Indonesia: Govt to develop palm oil industrial zones

Khoirul Amin, The Jakarta Post 21 Dec 15;

The government has been reviewing three industrial areas to be designated palm oil industrial zones in a bid to strengthen the downstream industry in the world’s largest palm oil producer, the Industry Ministry’s director general for agro-industry, Panggah Susanto, has said.

“We’re preparing three palm oil industrial zones as parts of green economic zones. We’ve selected the three areas for the development of the palm oil downstream industry. They are the industrial zones of Sei Mangkei [North Sumatra], Dumai [Riau] and Pupuk Kaltim [East Kalimantan],” he said.

Panggah explained that the three industrial zones were aimed at producing various palm oil products, such as olein and stearin — both of which are commonly used for cooking oil, margarine and shortening.

He added that the ministry expected partnerships with both state-owned enterprises and private companies to develop the palm oil industrial zones.

The Sei Mangkei industrial zone is currently managed by state-run plantation firm PT Perkebunan Nasional (PTPN) III, the Dumai industrial zone by private agribusiness giant Wilmar Group and the Pupuk Kaltim industrial estate by state fertilizer company PT Pupuk Kaltim.

Imam Haryono, the Industry Ministry’s director general for industrial estate development, said that the three industrial zones were chosen based on the availability of gas to support production and the accessibility to international shipping.

“The chosen industrial zones will surely get many benefits. There will be many investors coming in,” he said.

The designations of the palm oil industrial zones were based on an agreement reached through the Council of Palm Oil Producing Countries (CPOPC) that was recently established by Indonesia and Malaysia, which together account for 85 percent of the global palm oil market.

Panggah said that the Indonesian Industry Ministry had been appointed to chair the development of the palm oil zones. “The two countries are also currently harmonizing the standards of their respective palm oil products,” he said.

Palm oil products of both Indonesia and Malaysia have recently faced difficulties entering into some developed markets, such as Singapore and the EU, because of stringent requirements related to environmental protection.

Recent forest fires that have happened in Indonesia were allegedly caused by slash-and-burn practices involving both Malaysian and Indonesian palm oil companies, as well as local farmers.

The CPOPC, which was initiated by Indonesia and Malaysia in early October, is aimed at finding solutions for various problems facing the palm oil industry.

The council is also set to expand its membership by including some other palm oil producing countries. Separately, Industry Minister Saleh Husin said that his ministry would remain committed to developing Indonesia’s downstream industry to create added value for the country’s export commodities.

Institute for Development on Economics and Finance (Indef) executive director Enny Sri Hartati argued that developing the downstream industry was important to boost the country’s exports, which had so far heavily relied on raw natural resources.

Indonesia’s exports slumped by 14.32 percent year-on-year to $138.42 billion in the January to November period of this year, hugely because of a slump in commodity prices, including that of crude palm oil (CPO).

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