustainable palm oil practices for independent smallholders is possible thing to do but the process still faces issues. The proof is that independent smallholders reached only 2% implementing sustainable practices of their total plantations nationally.

Uki, her nick name thought, they keep fighting and expanding their plantations to get Roundtable on Sustainable Palm Oil (RSPO), Indonesian Sustainable Palm Oil (ISPO) certificates, and International Sustainability & Carbon Certification (ISCC).

She continued, in the same time, EUDR raised and would be delivering impacts for independent smallholders. They would be away from European trade scheme. The smallholders would be away from their dependence on mills, knowledge capacity, and existence of intermediary traders. These are serious issues for them.

“These are contradictive to the terms and conditions in EUDR that should confirm that every product gets into or sold in European Union should be getting Due Diligence in EUDR within the main conditions are legal and traceability,” Uki said.

She thought, EU should consider not only palm oil commodity with zero deforestation and traceability, but also palm oil that independent smallholders produced. At least, every palm oil product that gets into European Union should be 25% derived from smallholders’ plantations.

“This could be solution to make sure that EUDR plays its roles not only in zero deforestation but also improves the source of life of smallholders, encourage their involvement in protection and recovery initiatives. If not, EUDR would be a regulation that ignores smallholders and make deforestation get worse which we ultimately get losses,” Uki said. (*)

About FGD Sawit Berkelanjutan:

FGD Sawit Berkelanjutan is an interactive discussion by many stakeholders in national scale that presented speakers from many sectors to deliver whole description about palm oil. The goal is about to deliver the right understanding about palm oil existence, contribution for the country, the social, and environment.

Diskusi Sawit Bagi Negeri got fund support from Palm Oil Plantation Fund Management Agency (PFMA) within its strategic partners, Media InfoSAWIT and Palm Oil Magazine. The discussion that took many palm oil stakeholders, such as, the government, businessmen, organizations, social and environmental activists, and others was about to develop palm oil plantations to be better.

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